How Governments Lose Trillions Mismanaging Property
Jul 13, 2015 11:39 AM EDT
By Peter R. Orszag
In all the dire talk about public debt, far too little attention is being paid to public assets. Helping to right that balance is a new book, "The Public Wealth of Nations," by Dag Detter of Whetstone Solutions and Stefan Folster of the Royal Institute of Technology in Stockholm.
Governments across the world have an estimated $75 trillion worth of commercial assets -- roughly 50 percent more than the $54 trillion in global public debt -- and these assets are typically quite poorly managed, Detter and Folster show. In some cases, governments have actively tried to hide their value, often so that government officials can personally benefit from handing out favors.
Measuring the value of public assets is admittedly challenging. In their calculations, Detter and Folster include only commercial assets, such as bank accounts, pension funds, government-owned corporations and toll-based infrastructure. They exclude national parks, historic buildings and the like. The total value of all public assets is thus actually higher than $75 trillion.
(William Buiter, who is the chief economist at Citi, my employer, properly notes that the division between commercial and noncommercial assets is less clear-cut than it might seem. A national park, for example, may have some commercial value if it contains natural resources and the government allows them to be exploited.)
In general, public assets are not managed well, and the returns from better management would be enormous. A 2 percentage-point increase in the return on public commercial assets would generate an additional $1.5 trillion a year, a sum equal to total global spending on research and development.
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http://www.bloombergview.com/articles/2015-07-13/how-governments-lose-trillions-mismanaging-property
