December 25, 2007
Sovereign wealth
Back in 2001, when Alan Greenspan wanted to help George W. Bush bankrupt the federal government and greatly worsen the after-tax distribution of income with an appallingly imprudent and inequitable set of tax cuts, Greenspan argued that the then-current budget surpluses constituted a threat to the capitalist order. If the surpluses continued, said Greenspan, eventually the federal debt would be paid off. Then money would start to pile up in the government's coffers, and there wouldn't be anyplace to invest it except the stock market. (Obviously false, of course.)
But government ownership of the means of production is socialism (booooo! hisssssss!!!!!) and therefore if the feds owned some index funds we'd all wind up ducking the secret police and queuing up for bread. Therefore, since fiscal responsibility is the road to serfdom, we should just go ahead and rob from the poor (and the near-poor, and the middle class, and the prosperous, and the merely rich) to give to the greatly rich (the top 1% of the income distribution) and the appallingly rich (the top 1/10th of 1%).
The fact that Greenspan was able to say all of that with a straight face testifies to his lack of anything recognizable as a conscience. The fact that the press and the Democrats in the Senate (yes, I'm looking at you, Mr. Baucus) let him say it without laughing out loud testifies to their lack either of common sense or of backbone.
Anyway, it happened. We have been protected, apparently permanently, from any threat that the debt will be substantially reduced, let alone repaid in full. Mr. Bush's stated target of reducing the annual deficit — not the debt, just the annual increment to the debt — to half its peak level will almost certainly not be met.
In the meantime, the financial-services sector, in desperate trouble due largely to the collapse of the housing bubble that very same Mr. Greenspan helped to inflate, is looking for quick infusions of equity. The infinite hunger of the American people for imported goodies, and for suddenly-expensive imported oil, continues to pump dollars and dollar-denominated assets into foreign hands. So we see Merrill, Citigroup, et al. selling substantial equity states to the "sovereign wealth" funds of states with either fiscally responsible governments (e.g., Singapore) or big pools of oil (e.g., Dubai).
Right. So instead of our own government owning shares of American companies, we have foreign governments (most of them thoroughly undemocratic) owning shares of American companies. Obviously, that has nothing in common with socialism. And of course it's much safer to have foreign dictators in a position to influence American corporate policies than it would be to have American elected officials in that same position. I hope Mr. Greenspan and his fellow fans of plutocracy are happy.
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