They’re a socialist idea that cannot exist without capitalism. Sovereign wealth funds are their name, a fancy title for state-owned investment pools. They come in various shapes and sizes, created by countries as different as Norway and Qatar…which actually aren’t as dissimilar as you’d think.
The leftist plan for sovereign funds is pretty simple: take cash-flows that the state controls and instead of spending it immediately – hello USA congress – invest it in real assets or with asset managers. Sounds good, right? If you do this consistently over years, you end up with something like Singapore’s fund, which is worth around a third of a trillion dollars. That puts it in the top ten.
One presumes that eventually the nut will be large and stable enough that the return on the investments will yield cash back to the people. If this reminds you of the oil royalty system for Alaskan residents, it should. The difference lies in the direct connection between oil out of the ground and a check in the mail. In Alaska, there is minimum government interference in that process. Everywhere else, layers rule.
The disconnect lies in philosophy. Governments do not create anything, and the least thing they create is wealth. Their only income derives from taxing, regulating for fee and forced usurpation of the fruits of capitalism. Adding value, increasing productivity, creating goods and services for which people pay money is neither a socialist nor a governmental function. But the money governments require to support themselves must come from somewhere. Hence their parasitic nature.
The SWF is then just another way of governments controlling what belongs to you. They think that it’s their money to invest, and, even if the idea sounds reasonable, I disagree. They money still belongs to me. Why would I cede responsibility for investing money beyond what the government needs to that same government? Why not return that money directly to me, or just not take it in the first place?
Reality is more nuanced, but not much. Most SWFs are based on the money obtained from resources, mostly oil. That’s the common denominator of Norway and Qatar. Because the oil technically belongs to all citizens (or subjects) the justification for these funds is that it’s the best way to manage the wealth so derived for everyone.
Except. Except that without capitalism, that oil stays in the ground, useless. And when it is recovered, the Alaskan model shows a better way. From an oil reservoir deep underground, via enormous investment, to the end user, from whom the royalty is paid yearly to the owners. No socialist goals. No mandated investment guidelines. No bloated fees. No third-party decisions about how the profits are used.