by David McDonald — May 7, 2012
Much of my life as an academic is spent excavating around the edges of well-established research questions, but occasionally something pops up that is so obvious and so compelling I wonder why it has not been investigated before.
I’d known for some time that some public pension funds had been investing in privatized services (e.g. the Ontario Teachers’ Pension Plan buying up water companies in Chile) but I hadn’t realized how pervasive it was or what the potential was to do something more progressive with this money.
And we are talking about lots of cash; trillions of dollars generated by public sector employees and employers, and money produced from natural resources or trade surpluses in the case of sovereign wealth funds. This is money that is publicly owned, but increasingly run by private investment funds with little or no consultation with members or with citizens. Where is all this money going and why can’t we tap into it for the betterment of public services?
Some of the answers to these questions are discussed in our recent paper The Cupboard is Full: Public Finance for Public Services in the Global South. The authors argue that a mere 1% of current public pension funds and sovereign wealth funds could generate $100 billion in assets to kick-start an ‘infrastructure bank’ that could then be used to lend money to cities and countries that desperately need capital to build basic public infrastructure. Additional funds could be leveraged from aid agencies and donors.
In return, pension and sovereign wealth funds would generate reasonable rates of return for their members, while avoiding fluctuating and destructive investments in more speculative and politically sensitive areas.
In support of better public services
Moreover, unlike the neocolonial decision-making of the World Bank, this infrastructure bank could serve as a beacon of progressive support for public services, providing advice on how to create equitable tariffs, advance environmentally sustainable practices, encourage public participation, and so on. In short, it could be an institution that provides a very different sort of ‘knowledge’ than that offered by the neoliberal financial institutions, promoting public ethos and international solidarity over narrow and short-term cost recovery goals that too often ride roughshod over basic human rights.
It is naïve to suggest that the creation of such a fund would be easy, but surely we can make better use of the trillions of public dollars sloshing around out there.
David McDonald is co-director of the MSP and professor of global development studies at Queen’s University in Canada.