22/10/2008 4:07:47 pm
European Wealth Funds? Those who blame the free market for the financial crisis naturally propose more government intervention in markets. French President Nicolas Sarkozy seems to be leading the efforts. Yesterday, he proposed that European countries create their own sovereign welath funds. That is, state-owned funds filled with money from tax-payers, dedicated to purchasing European companies.

Sarkozy claims that he wants to avoid European companies being taken over by foreign owners. He does not, however, cite any negative aspect of foreign ownership or inflow of foreign capital. The proposal is very bad indeed. We should not have a race between the countries of the world regarding which country can be the best at socialising companies.

In fact, among the various government-related causes of the financial crisis, we have the Chinese sovereign wealth funds. China has used its incomes to build giant state-owned funds that purchased US securities. This fuelled the lending in the US and contributed to the bubble. Should we really have more of what caused the crisis?