Are Sovereign Wealth Funds Good? (+) Can Sovereign Wealth Funds Achieve Socialism?

Today we learn about social/sovereign wealth funds, their effects, and whether or not they could achieve socialism. Enjoy!

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Thanks for watching everyone. Feel free to leave questions, comments, and your general thoughts about my analysis or this issue in the comments below.

0:00 (1)(1) Introduction
0:10 (1)(2) Why would a state manage an investment fund?
1:44 (1)(3) Aren’t investment funds risky?
3:30 (2)(1) Should governments be trusted to manage investments?
4:17 (2)(2) Norway’s Sovereign Wealth Fund(s): Introduction
4:45 (2)(3) Norway’s Sovereign Wealth Fund(s): The Land Endowment
4:57 (2)(4) Norway’s Sovereign Wealth Fund(s): Government Pension Fund Norway (GPFN)
6:08 (2)(5) Norway’s Sovereign Wealth Fund(s): The Oil Fund/Government Pension Fund Global (GPFG)
8:42 (2)(6) So… Should we governments be trusted to manage investments?
9:15 (2)(7) Diversification of Wealth
10:26 (2)(8) Constructing a Sovereign Wealth Fund
11:06 (3)(1) Can sovereign wealth funds achieve Socialism?
11:46 (3)(2) Is Norway a good empirical example of ‘Wealth Fund Socialism’?
13:54 (3)(3) Could a sovereign wealth fund control a majority of the economy?
16:46 (4)(1) Closing Thoughts

[MBrowningHB]

On the point that a large enough social wealth fund might incentivize the government to prop up large inefficient businesses: when you own the entire stock market, you own not just the large inefficient businesses, you also own the competitors to the large inefficient businesses. the social wealth fund would actually be incentivized to have the more efficient competitor depose the less efficient businesses as that would be the return maximizing move. for example, John D. Rockefeller’s wealth doubled when the large and inefficient Standard Oil was broken up.

[MinecraftMonkey]

I mean what I think you're fundamentally missing is a mixed approach. I don't think anyone actually suggests that an SWF could have ownership in 100% of domestic firms, however, it fills a decent chunk of that (as you mentioned with the Oslo fund holding around 10% ownership despite only being allowed to since 2020) and mixed with nationalisation/local ownership of key utilities such as water, rail, mail, energy, transport etc. with cooperatives thrown into the mix I think you'd probably be looking at a heavy amount of the economy being "socially owned".

At the end of the day if we achieved all this and even 40-50% of the economy was still privately owned but heavily unionised with elements of ESOP/worker board representation then I don't think many modern-day people on the left would actually care.

Good video still though <3

[godminnette]

The over centralization of investment sourcing, whether it's through state or a monopolistic asset manager like BlackRock (and the firms that vote with BlackRock nearly 100% of the time when they own shares in the same firm), is just a bad idea. We already see many studies on the effects of passive investment funds as they become a larger and larger share of where money is invested compared to active investment: metrics are used to determine a set of firms that should be invested in, everyone invests in them, and the firms become a more isolated block that move together in the stock exchange. They become less competitive, firms become less likely to leave or enter the block, etc.

States can play a supportive role in setting good metrics for economic success and ensuring that firms feel the effects of negative externalities to better hit those metrics. But I suspect too large of a sovereign wealth fund will just slow any momentum towards most metrics one would use to measure a good economy, growth entirely aside.

[tomray]

Hey man! I love your videos. I love the SWF idea even if we just create a small index fund for the energy sector that owns 0.5 stock in each company. I used to be a lot more socialist, but I become a lot more socdem when I found where most of the good research is, not just aesthetically appealing values

[gerardoberdin]

Trustworthiness is a big question. If honest to goodness is existing everything follows but not what is in contrast.

[anthonytom-duyquang]

Great video! I think one more criticism that could be made against SWFs that own close to 100% of the domestic assets would be that it would hurt the incentives for higher productivity. That's because the social dividends to everyone in society would crowd out the profit bonuses in more productive firms, so there really is no incentive to do better as business owners.

I myself would only be advocating for SWFs to own a maximum of 40% of the domestic assets to reduce inequality between sectors with different capital intensities. No single socialist model of ownership can dominate society, and we should be looking at the appropriate type of social ownership best for each industry, whether it's SOEs, SWFs, worker cooperative ownership, or consumer cooperative ownership.

[gnomebody]

What I don’t like about socialists is they only seem to care about achieving socialism. I do not care what economic system we use as long as it benefits the most amount of people.

[MstlyHarmless]

Educational video as usual.

For MMT, Norway’s SWF is functionally a way to manage inflation while supporting its high levels of employment. Kroner remitted to the government via the fund are effectively a tax, and foreign currency remittances allow the government to spend in fx markets without putting pressure on the domestic currency.

MMT is not opposed to SWF, but points out that it is a macroeconomic management tool, and is not related to the government’s capacity to spend. I’ll see if I can find something short to link in discord later.

[EvanWilson-fj]

I live in MA and Gov. Healy and the previous administration invested our surplus funds into an account gaining higher interest. We are now using those interest payments to fund social spending projects. Is this basically the same idea just on a smaller level?

[kvikende]

Love the pronounciation of folketrygdfondet. Such a beautiful word.

[Eulerfromthefuture]

is it possible to a country that dont have oil reserves or anything like that to build a successful sovereign wealth fund?

[sharann]

You missed one major point. The financial Balances (or Saldenmechanik in German). Norways high surplus of savings are causing massive debts for the rest of the World. The Surplus is usually accepted for Oil exporting countries as for Russia, Qatar, Saudi Arabia etc.

But not every country can do this, after all everyone is dependent on their own productive capability.

[SergeantKal]

They're a great enforcement of restraint. You just need to keep the public's hands away from raiding the treasures. Overall, I think it comes down to a question of social values. Is your nation able and willing to moderate its own in order to achieve an outcome of stability?

As an American working in real estate, I often see all these houses that we built that aren't being respected both as an asset *and* as a liability. I've reached the conclusion that it's just another industry in which we've over-indulged our vain need to spend money extravagantly. If we'd never exploded our housing stock to such an extent, we'd actually have taken some better care of the inventory. And all of that productivity could've been directed somewhere better; less fleetingly wasteful.

[Eulerfromthefuture]

is it possível to states within a country build something similar?

[GodKJB]

If Larry Fink is the CEO of BlackRock, who is the owner of blackrock?

[RandomGuy-pizl]

The two lines at the bottom of the screen overlap. Please fix this, it hurts me

[PhilosophicalZombieHunter]

Dude, Venezuela had problems 2 years before 2016. The Obama sanctions on Maduro were in march 2015 for the human rights violations during the protests in 2014.
Also, Venezuela tried to diversify. They encouraged 258, 000 coops to start up and a variety of different plans to incentivise the formations of new businesses based on a socialist model. The problem is that the country was poor and they needed the oil money more urgently than the richer Norwegians did... and.. coops are not very productive (agriculture output went down 70% over a 10 year period while the population grew by 33%) while some of the incentive plans cannibalised the existing private businesses.

[stlouisix]

Pope Pius XI,  Quadragesimo Anno (# 120), May 15, 1931: “Religious socialism, Christian socialism, are contradictory terms; no one can be at the same time a good Catholic and a true socialist.”🇻🇦

[piratesocialist]

I don't really buy the point against an economy encompassing SWF. By just breaking up the fund management in competition, allocation efficiency isn't a concern anymore.

[realdanrusso]

i think your understanding of socialism relies way too much on the state's role in it