Overseas expansion may help explain US economy puzzle

Listen to this article

00:00
00:00

From Mr Louis Borget.

Sir, Robin Harding mentions several possible reasons for a significant divergence between corporate earnings and investment but does not mention as a possible reason the rapid expansion into overseas markets since the 1980s as a result of increasing wealth in other countries and structural changes such as China’s entry into the World Trade Organisation (“A mysterious divergence”, Analysis, July 25).

During more recent years the US recession has caused overcapacity at home while overseas markets have expanded significantly. It would seem reasonable to expect US corporations to benefit financially from growing markets overseas without the necessity to increase capacity proportionately in the US or to hire additional workers in the US. This might also explain why smaller, private companies, probably less active globally, are increasing investments at a higher rate than larger corporations.

Louis Borget, Croton on Hudson, NY, US

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.