Why are we only talking about government debt, why not assets? Looking for a tool to help revive economic growth politicians do not have to look very far. Many governments around the world have a substantial portfolio of commercial assets yielding often a very small return to its ultimate owner -- the taxpayer. Making these assets sweat is an under utilized device to help revive the economy and create sustainable economic growth, whether we are talking about China, Europe or even the US.
State-owned Commercial Assets ('SOCAs') are probably one of the largest asset classes globally, worth many times over the value of private equity and hedge funds put together. These forgotten assets are less visible and often lacking professional management, with an almost unlimited upside if managed correctly.
Worldwide their total value is estimated well over USD 12 trn, or representing 20 per cent of global GDP in value terms. However, in some BRIC-countries such as India and China it could be more than half of GDP. Even in the US there is a wide range of state-owned commercial, including US Postal Services, Amtrak, commercial banks and financial institutions, as well as commercial assets held by state or local governments.
These state-owned assets have the potential to affect our lives both as taxpayers and through their effect on the development of the global economy. They are the suppliers of vital services such as energy, transportation and finance.
Can a developed economy really afford poor performance of key infrastructure and compensate the drag they have on the economy with taxes? In contrast, some emerging economies see them as the engine for growth and put vast financial resources behind their international expansion. Both sides of this question, be it in a developed or an emerging economy have an effect on economic growth and should therefore deserve our attention.
Privatization is the instinctive response from a financial perspective when putting the spotlight on commercial assets owned by a government. However, at the moment each side of the coin has their reason for not proceeding down the road of privatization and selling off their assets in a rush.
The concept of a state acting as a professional owner is not new. Singapore has shown how to organize these in a separate portfolio, Temasek, their professional holding company and National Wealth Fund. Following the financial crisis in the 90's, Sweden led the way as one of the first countries to actively manage its portfolio of commercial assets, including restructuring the postal services, railways, electricity and telecoms to become one of the most proficient in Europe. As a result profits materialized within a year and the value of the portfolio quickly outperformed the local stock market.
The start of such transformation is no doubt -- 'transparency'. A financial overview through an aggregated Annual Report is fundamental and would be the self-evident start for any similar undertaking in the private sector.
Secondly, separating the assets away from political influence under a centralized command, a National Wealth Fund, with clearly defined objectives will achieve results in a surprisingly short time.
China has undertaken a phenomenal transformation of its state assets. The federal portfolio is divided between SASAC, the ministerial body managing the large industrial assets and Huijin, the holding company managing the commercial banks. Further commercial pressure would nevertheless help create a more balanced and sustainable domestic economic development in China, such as introducing more commercially based funding of the state companies, gradually decreasing its dependence on the state commercial banks and thereby allowing more bank financing to support the private sector.
In the MENA-region, state commercial assets correctly managed in countries such as Egypt and Tunisia could also act as a tool for social transformation to form a new social contract post the Arab Spring.
Significant political will is needed to challenge the vested interests wanting to preserve these assets as a forgotten resource. The current financial crisis is a unique opportunity to finally demonstrate the financial upside outweighing the political risks of such a structural reform -- to the benefit of taxpayers, employees and the world economy.
Each asset should be able to stand on its own through sales and/or fees. That includes the post office and the national parks.
For the post office, having a door to door mail and package carrier that can deliver to anywhere in the United States, including the deepest reaches of Alaska, is important but Congress needs to get rid of the lease and let it run like a business which means charging a market rate based on the cost of delivering an individual piece of mail. Bring someone in who experience in running a business successfully and give him or her free reign to do what is needed. Eliminating the anti-layoff provisions would be the first step. The second step would be to eliminate all the rules that hamper the post office increasing rates as costs require. Costs of course could be lowered by implementing the proposals to integrate postal service into retail outlets, which would allow for customer convenience and cost savings.
For the national parks, I'm not suggesting an entrance fee but for parks where camping is allowed those fees would have to rise, as would other use fees for the parks. This could be supplemented by other forms of revenue.
Also, the NPS takes in more than the gov't budgets back.
I don't think you made a single useful recommendation here.
But I got one for you; the Energy Companies are cleaing our clocks in terms of oil leases and the like.
Somehow thru the revovling door system, they get their people placed into the correct places so that they get sweetheart deals, and 'mistakenly' sign bad leases that cost us billions & billions of $$
Then whistleblowers get attacked, and Congressmen run interference when anybody tries to breakup this racket.
Beautiful, well developed campuses with world renown research and technology programs would be subverted into profit generating labs.
We cannot allow it, even one time.
But it's making a lot more sense than the Tea Party or Americans for Tax Reform.
Wow! More state-owned assets than Hedge funds and private equity taken together. Could that be because the wealth of retail tax payers around the world in sum still exceeds the wealth of the small minority of high risk return seekers?
In other words: there IS still a global middle class paying taxes. Isn't that just wonderful?
Another thing, I can't tell if he is talking about doing things like charging something "more reasonable" for extraction fees or grazing rights on public lands. They ARE pretty low, right now. But if this if for parkland, it is a bad idea to allow such things to occur at all, as the planet badly needs more nature preserves--to help slow down the die-off of so many species. Letting species die is like drawing down principle rather than living off of interest, to use an investment metaphor.
And have you ever seen the government sell off assets and get a good price for the items? What does the term Government Auction bring to mind? So if the Government starts selling off things like Property in various Cities do you think these properties will generate near market value prices?
Me neither. This is just another way for the Rich and Powerful to take US property and make a profit.
That is an avenue open to us, and yet largely untapped.
Second, a tax floor. Every adult citizen is responsible for a certain minimum amount of tax - perhaps it's $50. No longer should you be able to get back more than you put in - you should always be giving at least $50 when it's all said and done.
Just that floor... 310 million in America, 45% pay no tax - that's 139,500,000 - times $50 - almost 7 billion per year.
We need to get our financial house in order. Everyone has to pitch in to do so.
I like it all, however $7B doesn't make a dent- but there is an important equity issue
Selling our community assets to private concerns opens the door to insider-trading type abuses.
Cheney and his crew would own every open inch of land if we were to allow this type of heist.
Do not even think about it.
There is the other side of the coin - managing it better.
Not one.