A Sovereign Negative Wealth Fund

The entire point of a sovereign wealth fund is in the name: wealth. The fund is supposed to capture wealth for investment to create new wealth.

The government clearly does not have $25B of cash just lying around, meaning that it is likely debt sponsored.

But, wealth is not debt. Wealth is the net of the creation of value after you pay for the inputs. Debt costs are part of those input costs, which includes paying the debt plus the interest.

What was announced by Carney as a "sovereign wealth fund" is not at all like Alberta's oil fund, the Saudi fund, Norway's oil revenue funded pension funds (worth $2.2 Trillion), or any of the other so-called sovereign wealth funds. These other funds are made up of pools of money for investing, much like a hedge funds or Canada's pension funds. That money is built-up from part of the surplus over time, the net surplus from capital value creation or a portion of wage. They are true pools of wealth with contractual obligations for returns to their owners and so are invested to gain those returns, all with an associated risk.

The new fund announced by Carney is going to be filled with borrowed money and money from the transfer of public wealth to the private sector, backed by the taxpayer. That makes it the exact opposite of these other wealth funds.

Indeed, it is a negative wealth fund.

What Carney has created is a vehicle for cheap credit (borrowed at government rates) for lending to private capital to own what was already owned by the public. Siphoning off wealth, not creating it.

The program is much like the other pools of money the federal governments had established recently such as the Canada Growth Fund (the investments vehicle in CDEV), Canada Infrastructure Bank (CIB), the innovation funds for commercialization of university research, and procurement funds attached to the DIS. Pools of money driving the privatization, redirecting, or destruction of public wealth.

It is also the same process that allows "P3s" to work as a subsidy to profits. The profit rate guarantee is essentially the difference between the price of the private market corporate debt and the public-backed cheap debt.

The debt is "cheap" because it is backed by the public.

This negative wealth fund is no different from all the other failed funds where government acting like a private a bank instead of investing directly with some ownership over the output.

In fact, the Venn Diagram with the CIB is basically a circle, making it a repeat of the CIB which is broadly known not have fulfilled its mandate:

• Both funds focus on infrastructure that can (in theory) generate revenue and mandated by law to attract private investment (in theory)
• What started as a 5:1 private to public investment target was changed to 2:1 and the reality was less than 1:1.
• They both overlap in targeted sectors, including energy, transportation, and telco
• The Trudeau Liberals supposedly also "seeded" CIB with $35B.
• Last summer, the PBO estimated the CIB will spend less than half of this in its 10 years of existence.

There is a clear consensus that the CIB failed.

The funds exist to subsidize the profits of commercial investment operations for things that would either have been built by the private market or were not commercially viable. If it was commercially viable, it would likely have been done without government involvement. If it is not commercially viable, it is highly inefficient to try to get investment through subsidized profit rates. It is a vain hope that private capital might want to invest time and resources into something it does not want to.

Of course, some investment will flow. Some predatory capital will seek out the best terms for their profit subsidy, but it will be through a process of profit on transfer, extracting financial wealth rather than building wealth.

Over time, and depending on need, the government will also consider other sources of capital for the Fund, such as unlocking the full value of federal assets. – Canada.ca press release

Selling-off private assets and using the proceeds to incentivize the privatization of more public assets.

Airports and Ports are the first on the agenda, as was announced in Budget 2025.

The government is even open about how money in the future will get into the fund in recent interviews: Asset Recycling.

Welcome back to 2016, the last time the government tried and failed to use this to generate investment.

The weird addition to this fund over the CIB is "allowing" Canadians to put their savings ("non-tax" money because it is by choice) into a fund that makes gains for those investors.

This is just a fancy form of regressive taxation. It is a tax because the asset that is being privatized was owned by all the public. The privatization moves it into fewer hands based on ability to pay. And, there are financial benefits only to those who can pay into the fund. Which is just like the regressive nature of all private investment returns.

Folks who cannot afford to invest are also the people most likely to be worse off from privatized asset. They are more likely to be service users disproportionately impacted by user fee hikes, or as workers with suppressed wages and working conditions.

What about if the investment "fails"? Well, the rest of the public is acting as a backstop to the profits (just like in many P3s) and so it is even more regressive, the result is just the loss of public wealth.

There is an added "benefit" for the government padding investor profits this way. What would have been marked as "savings" is now "investment spending" as it is put to work for capital as a subsidy. A little additional GDP growth from a trick of the reclassification of savings.

Working people already expect a "return" on their taxes. It comes in the form of resilient infrastructure, decent jobs, and quality public services.

Instead on developing these needs, the government would rather come up with yet another privatization scheme that transfers wealth from the bottom to the top of the economic scale.

Finally, this new fund will not solve the root problem of the lack of private investment in this country. Investment in productive output in capitalism (and the jobs that go along with that) follows the potential for profit on the investment.

These funds might address desires for financial profits, but do not address the collapsed demand for Canadian products and output. Large piles of money will not create sustained profitability needed for private capital to invest in output here.

There are workable alternatives, but they must start with a serious industrial strategy, one that does not rely on private capital from the start. Canadians want the government to get actively involved in the economy, to shift production to provide for what we need while supporting the workers and their communities navigating that transition.

Achieving what Canadians need will require more than large cheap piles of credit, a fancy slogan, and some hope some one else will do it for us.