Wednesday, October 24, 2007
Sovereign Wealth Funds
It's clear that there is unease about the prospect of large investments being made in the U.S. and European economies by funds that would be controlled by the state--would the Kremlin be a passive investor, seeking mainly to receive returns, or would it want to utilize its financial clout for political purposes?
Kudrin told the Wall Street Journal reporter at the lunch that new rules and codes of conduct were necessary, mostly to reassure the public in the US and Europe. "The US administration is saying that it will restrict the movement of capital [and investment] if they're not happy with the rules," he said.
But later he also made it clear, "Sovereign wealth funds should be subject to the general rules of the free movement of capital"--meaning that Russia would not accept any sort of two-tiered system which would disadvantage Russian investment.
It's clear we need to start thinking about what we mean when we say an investor has a right to a return--and whether that is measured only in terms of dividends but also in terms of influence and control over a company.
The fuss over sovereign wealth funds points to a more interesting phenomenon. Namely, how do we treat nations when they start acting like firms.
I suspect that some nations view sovereign wealth funds as vehicles for expressing national interest. Others, however, are just looking for a return. Should we encourage one form of behavior at the expense of the other?