A US Sovereign Wealth Fund Would Be Industrial Policy Mission Creep

Introduction

The concept of establishing a US sovereign wealth fund (SWF) has been gaining traction in recent years. Proponents of SWFs argue that they can provide numerous benefits, such as diversifying investment portfolios, mitigating price volatility, and funding long-term infrastructure projects. However, there are also concerns that SWFs could lead to mission creep, whereby they are used to pursue industrial policy objectives rather than purely financial goals.

SWFs and Industrial Policy

Industrial policy is a government interventionist approach that aims to promote certain industries or sectors of the economy. Governments may use a variety of tools to implement industrial policy, such as subsidies, tax incentives, and trade protection. SWFs could potentially be used to implement industrial policy by investing in specific industries or sectors that the government deems to be strategically important.

Mission Creep

Mission creep is the tendency for government programs or agencies to expand their scope or objectives over time. This can happen for a variety of reasons, such as political pressure, bureaucratic inertia, or a lack of clear oversight. SWFs are not immune to mission creep, and there is a risk that they could be used to pursue industrial policy objectives that are not in the best interests of the fund beneficiaries.

Examples of Mission Creep

There are several examples of SWFs that have been used to pursue industrial policy objectives. For example, the Norwegian Government Pension Fund Global has invested heavily in renewable energy companies. The China Investment Corporation has invested in companies that are involved in strategic industries such as energy, infrastructure, and telecommunications. These investments are not necessarily in the best interests of the fund beneficiaries, as they may not be the most profitable or efficient use of the fund's assets.

Conclusion

The establishment of a US SWF is a complex issue with both potential benefits and risks. While SWFs can provide numerous benefits, there is a risk that they could be used to pursue industrial policy objectives rather than purely financial goals. It is important to carefully consider the potential risks and benefits of a US SWF before making a decision about whether or not to establish one.