The Public Wealth of Nations: How Management of Public Assets Can Boost or Bust Economic Growth

by Dag Detter, Stefan Fölster

We have spent the last three decades engaged in a pointless and irrelevant debate about the relative merits of privatization or nationalization. We have been arguing about the wrong thing while sitting on a goldmine of assets.

Don’t worry about who owns those assets, worry about whether they are managed effectively.

Why does this matter? Because despite the Thatcher/ Reagan economic revolution, the largest pool of wealth in the world – a global total that is much larger than the world’s total pensions savings, and ten times the total of all the sovereign wealth funds on the planet – is still comprised of commercial assets that are held in public ownership. If professionally managed, they could generate an annual yield of 2.7 trillion dollars, more than current global spending on transport, power, water, and communications.



Based on both economic research and hands-on experience from many countries, the authors argue that publicly owned commercial assets need to be taken out of the direct and distorting control of politicians and placed under professional management in a ‘National Wealth Fund’ or its local government equivalent. Such a move would trigger much-needed structural reforms in national economies, thus resurrect strained government finances, bolster ailing economic growth, and improve the fabric of democratic institutions.

This radical, reforming book was named one of the "Books of the Year".by both the FT and The Economist.

Genres: Economics, Politics, Nonfiction, Money, Government

230 pages, Kindle Edition

First published June 25, 2015

Reviews

[Skut333 · Rating 4 out of 5]

Книга яка має бути на робочому столі кожного урядовця який має хоч якесь відношення до держслужби.
Написана трохи важкувато і тому потребує перечитування окремих розділів. Проте, головна її ідея, що більшість держав не знають чим вони володіють і як отримати з цього кошти є вкрай важливою.
Крім того друга головна теза в тому, що усі без виключення державні підприємства потребують незалежного урядування, незалежно чи вони в держаній чи частково в приватній власності. Важливою особливістю книги є те, що вона не є теоретичними розумуваннями, а наводить цифри та живі приклади при чому як компаній вприватній власності так і державній. Та найголовніше автори демонструють на прикладах де йспішно вдалося впровадити ефективне урядування державним багатством наскільки позитивно це впливає на економіку. Прикро одне, що Україна згадується тут лише як приклад як робити не потрібно.

[Bernise Laurent · Rating 3 out of 5]

I would say that for those who haven't really considered whether public ownership of assets could be used beneficially, the book could be pretty groundbreaking. For those who already have a fairly clear idea of what mixed economics is, it can come across pretty boring. Yet, I do feel like it does serve a bit of an interesting purpose. You could read this, or you could read the sequel by the same author Public Wealth of Cities that goes over pretty much the exact same point, but in a more tangible and more useful format... with some important considerations.

This is what the core argument is: Publicly owned assets have been derided as stagnant and the temptation to privatize everything may seem on the surface as a solution to all governmental agency problems, but this doesn't actually solve anything... and in turn, misses a core opportunity to make use of the the system. Furthermore, the core issues with State Owned Enterprises (SOEs) has been issues with governance structures, rather than the stricter issue of the question of ownership. To this point, the two focal countries for understanding different sort of management styles is the Swedish public asset management portfolio, and Tamaesk in Singapore.

This in turn leads to two necessary steps, and four characteristics that need to be handled: First, there needs to be better calculation of the actual value of publicly owned assets through the adoption of "actual accounting" or Generally Accepted Accounting Principles (GAAP). By genuinely understanding the potential and actual value of the assets that are owned, unused or underutilized assets can be better used for real purposes. This further is emphasized by the need for highly professional management of these organizations.

Secondly, there are three characteristics that need to be taken into account for solid practice: transparency in governance structures to combat abuse, having a clear objective of value maximization, and finally political independence to prevent meddling from public interests.

While there are a lot of ways of structuring public assets from SOEs, to a partially-publicly owned management, to public asset holding companies, or anything in between... the core is simple: Public assets managed professionally should be able to both use the assets for the actual benefit of the public, directly partaking in broader projects to improve citizen well-being, but also ensure it in such a way that doesn't come into conflict with that which is already working in the market. Overall, forming a "public wealth fund" is a core step in the right direction.

Simply put, it's a justification for a sort of mixed economic model while walking backwards from the neoliberal model of capital governance, to which point I feel like it gets some things right and other things a little off. So, I have five comments:

1) The book, insofar as trying to advocate for a more independent, profit-focused enterprise, doesn't really address the political economy issues that are associated with such a change. While I do think that it is better to hold public assets in a manner which tries to maximize their utilization, it has to come in the context of the already existing political culture. Singapore is a great example of a right-wing mixed economy is which government goals and capital organization are aligned.

2) It's focus on profit maximization risks recreating the same issues that private corporations have of overstepping ecological, social, or humanitarian bounds. I think there is justification to say that civilly owned capital could result in broad improvements for the society around it: If you have a plot of land surrounding a train track that is laying fallow, maybe using it for forestry or as artificial wetlands might be a good idea. However, not everything needs to be profit-oriented. Furthermore, by framing everything in a market structure (including the shift towards state capitalism) can easily leave it to be lead astray.

3) From a further political economy perspective, the emphasis on political independence is a double-edge sword. By distancing the organization from traditional political structures allows it to have more freedom and dynamism to adapt to a wider variety of circumstances, hopefully to improve capital utilization. But by doing so, it also detaches it from one of the core vehicles of change, which is electoral behavior. Now, this really gets into a democracy-is-corrupted-if-biased-good-if-not perspective... but still needs to be addressed.

4) He isn't a part of Western socialist thought so I won't fully fault him here, but the theory could be very well what Polanyi would describe as a counter-movement: change that happens which shaves down the rough edges of a capitalist market economy, without actually addressing the structural issues of a capitalist market economy. It isn't an excuse to not put in regulations or cooperative ownership for other parts of the economy, and you have to be careful that the reliance on cash from these institutions embeds the government further in abuses of a capitalist economy. Still... counter-movements that help people are still helpful, and there is no excuse to not do them.

5) He doesn't address the history of mixed economics, but I am also not really sure that is a problem. Like, he is suggesting a specific model of mixed economics so trying to understanding the evolution from feudalism to mercantilist economies of the Gilded Age isn't exactly necessary... But still.

Overall, slightly disappointing but decent book. Read Urban Wealth of Cities, it has more nuanced thoughts, even though much of the book is mostly the same, including the core points.

[Carlos · Rating 2 out of 5]

The main point of the book is that public assets should be better managed. In many countries, public assets are larger than public debt but usually transparency only applies to liabilities. The authors propose a "national wealth fund" as a middle point between state management (with all the known problems) and privatisation. The book explains some good ideas, such public owned land catalog, that could be implemented immediately in many countries to improve governance. Nonetheless, the main gap in the argument is the political economy to achieve such an outcome.

[Kelly · Rating 3 out of 5]

Good, but their second book on Cities is better!

[Neil Bradford · Rating 1 out of 5]

Great topic, unreadably bad book.

[Frank af Petersens · Rating 5 out of 5]

Brilliant and convincing argument for better management of neglected assets that elegantly sidesteps the divisive issue of privatisation vs. public ownership.

[Warren · Rating 3 out of 5]

The authors make an interesting argument that state owned enterprises should be consolidated into one commercial entity to ensure that governments (and politicians) focus on governing and not trying to be capitalists. This, the authors argue, will ensure that public assets are run for the benefit of, and in the interest of, citizens. The authors cite some interesting examples but overall it feels like the book is light on theory. Indeed, the theory behind state owned enterprises and public assets is dealt with in a cursory manner with a focus more on examples of the authors' arguments in action. This approach was probably adopted to avoid the size of the book spiralling out of control. However, it does beg the question: it appears to work in practice, but does it work in theory?

[Mike Bloomberg · Rating 5 out of 5]

I haven't read a proposal for public policy / fiscal management more transforming since Henry George and Progress and Poverty. Very much looking forward to "The Public Wealth of Cities" and would wager that we will see Detter's proposal for wealth-fund managed assets in the United States in the coming years.

[Myles · Rating 3 out of 5]

Succinct advocacy for better management of public wealth. Not exactly beach reading, though.