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What's weird about sovereign wealth funds? It's very straightforward. Wealth should be shared more equally and that's what building a sovereign wealth fund achi

What's weird about sovereign wealth funds? It's very straightforward. Wealth should be shared more equally and that's what building a sovereign wealth fund achieves.

crdoconnor 9y ago
There's nothing weird about them per se, it's just that the UK really has no reason to build one. It's simply a way of taking a country's wealth and instead of spending it on infrastructure, public services, industry or welfare - it gets spent on assets (usually foreign). The good parts: * It lets a small country (e.g. Singapore) exert a stabilizing influence on its economy when it is buffeted by large external economic forces outside of its control. * It lets a country that has natural resources (e.g. Norway) both A) set some of that wealth aside for the future and B) mitigate the massively damaging effects of dutch disease (a seriously underrated economic effect). This is termed "sterilization". The bad parts: * If you buy overseas assets they can be seized. I think this is why Venezuela isn't really capable of building a sovereign wealth fund. If they bought a shopping mall in New York state 10 years ago with their oil wealth it is likely it would simply have been seized. * If you're putting money into a sovereign wealth fund you're not spending it on the welfare of your citizens. I used to live in Singapore and the contrast between the way it treated its poorest citizens and the amount of money pushed into Temasek is disgusting and shameful. * Sovereign wealth funds attract corruption like flies on shit and the management of it is where the principal/agent problem reaches its nadir because it's so easy to surreptitiously suck wealth out if you exert control or influence over it. I think Norway's is probably the only sovereign wealth fund in the world that is free from corruption. Even then I wonder. Since the UK is not a small economy and can absorb external shocks more easily than Singapore and it's not going to suffer from dutch disease what's the point? Creating yet another entry point for financial parasites in the City of London to extract taxpayer wealth?

What's weird about sovereign wealth funds? It's very straightforward. Wealth should be shared more equally and that's what building a sovereign wealth fund achieves.

crdoconnor 9y ago

There's nothing weird about them per se, it's just that the UK really has no reason to build one. It's simply a way of taking a country's wealth and instead of spending it on infrastructure, public services, industry or welfare - it gets spent on assets (usually foreign). The good parts: * It lets a small country (e.g. Singapore) exert a stabilizing influence on its economy when it is buffeted by large external economic forces outside of its control. * It lets a country that has natural resources (e.g. Norway) both A) set some of that wealth aside for the future and B) mitigate the massively damaging effects of dutch disease (a seriously underrated economic effect). This is termed "sterilization". The bad parts: * If you buy overseas assets they can be seized. I think this is why Venezuela isn't really capable of building a sovereign wealth fund. If they bought a shopping mall in New York state 10 years ago with their oil wealth it is likely it would simply have been seized. * If you're putting money into a sovereign wealth fund you're not spending it on the welfare of your citizens. I used to live in Singapore and the contrast between the way it treated its poorest citizens and the amount of money pushed into Temasek is disgusting and shameful. * Sovereign wealth funds attract corruption like flies on shit and the management of it is where the principal/agent problem reaches its nadir because it's so easy to surreptitiously suck wealth out if you exert control or influence over it. I think Norway's is probably the only sovereign wealth fund in the world that is free from corruption. Even then I wonder. Since the UK is not a small economy and can absorb external shocks more easily than Singapore and it's not going to suffer from dutch disease what's the point? Creating yet another entry point for financial parasites in the City of London to extract taxpayer wealth?