Recently there have been numerous articles in the press about Sovereign Wealth Funds, Many of these articles have been about the size and power of these funds. The reality is that these things are basically a disaster, but not for the companies or countries they invest in. Rather they are a disaster for the country that provided the funds. To understand why, you have to ask yourself some questions.

By definition Sovereign Wealth Funds are set up by politicians. Have you ever known any politician anywhere who is really good at managing money? Most of these funds are not transparent. They issue no reports and are answerable only to a few government officials. If there are a few people are around a huge amount of money with few rules, what do you think will happen? Why are these funds around anyway? Are the roads, schools, airports, universities, and hospitals in China, Russia and the Middle East so good that they do not need any money invested in them? If the economy in China is growing so fast, why does China think it can make more money by investing in the US? And why are they investing in banks that have been so badly managed that they are losing billions? Why would guidelines help? These things are owned and operated by sovereign countries who are not accountable to anyone. Why should they obey any guidelines? The only funds who would follow the guidelines would be funds like Norway’s, who don’t need the guidelines, because they are already transparent and subject to democratic oversight.

William Gamble
Author: Freedom: America’s Competitive Advantage in the Global Market
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