State investment is playing an important role for the future of international politics

From China to France and Singapore, sovereign wealth funds and state-owned enterprises have helped transform states into major global owners of capital. What are the consequences for the global political economy? The ‘new’ state capitalism of the 21st century is much more transnational and diffuse than a geopolitical reading suggests. Milan Babic proposes to look at the consequences rather than the immediate motivations of foreign state investment, which are hard to decipher and generalise. In his study, he uses fine-grained firm-level data across the globe.

 
States play different roles within the economy: they create markets, sustain price stability, regulate competition, or ‘represent’ the domestic economy abroad, among others. One aspect that gained increasing attention since the 2008 global financial crisis is the role of states as global investors. Sovereign wealth funds (SWFs), such as Saudi Arabia’s PIF, Norway’s GPF-G, or China’s CIC make regular headlines in the financial press. Likewise, state-owned enterprises (SOEs) increasingly engage in large-scale cross-border investment in infrastructure, multinational companies, and other important assets. The 21st century hence saw the transformation of states into major global owners of capital, from China to France and Singapore. SWFs, for example, held in 2018 almost eight times as much in assets under management as in 2000. Today, the more than USD 10 tn. in assets SWFs own by far exceed the USD 4tn. that are owned by hedge funds. For students of international politics, these numbers beg a key question: what are the political consequences when states rise as major global owners and investors in the global political economy?

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Πηγή: blogs.lse.ac.uk