France announced that they will start a $25 billion investment fund to help strategic industries from being bought by foreign companies. The EU said they will scrutinize this plan to make sure that it does not interrupt the free flow of capital. Right.
The new form of protectionism is with financial capital flows and not just trade. Firms are in the need for capital and instead of receiving it from private sources governments will move in to fill the void. What constitutes strategic industry. The usual definition has been military but the introduction of a country SWF may include any industry that a government views as important in the long-run.
Protecting industries is nothing new but it i now being taken to a new level with the French initiative. The question is whether taxpayers want to be in the investment business when there is a private alternative available.
The new form of protectionism is with financial capital flows and not just trade. Firms are in the need for capital and instead of receiving it from private sources governments will move in to fill the void. What constitutes strategic industry. The usual definition has been military but the introduction of a country SWF may include any industry that a government views as important in the long-run.
Protecting industries is nothing new but it i now being taken to a new level with the French initiative. The question is whether taxpayers want to be in the investment business when there is a private alternative available.
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