An extract from the Foreword written by Adrian Wooldridge, The Schumpeter Editor of The Economist
It is not every day that you come across a new idea in public policy. After the burst of creativity of the 1990s statecraft is becoming sterile. The left is retreating into the big government ideas of the 1970s. The right is failing to address the great problems of our time such as rising inequality. The left demonises the use of market-mechanisms to improve the state. The right demonises the use of the state to address market failures. At a time when tech-entrepreneurs are reinventing the world public policy-makers are reinventing the wheel.
The idea of the public wealth of nations is just such a new idea. It identifies a problem that few people had realised exists. It shatters the tired categories of left and right. And it suggests a relatively pain-free way of boosting economic growth.
The argument rests on a striking observation (amply backed up in the text): that governments around the world have billions of dollars of public assets, ranging from corporations to forests to historical monuments, that are usually badly managed and frequently not even accounted for at all. Policy makers have focused on managing debt since the financial crisis of 2007-8. But they have largely ignored the question of public wealth. In most countries public wealth is larger than public debt: managing it better could help to solve the debt problem while also providing the materiel for future economic growth.
Dag Detter and Stefan Fölster shatter the tired categories of left and right. To right-wing fundamentalists they are dangerous statists. To left-wing diehards they are latter-day Thatcherites. To the rest of us they are brave pragmatists. They argue that they polarised debate between privatisers and nationalisers has missed the point—that what really matters is the quality of asset management. The focus when it comes to public wealth should be on yield rather than ownership. They calculate that improvements in public wealth management could yield returns greater than the world’s combined investment in infrastructure such as transport, power, water and communications. They also note that improvements in public wealth management could help to win the war against corruption. They thus address at a single stroke two of the great problems of our age: the shortage of infrastructure investment thanks to the overhang of the public debt and the halt in the advance of democracy thanks to the prevalence of bad government.