Please Don't Let the Government Invest Funds in the Stock Market, part II
I am all for restructuring the whole social security system, but, as I have written before, we cannot let the government invest social security funds in private equities. The potential for manipulation and creeping socialism are astronomical. Its easy to picture fights over whether the social security funds should be invested in tobacco makers, gun makers, hospitals that conduct abortions, Domino's Pizza (that donates funds to oppose abortion), Haliburton, etc. etc.
I have always used government-funding of universities as an example -- the government uses the leverage of this funding (and the threat of its withdrawal) to force all kinds of regulations on universities. Today, we have a good case example that is even more directly applicable.
Over the past several years, Calpers (the California state workers retirement fund) has been a great example of how government control of equity investments can be a disaster. In the case of Calpers, their huge pension investments automatically make them one of the largest investors in each company in their portfolio. Calpers has used that power wisely at times, promoting improvements in corporate governance, but has also used it astronomically poorly.
Under Sean Harrigan, Calpers portfolio has been unbelievably politicized, up to and including having the portfolio use its ownership in several grocery chains to support striking members of the grocery union run by... Sean Harrigan. Professor Bainbridge has a couple of good roundups here and here.
If we are change how social security funds are invested, let individuals make their own investment choices.
