Private Wealth and Public Goods: A Case for a National Investment Authority

By Hockett, Robert C.; Omarova, Saule T. | Journal of Corporation Law, Spring 2018 | Go to article overview

Private Wealth and Public Goods: A Case for a National Investment Authority


Hockett, Robert C., Omarova, Saule T., Journal of Corporation Law


I. INTRODUCTION II. FINANCING COLLECTIVE GOODS: A REVISED CONCEPTUAL FRAMEWORK        A. Public Goods and Public Action: Rethinking the Theoretical          Link            1. The Standard Account of Public Goods: A Brief Recap            2. A Revised Account: Collective--Including Public--Goods              as Solutions to Collective Action Problems        B. Public-Private Provision of Collective Goods: Rethinking          Solutions            1. Collective Goods and Controllability Problems            2. Collective Goods and Capturability Problems            3. Synthesizing Capturability        C. The Missing Link: Rethinking the Goals and Architecture of          Public           Finance III. PUBLIC INVESTMENT AS A POLICY TOOL: INSTITUTIONAL EXPERIENCE        A. Credit Mobilization: The Reconstruction Finance Corporation        B. Asset Management: Sovereign Wealth Funds IV. REIMAGINING PUBLIC INVESTMENT: A NATIONAL INVESTMENT AUTHORITY        A. Purposes and Functions of the NIA: An Overview        B. Credit Mobilization: The National Infrastructure Bank        C. Asset Management: The National Capital Management Corporation V. INSTITUTIONAL DESIGN: KEY CONSIDERATIONS        A. Organizational Issues and Accountability Mechanisms            1. Organizational Lines            2. Personnel Issues            3. Accountability Mechanisms and Political Legitimacy        B. Funding and Operational Issues VI. CONCLUSION 

I. INTRODUCTION

Much American electoral and policy debate now centers on how best to reignite the nation's economic dynamism and rebuild its competitive strength. Some of the rhetoric heard in this debate has exposed deep fault lines in the country's social and political fabric. Decades of systematic erosion suffered by domestic industrial capacity and a corresponding loss of well-paid manufacturing jobs, a shrinking social safety net, a steady dismantling of the regulatory state and a decline in overall government capacity--these are among the many structural factors that have brought rising economic inequality and dysfunctional political dynamics to contemporary America.

This Article rests on the premise that, ultimately, the solutions to all of these problems depend on the ability of the united states to address its most pressing public policy challenge: the challenge of ensuring structurally balanced, sustainable, and socially inclusive long-term economic development. (1) Only by continuously facilitating the long term growth of its "real" economy (not merely short-term speculative finance), and by more widely spreading the benefits of such growth, can America rebuild its true strength as an economy and as a polity.

This is an extraordinary challenge, demanding a correspondingly extraordinary institutional response beyond the familiar menu of corporate tax breaks and government subsidies to private business ventures. This Article proposes precisely such a response. It designs and advocates a new, though not entirely unprecedented, public institution. This new federal instrumentality, which we call a National Investment Authority (NIA), would be charged with the critical task of devising and implementing an ongoing and comprehensive long-term development strategy for the United States.

Patterned in part after the New Deal-era Reconstruction Finance Corporation, in part after modern sovereign wealth funds, and in part after private equity and venture capital firms, the NIA we envision is an inherently hybrid, public-private entity. By exploiting the unique advantages of the federal government as a market actor--its vast scale, high risk tolerance, lengthy investment horizons, and direct backing by the full faith and credit of the United States--the NIA will harness and channel more private capital and expertise than is presently possible into ambitious publicly beneficial projects. (2) In effect, the NIA will operate as an economy-wide public-private partnership (3) with one especially distinctive feature: it will reverse the usual model of "public money, private management" by drawing freely invested private money to publicly-managed investment vehicles. …

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