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On September 2, 2008, a group of leading sovereign wealth funds (SWFs) agreed on generally accepted principles and practices. The process that created the so-called Santiago Principles is important in its own right, as a milestone on the way to what might become international financial architecture. Since SWFs rose to prominence two years ago, they have been trapped in sterile domestic arguments between national security and open investment. These have obscured SWFs' significance and the governance challenge they present. The challenge reflects the power shifts and culture clashes of financial integration, which, thanks to capital flow reversals, no longer looks like an exercise to remake the world in the Anglo-American image. Integration goes beyond opening borders to trade and investment. It entails assimilating public capital in private markets on a vast scale, dealing with new forms of financial organization, and marrying financial systems premised on very different ideas about the role of the state in the economy. The task of governing global finance entails making coherent, legitimate, and accountable a patchwork of public laws, private codes, bureaucratic networks and institutional remnants left in last century's wake. Because SWFs embody so many recent shifts in finance, the new principles go to the heart of the governance task. Their ultimate success or failure will be equally telling. In the meantime, states that had played a limited role in shaping the norms of international finance have taken the lead writing the rules. Competitors came together in a policy coordination forum, and in a substantive, non-hierarchical relationship with established international institutions. Funds from wildly different political systems have had to negotiate domestic and external demands, and reconcile conflicting visions of mixing public and private.

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