Foreign Land Ownership in America: Costs and Benefits

Over on X, Aaron Slodov, the Founder of the REINDUSTRIALIZE summit, asks how foreign ownership of land is legal in America. My response is below.

Foreign ownership of land is legal because it contributes to our national wealth. Americans want to be wealthy so we allow it. However, the scale of this foreign ownership is exacerbated by America's financial position in the post-war international order.

Foreign investors have, since the Founding, poured massive resources into the United States due to our strong and trustworthy legal institutions, innovative technological development, and vast natural resources.

America has been, for 250 years, the best location for investment on earth. Americans are productive, intelligent, and trustworthy. Invest here and you are almost certain to make money.

HOWEVER, there is a crucial caveat to this point: since 1945 the United States has occupied a dominant position in the global economy not just because of our productive power in the free market but because of our military might.

After Bretton-Woods (and the collapse of Bretton-Woods in 1971), the dollar has been the world's reserve currency. It is backed by global oil prices (America has a very close relationship to the Gulf States and arranges that virtually all international oil sales occur in dollars), American military might, and access to American markets. Foreign governments and investors desperately want the dollar.

It is (or has been) very difficult for a nation to live without it. Just ask Syria, Iran, North Korea, Cuba, and Russia. It is possible to do so but not easy and these nations tend to be very poor on average. Outcasting from the American-led liberal order is very often painful economically.

Put simply, other nations very much want the dollar in order to access American-dominated international financial institutions and to invest in American markets. To get those dollars they need to sell goods to Americans. Once they have dollars, they can use them to buy American exports (or dollar-denominated goods like oil) OR they can use those dollars to invest in the American economy by buying up assets like stocks, bonds, or capital assets (land).

Singaporeans are willing to buy American land in Michigan and Michigan sellers are happy to market to them because these foreigners pay a premium to have access to our territory. This drives the price of land up and puts more money back into the pockets of Americans. Sellers like money!

We could, of course, ban all foreign investment, all imports, and all immigration. This would be total autarky. This would be a radical policy--even more radical than North Korea's policy of Juche or self-isolation. North Korea for instance still maintains bilateral trade relations with China and also allows more foreign tourism than most people realize.

The downside to a policy of total isolation would be that it would immediately cause the amount of goods available for purchase to plummet and therefore their price to skyrocket. Americans would be instantly poorer. People who have been used to working 40 hours a week in a nice air conditioned office job would need to work twice or three times as much to maintain the same lifestyle, assuming it remains available at all. Indeed, many goods simply would no longer be available since they depend on foreign inputs.

Foreign goods that we don't make here would become massively expensive until we could build the factories necessary to make them. If the resource wasn't available here then the product would simply disappear for purchase. Black markets would emerge in foreign goods. Blockade running would become a very lucrative (but dangerous) profession.

There are immense opportunity costs to such isolation. Things that would be possible with lots of foreign goods on the market simply are no longer valued by consumers when things tighten up.

Autarky is expensive. When you need to do a lot of different things just to live then you can't focus as much on getting better at any one of them. You are poorer overall. The division of labor is the source of wealth when it comes to scarce goods.

There are upsides to autarky, too, which libertarians often ignore. A closed society has fewer divisions, fewer sources of controversy. It can preserve religious teachings and historical consciousness intact for longer because there are no foreign competitors.

A nation's way of life is always threatened by interaction with strangers and enemies. There is always a risk that citizens will choose foreign life over the domestic. Foreign contact threatens patriotism.

A closed society, by contrast, can maintain racial solidarity more efficiently and this is very often a goal of governments since they wish to preserve the nation (from the Latin, "natus" or birth). Our shared birthing-group, or race, or nation is generally a big part of our identity and a driving factor in political life.

It is worth noting of course, that America today is not simply an "open society." We have a religious dogma (anti-racism, feminism, gay rights, resistance to "aggressors," and mass migration are key tenets). Blaspheme George Floyd and you could easily lose your job even now. You certainly would not be considered respectable. Our society does not have unlimited tolerance of free speech by any stretch of the imagination.

The crucial point to all this is simple: every type of regime comes with trade-offs. Every economic regulation comes with upsides and downsides. Ban foreign land ownership and those foreigners will buy stocks and bonds. Ban the sale of stocks and bonds and foreigners will buy more exports. Ban the sale of exports and the markets will collapse to a much smaller state.

Each of these attempts to regulate buyer and seller behavior will come at a cost. That material cost might be worth paying for the sake of national cohesion and the maintenance of our way of life, but it won’t make us richer. Protection is not prosperity, it is the defense of prosperity. Those are not the same thing. If selling land to foreigners means the end of all of our liberties then we should ban the sale of land to that enemy.

But we should not lie about the trade-offs involved. There is always a price to be paid in this life. We are limited, mortal beings. We are always forced to choose.