Call it pothole politics — debate over how to fix the U.S.’s infrastructure: failing commuter railways, crumbling bridges, ancient sewer lines, decrepit electrical grids and, of course, pitted roads. But discussion doesn’t get the job done if there’s no money, and there’s no money. So a think tank, the Brookings Institution in Washington, has come up with a possible solution: Recruit interest from flush sovereign wealth funds like China’s and Abu Dhabi’s.
In a March 11 report, “Rebuilding America: The Role of Foreign Capital and Global Public Investors” (brookings.edu), Brookings urges a budget-strapped U.S. to embrace investments from these national piggy banks, particularly for infrastructure projects and new ventures such as green technology.
Beijing’s $332 billion China Investment Corp. could help fund President Obama’s vaunted plans for a high-speed rail network; perhaps the $430 billion Abu Dhabi Investment Authority could take a stake in bringing back the glory of aging LaGuardia Airport.
To be sure, most sovereign wealth funds are prudent, patient investors, and they don’t pursue overt political agendas, says Darrell West, Brookings’s director of governance studies. “We looked at how they have invested,” he says. “They generally take a long-term perspective and do not seek controlling ownership.”
What’s more, they’ve got plenty of dough. Sovereign wealth funds control some $4 trillion, and economic trends suggest some will become even wealthier.
“In our integrated global economy, capital is going to move across borders,” points out Gordon Goldstein, one of the Brookings report’s co-authors. If the U.S. doesn’t embrace such global investments, he says, other countries will, and they will gain a competitive advantage.
Nevertheless, the notion of the U.S. welcoming national foreign investments as if it were some neo-emerging-markets country may be hard for many politicians to stomach.
Imagine, for instance, if the $70 billion Libyan Investment Authority, founded by Muammar al-Gaddafi’s son Saif al-Islam Gaddafi, owned a big chunk of the Santa Monica Freeway. (It does, in fact, own a small portion of the fabled Financial Times.)
Sovereign wealth funds represent a highly diverse universe of actors, Goldstein admits: “It would be a mistake to characterize them in broad-brush terms.” Not so long ago, nobody would have envisioned multibillion-dollar Chinese holdings in U.S. Treasury bonds.
