Questions are arising regarding whether or not the political climate in Washington, DC – which saw the US 'shutting down' in October in a dispute over government expenditure – will impact upon the country's attractiveness as an investment.

Some maintain that such political stalemate is part of the democratic process, with SelectUSA, a government agency through the US Commerce Department tasked with attracting and retaining business investment, maintaining that "the US represents the best risk-adjusted return on investment, period".


“I don’t expect to see any real impact,” said Aaron Brickman, SelectUSA's deputy executive director. “What we see emphasised is the resiliency of the US market and how companies make decisions not based on what takes place from one day to another in the US, but rather companies see a 200-year history of openness to investment and an unparalleled environment for firms from around the world to succeed and thrive.”

The fact the US stock market did not react dramatically to Washington’s political shenanigans may support this position. AT Kearney’s FDI Confidence Index reports that the US is a very attractive investment destination for FDI due to its strong economic FDI determinants, its lower risk profile when compared to other leading global economies and its leading role in international investment diplomacy around the world.

The index, however, does indicate that the 2008-09 economic downturn contributed to erratic behaviour of FDI flows into the US. Other groups, however, have expressed concerns regarding the changes they see in the American system. A study entitled 'Economic Freedom of the World: 2013 Annual Report' by the Canada-based Fraser Institute warned that the US is stumbling when it comes to economic freedom. The reason, the study suggested, is overspending, a weakening rule of law, and increasing regulations on the part of the US government. Consequently, the US has seen its economic freedom ranking in the study plummet from second position in 2000 to 17th this year.

In the report, Hong Kong and Singapore retain the top two positions, with New Zealand, Switzerland, United Arab Emirates, Mauritius, Finland, Bahrain, Canada and Australia making up the top 10. The study was co-published in the US by the Cato Institute, a US libertarian think tank.

Ian Vasquez, director of the Center for Global Liberty and Prosperity at the Cato Institute, described economic freedom as when there is personal choice, voluntary exchange, freedom of competition, and protection of persons and their private property. “When those elements occur then there is economic freedom,” he said.

According to the study, the US saw its biggest drop in categories regarding legal systems and property rights. On legal issues, in 2000 the US had a rating of 9.23 in the report, which was the ninth highest in the world. The current ranking of 6.93 puts the country in 38th position. The 2.3-point reduction in the US legal area rating was tied with Venezuela as the largest reduction among the countries rated.

Mr Vasquez maintained this was because of the government’s increasing role in US citizen’s lives. He also claimed that despite Republican Party efforts to cut federal spending and de-fund the new US government healthcare plan, little will be accomplished to slow the growth of the government.