Mark Kleiman notes that back when we were looking at budget surpluses, it was deemed necessary to pass large regressive tax cuts to stave off the socialist dystopia that would surely result from government ownership of stocks (don't ask about the dubious logic that failing to pass large regressive tax cuts would inevitably have this result). What we have now instead are "sovereign wealth funds" (a.k.a. foreign governmnets) buying up equity in American companies. Somehow, though, this is all fine.
« Pushing Fighters | Main | Innumeracy »
Sovereign Wealth
26 Dec 2007 01:00 pm
Comments (12)
the U.S. might create laws which would favor those corporations over other businesses
Right, because nothing like this ever happens now.
It's hard to tell without some context how big a deal this is- in the 80s there was all this talk about how Japan was going to own the whole country, there was even a joke about it in Back to the Future. Needless to say, it didn't happen as people feared- Japanese corporations own a lot of real estate and businesses, but no one argues that it's a problem.
What we have now instead are "sovereign wealth funds" (a.k.a. foreign governmnets) buying up equity in American companies. Somehow, though, this is all fine.
Whoa, that took a hard right turn into nationalist economic populism. Maybe you could arrange a strategic partnership with Malkin on this issue.
I see propaganda posters . . .
Dirty foreigners buying our stocks!
Americans sweating to line Emirati pockets!
First they came for our ports, now they're after our portfolios!
the U.S. might create laws which would favor those corporations over other businesses
Yeah, what SP said: this is absurd. "The U.S.", or rather its corrupt politicians, create laws that favor their patron corporations every frigging day; in fact, that's pretty much the only thing they do beyond photo-ops and grandstanding.
Though personally I don't care whether they do it for the benefit of the domestic fat-cats or Dubai and Singapore-based ones. Same difference to me.
it was deemed necessary to pass large regressive tax cuts to stave off the socialist dystopia that would surely result from government ownership of stocks
Really? I think this was a pretty minor claim among proponents for tax cuts. Avoiding a huge recession in 2001 was probably the big one. And that paying down the debt sounds like a good policy proposal but has reasonably limited tangible benefits.
Ah, "corporations" as left wing bugbear.
Really? I think this was a pretty minor claim among proponents for tax cuts. Avoiding a huge recession in 2001 was probably the big one.
But of course, regressive taxe cuts don't stimulate consumption, which is what we needed in 2001, to avoid a recession, which we didn't.
Really? I think this was a pretty minor claim among proponents for tax cuts.
I remember it being a pretty big claim made by Fed Chair Greenspan, who for some reason everyone thinks is an all-knowing guru.
"Anon"
Ah, "corporations" as left wing bugbear.
It's a not a bugbear, corporations aren't very democratic. Decisions get made at the top and get transferred down, like the military. Sort of fascist.
But corporations provide many services so are sort of a necessary evil, like government.
Plus they have a lot of money, so they can pay whores to spread propaganda and shape the public mind.
These sovereign wealth funds are controlled by some undemocratic folks too (Russia? Gulf Sheikdoms? China?) but as someone pointed out, they are just seeking the greatest return on their money, the biggest bang for the buck - like the Japanese did in the 80s - it's not like they want to control the government.
But I think Matt's point is valid. Think of the US government forming a sovereign wealth fund, it's just looking for the greatest return not political control. I think Bill Clinton briefly floated this idea in regards to Social Security, but quickly withdrew it when people argued it would basically mean the state was appropriating the means of production. So instead of the US government owning the US economy, it will be other, undemocratic governments owning the US economy. No doubt, un-democratic US corporations will have no problem relating with undemocratic governments.
Personally, I welcome our new overlords.
I always found this conservative argument self-refuting - the claim that the problem of large government surpluses could be solved via tax cuts. Greenspan made this claim and every rightwing commentator agreed.
How, in the rightwing universe, is this possible? I thought these people believed that tax cuts increase revenue. If that's the case, then in the Lafferite universe, surpluses can only be eliminated through tax hikes.
Did anybody hear any supply-siders prescribing tax increases as a way of stoving off the socialist utopia of large, enduring budget surpluses?
No?
I'm shocked.
Matt,
You should read Holman Jenkins's column in today's WSJ about sovereign wealth funds: "Living With 'Sovereign Wealth'" (not free -- yet. Have The Atlantic sport you a subscription or pick up the dead-tree version until Rupert Murdoch knocks down the pay wall).
In short, Jenkins says (and I agree) that the SWFs buying non-controlling stakes in American companies is a good thing. He makes an important distinction between buying non-controlling stakes in publicly-traded companies versus buying controlling stakes in sensitive areas (e.g., energy, infrastructure).
"I think Bill Clinton briefly floated this idea in regards to Social Security, but quickly withdrew it when people argued it would basically mean the state was appropriating the means of production"
There's a huge difference between the government taking small, non-controlling stakes in publicly-traded companies (which it has flirted with occasionally, e.g., the call options the Feds took as part of the airline bailouts a few years ago) and "appropriating the means of production". In fact, individual shareholders/capitalists would be heartened by the federal government taking, say, a 3% stake in range of publicly-traded companies. With some skin in the game, the government would have a disincentive to enact populist but economically destructive policies that would lower the value of the government's shares. Similarly, as Jenkins points out in his essay, if every American had a portion of his Social Security money invested in stocks, it would temper destructive populist impulses by aligning the interests of citizen-shareholders and corporations to a greater extent.
"But corporations provide many services so are sort of a necessary evil, like government."
Yeah, right.
Ahem, corporations ARE creatures of the state. In a free society, they wouldn't exist. COMPANIES would exist, with no legal niceties about not being liable for the screwups of their members and no ability to evade individual responsibility by claiming to be a "separate entity".
The only reason foreign countries and corporations are buying up US assets is because the dollar is worth toilet paper, so they have to exchange the tons of it they've received for something actually physically valuable (hopefully - they'll be surprised there, too, eventually, at how little valuable most of the stuff they're buying is.)
This is a direct result of the notion that BOTH liberals and conservatives believe in: the central bank and government management of the medium of exchange.
Which is why I don't distinguish between liberal economists and conservative economists - they're both morons and thieves. They make my little bank robbery look like what it was - revolutionary expropriation.
RSH,
You're a bank robber? Now that's interesting.
If we ever had the "problem" of a government so flush that it had could buy up shares of stock, we could easily eliminate the problem of a federal sovereign wealth fund owning the means of production. Just divide the money by the 50 states, the 94 federal judicial districts or the 435 congressional districts and let the governor of the relevant state select separate investment advisors for each fund (I guess Uncle Sam would control the funds for DC and federal territories).
Some states are too damn big. A single CALPERS-style activist California fund would probably have too much market power, so judicial or congressional districts would be a better administrative unit.
But that's one problem we won't have to worry about for a while.
Comments closed January 09, 2008.
| 
Heads in the Sand
A big difference between the US government owning a big chunk of the stock market and a foreign government owning a big chunk of the stock market is that if the U.S. were to own a company, it would also have control over the laws under which that company operates. This would create a conflict of interest under which the U.S. might create laws which would favor those corporations over other businesses to the benefit of the U.S. treasury, as well as a problem in which the government might use corporations and their profits for things that it would not be politically acceptable through the use of tax dollars.
As it stands, Dubai or Singapore are just operating in the same manner as any other investor. And in any event, the amounts of money that the putative U.S. budget surpluses could have bought would have dwarfed anything that Dubai or Singapore could ever afford.
Posted by Anon | December 26, 2007 1:45 PM