A USA Sovereign Wealth Fund?

In 2007, Tyler Cowen raised an intriguing possibility.

I have yet to see the evidence that trade has a significant negative impact on middle class wages, but for sake of argument assume it is true. However benevolent it may sound, strengthening the social safety net would not be my policy recommendation number one. After all, if Samuelson-Stolper factor price equalization is the main mechanism at work, wages would have a long way to fall downwards and if anyone in the middle class is to keep working, the safety net must eventually be cut, not increased. You might think we can fund all these trade-losers by taxing capital but of course the incidence of taxes on capital sometimes falls on labor, not to mention that at some point the Laffer Curve kicks in.

Is not the appropriate policy recommendation to create a budget surplus, create a U.S.A. Sovereign Wealth Fund, and invest the resulting capital in the corporate winners from this entire process? In other words, we would be giving the trade-losers a more direct share in capital. Since output is rising and wages are falling, the return to capital must be rising; let's make money off of that.

Given the state of America's public finances, this is perhaps better described as an intriguing impossibility. And as once-mighty sovereign wealth funds in the Gulf and elsewhere evaporate, this does seem like a less attractive option on the surface. But NYU sociologist Dalton Conley has a thoughtful discussion of the USA sovereign wealth fund concept that is well worth a look. In the old days, policy entrepreneurs wanted the U.S. to mimic Japan or Germany. Conley asks us to look to ... Qatar.

With the current consumption-based approach to social and economic policy, there will always be a disconnect between the macroeconomic health of the U.S. economy and the economic fortunes of the typical American family. That's because technology-induced productivity growth often results in a windfall for the few at the top and little or no increased income rewards for those at the bottom. By contrast, if everyone were an investor, national productivity gains could instead be distributed in the form of dividends. When productivity went up, we could actually work less and take more time off when our kids were born or our parents were ailing, for instance. Such a work-deemphasizing approach would represent nothing short of a whole new economic policy-one better fit to a post-industrial knowledge economy and a fragile global ecosystem threatened by our consumerist culture.

A pipe dream? Hardly. Many other countries already enjoy such benefits. Qataris, Norwegians, and Emiratis all enjoy standards of living similar to ours without having to work much (or fret over the existence of jobs).

Conley goes on to sketch out what an American SWF might look like and how it would be governed. If the idea strikes you as zany, well, keep in mind that zanier things have happened.

Presented by

Reihan Salam is a policy advisor at Economics 21, a columnist for The Daily, and a blogger for National Review Online.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In