Divestment kerfuffle highlights perils of government ownership of means of production

The most common definition of socialism is “government ownership of the means of production.” The Rio Grande Foundation and many economists have expressed concerns over the 40 stakes the Administration has taken in private companies. We continue to oppose the federal governments moves and urge the Trump Administration to sell those stakes.

And then there’s New Mexico with $75 billion under control of the State Investment Council, much of which is invested in private businesses. Recently, progressive Sen. Jeff Steinborn called for New Mexico’s SIC to divest itself from Elon Musk’s various businesses. The SIC has roughly $188 million invested in Musk’s firms, representing about 0.25% of the council’s $75 billion portfolio.

Jon Clark, the head of the SIC, rebuffed Steinborn aggressively in a letter stating among other things, “The Council’s overriding legal and fiduciary responsibility is, without exception or political consideration, to optimize risk-adjusted returns for our beneficiaries, the majority of which are New Mexico school children and families.” However, the SIC has previously withheld investment funds from South Africa, Sudan, and Russia although the SIC doesn’t seem to avoid controversial investments in tobacco or other “sin” industries.

Regardless of what YOU think should be done with the money, our view is that the State shouldn’t control this money in the first place. The permanent funds were created under a false belief that oil and gas were “running out.” This money rightly belongs to New Mexicans, not the government. It should be returned in the form of eliminating a variety of taxes (income, GRT, and even property taxes), not held by government to fund future government operations.

If you think Steinborn is going to be the only politician of either party who wants to assert political control over the SIC’s funds, that is wishful thinking. It is ALSO wishful thinking that the $75 billion being invested by the SIC is the highest and best use of this money in a state with a stagnant population, failing education system, and a highly undiversified economy. It won’t be easy to change the State’s approach to holding onto all this money, but it is worth doing.