America’s Rogue Global Image and Booming U.S. Earnings

What explains booming U.S. global earnings in the face of America’s battered world image?

July 31, 2007

What explains booming U.S. global earnings in the face of America's battered world image?

It is a major paradox: The global image of the United States has never been lower — but the global earnings of U.S. multinationals have never been higher.

According to the latest results from the 47-nation Pew Global Attitudes Survey, anti-Americanism is more widespread than ever.

Favorable ratings of the United States fell in 26 of the 33 nations for which Pew has comparable data back to 2002. Not surprisingly, U.S. foreign policy, notably the war in Iraq, has been instrumental in lowering the U.S.’s image in the eyes of the world, but it is not the only cause.

Global support for the U.S.-led war on terrorism continues to decline, at the same time as the United States is the nation blamed most often for damaging the environment.

The survey also pointed to a deepening dislike of American values, ideas and customs — and a growing backlash against American ideas of democracy. In addition, the survey found negative attitudes toward American ways of doing business.

However, in 42 of 46 foreign nations surveyed, majorities say they admire U.S. technological and scientific capabilities. The poll also indicates widespread admiration for U.S. cultural exports — although in many nations, majorities believe that it is bad and worrisome that American ideas and customs are spreading to their nations.

By region, U.S.’s popularity continues to decline in the Middle East, Latin America, China, Turkey and Brazil. America’s popularity in “New Europe” has begun to slip as well, while among traditional allies of the United States in Western Europe, public opinion towards the United States has never been lower.

America’s image in France and Germany has plunged during the past year. Only 30% of Germans and 39% of those living in France have a positive view of the United States — a worrisome trend, considering that Germany and France are among the largest and most profitable markets in the world for U.S. multinationals.

In Britain, the U.S.’s image has sunk to a new low: Only a slim majority (51%) maintains a favorable view of the United States, which is down sharply from 75% in 2002.

Anti-Americanism has rarely been as prevalent and widespread as in the past five years. These circumstances have led many analysts to worry about a possible boycott or backlash against U.S. goods and services.

I am one of those analysts who thought high-profile U.S. brands were at particular risk — but nothing of the sort has materialized. Indeed, U.S. global earnings, as measured by foreign affiliate income, have soared during the past half-decade.

Remarkably, the sinking U.S. image overseas coincided with a more than doubling of U.S. global earnings. In 2006, foreign affiliate earnings totaled a record $291.5 billion — a 170% jump from 2001’s cyclical low. U.S. multinationals reported a synchronized, global profit boom, with record earnings in virtually every region of the world.

In Germany, where the image of the United States has plummeted, U.S. affiliate earnings nearly tripled between 2002 and 2006. During the same period, affiliate earnings more than doubled in France and the United Kingdom.

And the good times roll on: In the first quarter of 2007, U.S. global earnings soared 12% from the same period a year ago, rising to a quarterly record of $75.7 billion. U.S. global earnings are currently running at another record-breaking pace — a trend that flies in the face of the anti-U.S. findings of the Pew survey and many others like it.

What explains the apparent paradox of America’s battered global image on one hand — and booming global earnings on the other?

For starters, strong global demand and a weak U.S. dollar have boosted U.S. global earnings during the past few years. Beyond these cyclical forces, however, other factors are at work.

U.S. global brands — both consumer and business-to-business — remain among the strongest in the world and continue to inspire deep loyalty among foreign customers. In a recent ranking conducted by BrandZ, eight of the top ten and 15 of the top 20 most valuable brands in the world were American.

The boom in global earnings also reflects corporate America’s peerless global reach and the extraordinary success of U.S. firms in building global networks and leveraging global resources, while tailoring goods and services to local tastes.

Many U.S. multinationals deliver goods and services through foreign affiliates that are embedded in local communities. In many cases, these affiliates are just as local as the locals, providing cover during times of rising anti-Americanism.

Strong global capabilities in marketing, logistics, finance and after-sales services have helped offset America’s rogue image. Superior products, especially the U.S. information technology capabilities, have boosted U.S. companies’ global earnings as well.

Finally, the disconnect between the poor image/strong earnings could lie with the survey itself. Foreign attitudes toward Americans are often more positive than attitudes toward the United States as a nation.