Chapter

The Politics of Sovereign Wealth Funds

Christopher Balding

in Sovereign Wealth Funds

Published in print February 2012 | ISBN: 9780199842902
Published online May 2012 | e-ISBN: 9780199932498 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199842902.003.0004
The Politics of Sovereign Wealth Funds

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The primary concern of politicians and economists stems from the potential for the state to interfere in business matters and either protect or favor a certain business. The interests of government and business are fundamentally different interests. However, if governments favor certain business this creates the possibility that national interests may become corporate interests instead. This chapter explores the fear of politics and sovereign wealth fund becoming closely intertwined, the evidence that they have or not have merged, and the primary concerns such as national security that states might use sovereign wealth funds as instruments of state power. While the evidence that sovereign wealth funds have acted historically as instruments of state power or in collaboration remains thin, the logic behind the fear is not irrational. Drawing upon specific cases where the profit maximizing investment logic and the public policy interests of states have intersected, the politics of sovereign wealth is studied in both the international and domestic context. The sheer size of financial strength make sovereign wealth funds defacto political instruments in both the domestic and international context.

Keywords: sovereign wealth fund; public policy; political economy; sovereign immunity; taxation; international relations

Chapter.  13773 words. 

Subjects: Financial Markets

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