American Principles as a Catalyst for International Investment

America was founded on a mere idea of opportunity that enticed thousands of people across the soapy seas to nail down new entrepreneurial stakes in the fragile colonies. Blacksmiths, carpenters and farmers spread out to start new businesses to feed their needy families. Even in a global economy the entrepreneurial spirit embedded within our American values has market appeal that can be converted to investment value.

Life, liberty and pursuit of happiness are based on trust. People believe that when they put a dollar in the bank it will be there a few days later, they are charged the price posted for products, hard work still results in increases in wealth, and education opens new doors. Trust glues societal fabric between people, employees-employer, investor-executive, citizen-government, and civilian-law enforcement.

When the fundamentals of trust break down so does the economy. The microeconomic transactions that occur throughout the nation are founded on simple ideas of value and confidence in the future. The dollar is the measure of that trust and is exchanged in good faith among economic elements to complete transactions.

Trust applies to foreign investment as much as it does to domestic commerce. Multinational companies spend a lot of time trying to understand the political and economic nature of nations to make investment decisions. Political instability and mistrust raise the risks of investments that ultimately result in sparser economic wealth generation.

Companies invest in places where the political, cultural, and economic spheres show enough stability to help ensure that their investments will have value in the foreseeable future. Increasing investment and heightened economic activity is one sign of increasing levels of trust. Investors believe that their opportunities are safe and growing.

Laws and values come to define the health of the system. Where laws encourage entrepreneurial activity and protect the rights of people socio-economic assumptions form. It is those assumptions that filter throughout the decision-making lenses that lead people to engage the market at higher levels.

In countries where there are political instability and inconsistent application of laws, you find that economic activity declines. Not only do companies under perform the market, but the countries find themselves in competitively weaker positions as people either disengage from the market or move into the black market.

America is changing and opportunities to build a better society abound if we ensure that trust is created in society. Founding principles applied consistently across our country prompts engagement and stability in the market that is attractive to international investors. Nation building has entered a new era of exploring the power of the human mind and funneling that through our American lens to create greater investment and economic activity.

How Will Political Instability Impact Yemen's Economy?

Yemen’s investment opportunities were not necessarily strong before the recent ousting of the pro-American president by the Shia faction Houthi. That investment climate is even more uncertain now. As one of the world’s least developed nations the loss of investment could push the country further into poverty which contributes to greater in-fighting and instability making tribal regions open to foreign influence at the expense of a centralized government.

The long-lasting impact of investment opportunities will make themselves more apparent in the future as the nations tribes and factions determine what routes they are going to take in settling disputes. Any long-lasting heated conflict will likely ensure that investors do not put their money into a politically unstable nation heightening local fighting over resources. Land grabs and resource confiscation could lead to civil war.

Yemen has always been seen as a risky place for international businesses investment so recent instability shouldn’t come as a surprise.  According to the State Department there are opportunities for investing in sectors like energy, infrastructure, fishery, and real estate (1). The problem is that the government has been fairly unstable for a long time and officials can be influenced through bribery, clansman, and religious loyalties that raise legal risks.

As additional political instability takes precedence in the country investment opportunities for locals will dry up as businesses keep their distance and take a "wait and see" attitude. A study that reviewed 37 countries from 1979 to 2000 found that economic and social-political instability seriously hampered private investment (Escaleras & Kottaridi, 2014). Such decline in investments naturally threw a wet blanket on growth and prospects of the country.

Investors are unlikely to engage in further short-term investments within the country. Private investment will slow leaving a vacuum politically and economically that will likely be played out over Yemen’s natural resources like oil. Foreign investors may not be willing to wait for a country that will be in a protracted conflict. The end result is that Yemen will miss some opportunities and be added to the list of Middle East economic casualties.

Escaleras, M. & Kottaridi, C. (2014). The joint effect of macroeconomic uncertainty, sociopolitical instability, and public provision on private investment. Journal of Developing Areas, 48 (1).