Subscribe to enjoy similar stories. Not long ago America’s main concern with sovereign-wealth funds was how to regulate these large pools of money controlled by foreign governments. Now, seemingly overnight, the hot new idea in Washington, DC, is that America should join the club.
It is easy to understand the allure. A well-managed SWF can, in theory, let the government direct more cash towards its strategic aims, without—if returns are strong—the need to raise taxes. In practice, achieving this balance is difficult.
In America a SWF looks like a risky solution to a problem that does not truly exist. As is often the case these days, credit for the idea’s popularity goes to Donald Trump. In a speech on September 5th Mr Trump said that he wants to create an American fund if he wins November’s election.
Characteristically, he promised it would be the greatest such fund in the world. Critics were just starting to mock the notion when it turned out that Democrats were thinking along the same lines. President Joe Biden’s advisers have been working on a blueprint for a fund to promote America’s national-security interests, including by investing in emerging technologies.
To understand SWFs—and why America does not need one—consider two issues: the source of their wealth and how they use it. Traditionally, funds have been the preserve of countries flush with either commodities (Norway and the United Arab Emirates) or foreign-exchange holdings (China and Singapore). You might assume that the creation of a wealth fund is proof that these countries are rich.
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