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“There should be no excuse for those in power to dismiss these ideas.”
CHRIS GILES, ECONOMICS EDITOR OF THE FINANCIAL TIMES
THE ECONOMIST & FINANCIAL TIMES
BEST BOOK OF THE YEAR | 2015
by dag detter & stefan fölster
Wealth of Nations
How Management of Public Assets Can Boost or Bust Economic Growth
About the book
This book shows that public wealth is vast and could be put to much better use.
Most countries’ public wealth is larger than their public debt. While managing debt has become a matter of great concern during the financial crisis, public wealth remains opaque and largely ignored.
The polarized debate between privatizers and nationalizers has missed the most important point – the quality of asset management.
According to our calculations an achievable improvement in public wealth management would yield returns greater than the world’s combined investment in infrastructure such as transport, power, water and communications.
This book explores how some countries are experimenting with institutional setups, such as National Wealth Funds that achieve sounder management and cleaner democracy.
Foreword – by Adrian Wooldridge
An extract from the Foreword written by Adrian Wooldridge, The Schumpeter Editor of The Economist
It is not every day that you come across a new idea in public policy. After the burst of creativity of the 1990s statecraft is becoming sterile. The left is retreating into the big government ideas of the 1970s. The right is failing to address the great problems of our time such as rising inequality. The left demonises the use of market-mechanisms to improve the state. The right demonises the use of the state to address market failures. At a time when tech-entrepreneurs are reinventing the world public policy-makers are reinventing the wheel.
The idea of the public wealth of nations is just such a new idea. It identifies a problem that few people had realised exists. It shatters the tired categories of left and right. And it suggests a relatively pain-free way of boosting economic growth.
The argument rests on a striking observation (amply backed up in the text): that governments around the world have billions of dollars of public assets, ranging from corporations to forests to historical monuments, that are usually badly managed and frequently not even accounted for at all. Policy makers have focused on managing debt since the financial crisis of 2007-8. But they have largely ignored the question of public wealth. In most countries public wealth is larger than public debt: managing it better could help to solve the debt problem while also providing the materiel for future economic growth.
Dag Detter and Stefan Fölster shatter the tired categories of left and right. To right-wing fundamentalists they are dangerous statists. To left-wing diehards they are latter-day Thatcherites. To the rest of us they are brave pragmatists. They argue that they polarised debate between privatisers and nationalisers has missed the point—that what really matters is the quality of asset management. The focus when it comes to public wealth should be on yield rather than ownership. They calculate that improvements in public wealth management could yield returns greater than the world’s combined investment in infrastructure such as transport, power, water and communications. They also note that improvements in public wealth management could help to win the war against corruption. They thus address at a single stroke two of the great problems of our age: the shortage of infrastructure investment thanks to the overhang of the public debt and the halt in the advance of democracy thanks to the prevalence of bad government.
Public Wealth of Nations and Dag Detter on BBC Business Live
by dag detter & stefan fölster
Wealth of Cities
How to unlock hidden assets to boost growth and prosperity
About the book
Mobilizing existing resources to meet the current and future needs of cities.
Crumbling streets and bridges. Poorly performing schools and other social services. These are common themes in cities, which too often struggle just to keep the lights on, much less make the long-term investments necessary for future generations.
It doesn’t have to be this way.
This book by two Swedish experts in public finance describes a new way of restoring economic vitality and financial stability to cities, using steps that already have proven remarkably successful in some cities. The key is unlocking hidden social, human, and economic wealth in cities. A focus on public wealth shifts attention and resources from short-term spending to longer-term investments that can vastly raise the quality of life for many generations of urban residents.
Most cities could more than double their investments with smarter use of their commercial assets
A crucial first step is gaining a proper understanding of the city’s balance sheet—an understanding that that too many cities now lack. With this in hand, taxpayers, politicians, and investors can better recognize the long-term consequences of political decisions and make choices that mobilize real returns rather than relying on more taxes, debt, or austerity.Even poor cities own large swathes of
Even poor cities own large swathes of poorly utilized real estate, or they control underperforming utilities and other commercial assets. Most cities could more than double their investments with smarter use of these commercial assets. Managing the city’s assets smartly through the authors’ proposed Urban Wealth Funds—at arms-length from short-term political influence—will enable cities to ramp up much-needed infrastructure investments.
Foreword - by Dan Doctoroff
Cities have the assets to fill their coffers, to capitalize social development and human capital and avoid unnecessary poverty, unemployment and crime. Twenty-first-century cities should not have to face shrinking populations or falling life expectancy.
This is a book I urge people to read carefully and absorb
Having been Deputy Mayor for Economic Development and Rebuilding for the City of New York in the aftermath of 9/11, I know how innovation and smart thinking can rescue a city. We completely rethought the way New York used our assets, especially land, to dramatically strengthen the city’s physical and fiscal base.
This book calls for cities, not just a city like New York, to unlock the value of public assets as a core urban strategy. Doing so can uncover hidden social, human and economic wealth.
Dag Detter and Stefan Fölster make a powerful argument that cities can finance their future and emerge stronger by placing public assets under more professional guidance. Every city owns swathes of poorly utilized real estate or control underperforming utilities. Smarter choices could meaningfully enhance the value of investments.
The urban strategy called for here is not geared only for big cities, those with a robust technology sector, or the ones featured regularly on urban innovation blogs. All cities throughout the United States and globally are sitting on real wealth. Their assets just need to be realized through better management and, as with any portfolio, knowing what to sell and what to hold.
Public wealth is exactly that: something valuable to us all
Shifting attention and resources from short-term spending to investments that can improve the quality of life has already led to remarkable success in some cities.
At Sidewalk Labs, the urban innovation company that I founded in partnership with Alphabet, we work at the intersection of the physical and digital worlds to help make cities more efficient. I see every day the remarkable things that cities can accomplish; likewise, how public-sector commercial assets are often not tapped to the city’s best advantage. Cities need clearer goals. They need to track results and accelerate what works.
This is a book I urge people to read carefully and absorb. Whether a city manager, a devoted urban dweller, or simply someone who cares about the future of cities, the arguments developed throughout these pages will resonate. Public wealth is exactly that: something valuable to us all.
About the authors
Is the former President of Stattum, the Swedish government holding company and Director at the Ministry of Industry, responsible for the restructuring of the government-owned portfolio of commercial assets. He is an advisor to governments, investors and international organisations such as the IMF, World Bank and OECD. He has worked as an investment banker in Europe and Asia and served as a Non-Executive Director on a range of boards of private and public companies.
What if – it didn’t take higher taxes or more austerity for governments to build bridges and repair crumbling infrastructures?
Detter & Co can help you mobilise the additional funding.
Stefan Fölster is a Swedish economist and the President of the Swedish Reform Institute, as well as an Associate Professor at KTH Royal Institute of Technology in Stockholm. Fölster is the author and co-author of several books on economic reform, including Robotrevolutionen, which looks at the winners and losers in the digital age, and Renaissance of Reforms, Fölster was born in Germany, the grandchild of Nobel Prize winner Gunnar Myrdal and of Alva Myrdal, studied economics at UCLA in Los Angeles and at Oxford. He has had positions as an economist with the Ministry of Finance in Sweden as well as the Chief Economist at The Confederation of Swedish Enterprise.