Whole lotta shaking going on…

Ashby Monk

The entire planet is apparently shaking. The FT reported yesterday that the US financial system is about to suffer a shake up. The Washington Post notes the big shake up in Japan after Sunday’s national election. Shake ups are even happening today in Korea and Nigeria. Even the shaky are being “shaken up.” Apparently, the shaking has also hit some of the biggest SWFs in the world: the WSJ reports today that Norway’s SWF is being shaken up, and the FT reports that Singapore’s GIC is being shaken up. What’s going on?

My guess is that the economic volatility over the past few years has led to some profound changes to the global economic architecture, which the media has all agreed to refer to as a “shake up.” (I’m just a humble blogger without any real journalism credentials, but I think the term “shake up” needs its own shake up — see Tom Ricks’ article Bring the Pane for an interesting take on a similar phenomenon.) In the aftermath of the crisis, we are going to see economies and actors change, restructure, augment, alter, replace, amend, streamline and reshuffle institutional structures and governance practices.

With respect to the SWFs, the crisis has offered these funds an opportunity to examine internal practices and make appropriate changes. This has already happened in Alaska, China, Korea, Qatar, Temasek and many more. In the end, these changes will hopefully result in SWFs stopping bad practices and implementing good practices. Conceptually, I think it’s interesting to think that market forces are driving these government institutions to think about how to streamline and improve operations; a sort of internal creative destruction for public sector actors. In this case, however, the Schumpeterian entrepreneurs are injected into the SWFs (as just happened in Norway and Singapore) rather than challenging them from the outside…

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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