At least one President would share your dicscomfort with the public/private blurring of SWF’s:

“…it is folly in one nation to look for disinterested favors from another… There can be no greater error than to expect or calculate upon real favors from nation to nation.”
- Washington’s Farewell Adress, 1796

that’s an excellent point, 2fish

in this case, having individuals that have a different philosophy of banking in the mix is healthy.

even if they still are all obsessed with ‘running the world’…

Something that concerns me is power and wealth concentration since I don’t think it is healthy for too much power and wealth to be concentrated. However, getting a balance is very tricky to do, because if you squeeze out power in one area, it tends to go somewhere sense. For example, in the United States in the early 20th century, there was a concerted effort to get power out of the hands of the trust-controlled shareholders, but this had the effect of moving power to professional managers, and the relationship between boards of directors of your average American corporation and the shareholders resembles that of the Politburo and the electorate in communist countries.

Similarly large parts of the world financial system are in the hands of administrative bodies like the IMF or World Bank that are as far as we know pretty unaccountable to anyone.

Personally, I think that adding Arab princes and Chinese bureaucrats to the mix of people that “run the world” creates a healthier distribution of power since it adds diversity to the mix of the people that runs the world. If you restrict membership to “reliable democracies” you end up with people that went to the same schools, and see the world in the same way, and that makes things less democratic. If you have a group of people that agree on the fundamental issues, then democracy is pointless and a waste of time.

I do though think Sarah Palin’s approach of spreading the Alaskan (oil) wealth wasn’t all bad.

like it’s not like they’re not subject to oversight and regulation anymore… now if only we had a financial system something, it might be said, the boe pioneered!

But neither is a private South Korean company. I can understand why you’d have qualms about a Chinese company making large investments in the United States, but what confuses me is why you’d think that a state-owned enterprise would have fewer ulterior motives than a private Chinese corporation. Yes, the theory is that a private Chinese corporation ought to be for-profit, but CEO’s and boards of directors often have ulterior motives that make have nothing to do with profit.

bsetser: Because governments are different — and I think their are legitimate reasons to doubt whether for example the CIC would ever invest in the US in ways that would potential shift jobs from the China to the US, even if that produced higher returns.

But I also doubt that Li Ka-Shing would allow Hutchison Whampoa would shift jobs to the United States in a way that would damage Hong Kong, even if that produces higher returns. For that matter, I really doubt that the Board of Supervisors of a major German corporation such as BASF or Deutsche Telekom would allow this to happen, or that a South Korean family controlled chaebol such as Samsung or Hynduai would could or would close factories in South Korea and move them to the United States simply to achieve higher returns.

I think that there is this assumption that the US corporate form or norms are or should be standard throughout the world when in fact they are not. The US corporation and it’s relationship to the state is quite unique. The belief that the corporation has no particular duty to anyone except for the shareholders is also a rather peculiar American belief that quite simply isn’t shared by most corporations in the world.

Something to think about is that we know far more about the inner workings of the Chinese Politburo and State Council than we do about the inner workings of the Lee family that controls Samsung or for that matter the internal politics of General Motors or Sony.

Dr. Dan — yes, it really was mostly China and Saudi Arabia. Algeria too — but on a smaller scale.

2fish — governments can and do invest with a dual purpose at home. but governments investing abroad with dual mandates worry me. the main objective of China’s government isn’t to support US economic development — or maintain US financial stability. Ditto for the Gulf. Rather than expecting foreign governments to pursue key US policy objectives, we should expect the US government to do so – even if that means not always making money.

Foreign governments should be expected to pursue their own interests, not to support US policy objectives. One such interest is returns. And I can see a case that allowing sovereigns to invest in risk assets helps them achieve that goal. But the bargain that allows this on the scale that some are contemplating should be one — in my view — that also restrains the capacity of the institutions that invest abroad for returns to pursue other goals. Why? Because governments are different — and I think their are legitimate reasons to doubt whether for example the CIC would ever invest in the US in ways that would potential shift jobs from the China to the US, even if that produced higher returns.

Why? This sort of notion of what institutions should and shouldn’t do just doesn’t make any sense to me, and it would help if you explain where this comes from.

I would understand why it would cause nervousness if you have a foreign investor make investments to major public infrastructure, but I really fail to see why is should make much of a difference if the investment is done by a Hong Kong tycoon or the Government of Hong Kong.

Also in some ways, you are already too late. In talking about the Bear-Stearns merger and the recent moritorium on forclosures, Jamie Dimon has said that one of the motivations in putting JP Morgan capital on the line was civic duty. I’m sure people will question his sincerity, but it’s a hard argument to make that he *shouldn’t* have this notions of public service, and should just make as much money as possible, however possible.

Conversely, now that the Fed has acquired AIG, it has a legal obligation to look at corporate returns. For that matter the “profit driven private” investment bank model is tend, and the model that has seemed to work is the “Federal Reserve System” which is a very complex mixture of public and private entities. A blurred mixture of public and private precisely describes the Federal Reserve Bank of New York.

Surely you don’t think that we’d live in a better world, if corporations were driven solely by profit maximization, or if government didn’t think about economic return.

bsetser: I am uncomfortable blurring the line between private and public too much.

I don’t see why. The line between private and public in colleges and universities, public utilities, and pension funds is very blurry, and all of them work well. There are reasons to be careful when you mix private and public money, but there are ways of dealing with those issues.

In any case, the I think the question of the role of the US government and private industry is going to be a very major issue over the next few years. It is not out of the question for example, that for the US to have a for-profit auto corporation is simply impossible, and that if the US wants an auto industry that they will have to basically subsidies it in the way that railroads and aerospace are subsidized by the government.

Also, I do have the very uncomfortable feeling that the reason a lot of economists don’t like mixing public and private is that it makes their economic models stop working if people and institutions have complex motivations. Once you have complex motivations, then you can no longer figure out what is going to happen by graphing utility curves or assuming profit maximization.

But forcing society into a particular structure just because it makes it easier to draw certain graphs seems like the wrong way of going about things.