It gets too little MSM and even new media attention but state capitalism in the form of “sovereign wealth funds” constitutes a most serious threat to freedom. How serious? The Financial Times editorial board concluded it poses dangers beyond national security. Why?
The sheer volume of money placed at their disposal – ING estimates that they manage $2,200bn, which could grow to $7,000bn to $9,000bn by 2015 – adds a new dimension to the perennial sensitivities of cross-border buy-outs. German Chancellor Angela Merkel, in calling for a European system to vet acquisitions by these funds, responds to genuine concerns over their opaque nature and potential to act through political motives. . . .Yet the rapid growth of sovereign wealth funds poses risks beyond that of national security. There are worries over competence within some funds; concerns that their scale and ability to affect asset prices could lead to market volatility; and suspicion that they could help countries preserve a favourable currency regime. If decisions are swayed by political considerations, they could also undermine market discipline that matches rewards to sound corporate governance.
The transparency cure advocated by the editors may be a necessary component of a comprehensive defense strategy needed to meet such a threat, but it is NOT a sufficient one. The Dubai Port World debacle demonstrated the weakness of the CIFUS model the EU is considering adopting. Nor has EU acceptance of state “golden shares” do more than prevent an outright takeover of a small number of so called strategic assets.
I wish I had an outright answer. I do not. I do know that one (or probably more) must be found if freedom is to survive. For with minor exceptions (such as Canada and Norway), these sovereign funds belong to dictatorships (China, Russia, oil producers) are bound to be used to further their survival by expansion.
Fortunately, European leaders are beginning to recognize the problem. Can Americans forever stay behind?
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