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The National Interest
Croesus and Caesar
by Richard Rosecrance
. . . It is true that investing in America is still in Europe's own economic interest. Investments yield more in New York than they do in Paris. In the short term, though, Europeans and Japanese have lost money in the United States. The New York stock market has not gone up, and European returns on U.S. investments are cancelled by currency losses. As Europe enlarges, the expansion of the European market will draw money back to Brussels. In the longer term, however, U.S. growth will return, and Europe will want to share in its benefits. As the dollar falls, Europe will substitute new foreign direct investment for trade with the United States. If one takes even a casual glance at the size of such investments in the United States, one sees immediately that their value dwarfs that of commerce. This is not going to change radically or soon. Europe will still place large funds in the American economy. But enough funds, and on what terms? Europe Needs America as a "peaceful power", Europe does not want, or at any rate should not want, to separate from the United States and rebuild its own major military capabilities. It needs American defense protection while integrating with a still unstable region stretching beyond east-central Europe to Central Asia. Robert Mundell, the father of the euro, believes that as many as fifty countries will eventually join the eu — even some from North Africa — and adopt the euro as their national currency. America, not Europe, will defend these expanded borders — and Europeans recognize that they must play their financial part to receive help in protecting their growing perimeter. . . .