Silver as an investment

Foreign Investment Is Not a Problem for the Domestic Economy

mises.org / Mateusz Machaj / July 28, 2017

In the recent months political atmosphere in Poland has become more nationalist, which is reflected in a growing anti-foreign attitude toward capital flows. The general argument used relate to the apparently negative aspect of interest payments and dividends on invested capital being transferred to foreign owners. “What a waste”, the crying goes, “cannot we leave everything in the hands of domestic owners, so that money stays in the country to provide employment? How can we let such a drain of resources to occur?”

Thus, mercantilism seems to be alive and well in the twenty-first century, remaining extremely faithful to its initial fallacious tradition. The reality is, however, that capital flows resulting from foreign investments are not draining our country — or any other country — of anything. There is simply a price to be paid for using capital from abroad. Like any price, capital flows have something to do with scarce resources. In these particular circumstances, capital financing has allowed Poles to purchase various productive factors of production in the international markets. This includes the whole bunch of know-how which flows in with it and creates the framework to increase laborers’ productivity. It should come as no surprise that in Poland foreign companies, or companies with majorities of foreign owners, are statistically paying significantly more to their employees than domestically owned companies. The feature applies to all types of employment, not only the board members, but the workers of all of the lower levels of employees. The capital flowing in has to simply bid for workers and offer higher wages. At the same time it still has a capability for better profit opportunities because it often benefits from ideas how to make labor more efficient and productive.

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