All around the world, free enterprise is spreading. China, India and Russia, all former bastions of state control, are now beacons of helter-skelter capitalism and entrepreneurship. It's a safe bet that at no time in human history has so much of the world's industrial capacity been in private hands. And for this we can thank the powerful forces unleashed by free trade, the wider adoption of market capitalism, and the growing competition and interconnectedness of the world's economies.

But these same forces are leading to a rising wave of governments and government-affiliated entities snapping up assets and enterprises that used to belong to the private sector.

In countries that are resource-rich or export powerhouses, governments and government-controlled entities have amassed huge pools of capital. A report issued last month by Morgan Stanley economist Stephen Jen estimated that funds such as the United Arab Emirates ADIA ($875 billion), Russia's stabilization fund ($32 billion) and Singapore's Temasek Holdings ($100 billion) collectively hold $2.5 trillion in assets — a sum equal to about 18 percent of the value of the S&P 500.

The funds' managers have generally been content to invest in safe assets such as bonds. But in recent weeks, the money that Americans ship abroad for merchandise and petroleum has been washing back onto our shores in new ways. General Electric recently sold its plastics unit to Saudi Basic Industries Corp. (SABIC), which is 70 percent government owned, for $11.6 billion. On May 20, the private equity firm Blackstone Group announced that China's State Investment Co. is buying a 10 percent stake for $3 billion.

This phenomenon isn't entirely new. In 1996, Norway's government, planning for a day when its North Sea petroleum bounty would slow to a trickle, began plowing oil revenue into a mutual fund, which is now worth about $311 billion — or about $67,000 per Norwegian.

China, which has a whopping $1.2 trillion burning a hole in its coffers, has so far been content to invest in U.S. government bonds and bonds issued by quasi-government agencies such as Fannie Mae. But like any smart investor, it is looking to diversify. And as more shoes and dishwashers are made in China and shipped to the United States, as more (and more expensive) oil is pumped from the sands of Saudi Arabia and shipped to India, as Russian nickel producers ship more metal to Brazil, the volume of cash on government balance sheets will rise.

FINDING A GREATER FOOL

In a long-running bull market like the one we're having, profiting is all about finding a greater fool — i.e., a naive investor willing to pay a premium for an already high-priced asset. Portfolio managers on Wall Street are salivating at the idea that China's government may start rolling cash into the S&P 500 index, for example.

But there are complications. Many of the governments starting such funds have shown a propensity to intervene in their domestic economies and capital markets. And when governments own companies, that creates the potential for geopolitical mischief. Hugo Chavez has used the Venezuelan government's shares of Citgo, the gasoline distributor, to poke his fingers in the eyes of the U.S. government. In Russia, Vladimir Putin has used state control of energy companies as a political tool against domestic enemies and a diplomatic tool against Russia's neighbors. Imagine two private equity firms bidding on a set of assets owned, controlled or influenced by the Chinese government. One is the Blackstone Group, of which the government owns 10 percent; the other has no government connection. Which has the leg up?

Americans don't seem to mind that foreigners own 45 percent of U.S. publicly held debt, in the form of low-yield government bonds. After all, as long as we pay the interest, the debt doesn't entitle the foreigners to any say in how we run our business. But stock investors have a say in how the corporations they own are run. The business media are filled with stories about shareholder activists using small stakes — 5 percent, 10 percent — to agitate for changes in management or policy. One could imagine a day when the Chinese or Saudi government is a top shareholder in blue-chip companies.

NATIONAL SECURITY

What's more, the foreign state-affiliated companies tend to cluster in industries that have a bearing on national security: logistics, infrastructure, oil, petrochemicals, airlines. Remember the outrage when Dubai Ports World wanted to buy a British company that operated U.S. ports? Or when the Chinese-government-controlled petroleum company CNOOC tried to buy Unocal in August 2005? Expect more of these episodes. China is thought to be setting up a $300 billion investment fund — $300 billion buys you Microsoft, or Coca-Cola, PepsiCo and McDonald's.

Other concerns arise from the prospect of foreign governments acquiring big chunks of corporate America. Fortune 500 companies such as General Electric are comparatively enlightened employers when it comes to issues of gender, race, sexual orientation and religion. Can anybody say the same about Saudi Arabia? What kind of future might a female Jewish engineer with GE plastics have at SABIC?

Some of the fears engendered by rising foreign ownership of American assets are certainly overblown. Foreign companies, even ones controlled by foreign governments, aren't likely to acquire U.S. companies and then cart off their assets, fire the employees and ship the jobs overseas. To the contrary, they invest in American firms precisely to gain access to the U.S. market and the U.S. workforce.

But the greatest impact is likely to be psychological. The vast sums of money being deployed by foreign governments remind us of two uncomfortable facts, also ironic byproducts of globalization. Partly because of our huge trade deficit, the dollar isn't nearly as strong as it used to be, so many foreigners view the United States as a sort of global bargain basement. And the fact that the big hitters in the game are Chinese, Indian or Saudi reminds us that while the United States is clearly the richest and most powerful nation on Earth, we Americans no longer have the field to ourselves.

Daniel Gross writes about business and finance for Slate, the online magazine at www.slate.com. He wrote this commentary for The Washington Post.