From Quantitative Easing to neo-mercantilist policies, the renewal of industrial policy, the multiplication of sovereign wealth funds and marketized state-owned enterprises, increased state participation in global value chains and global networks of corporate ownership, the state seems to be ‘back in business’ everywhere. This raises a series of questions:
- Are we witnessing a shift to state-led development? A return of ‘state capitalism’ under a globalised and financialized form? Are these processes challenging market ascendance and/or neoliberalism as a global development regime?
- Has there been a transformation of the developmental state and of the logics and instruments of ‘catch-up’ development? New tools of state intervention for industrial and innovation policy?
- What are the implications of the resurgence of ‘state-capital hybrids’ (state-sponsored investment funds, state-owned enterprises, development banks, etc.) as key actors in development? Are these transforming the global development finance architecture? What is the relationship between, on the one hand, state-owned, state-controlled, and state-directed capital, and on the other hand, private capital?
- What are the wider geopolitical and geo-economic shifts in which the rise of the new state capitalism is embedded? What is new about the recent ‘wave’ of state capitalism across the global economy? What are the strategic, structural/epochal, and contingent drivers of its emergence?
- What is the progressive potential of these developments, both in the global South and in the global North? What are the limits to the new state capitalism, and the various forms of resistance to it?
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By Ilias Alami and Adam Dixon
Recent transformations in the global economy have sparked renewed interest in the role of the state in capital accumulation. Such transformations include a ‘return’ to various forms of state-led development across the global South since the early 2000s (in China, Russia, and other large emerging economies), extensive state intervention following the 2008 global financial crisis in the global North, and the multiplication of various forms of state-capital entanglements such as sovereign wealth funds (SWFs) and state-owned enterprises (SOEs). For instance, the number of SWFs increased from 50 to 92 between 2005 and 2017, while assets under management grew to over $7.5 trillion worth of assets, which is more than hedge funds and private equity firms combined. According to a recent study, ‘SOEs generate approximately one tenth of world gross domestic product and represent approximately 20% of global equity market value’. SOEs now dwarf even the largest privately-owned transnational corporations, with PetroChina currently leading the list with a market value of more than $1 trillion. Three of the top five companies in the 2018 Fortune Global 500 are Chinese SOEs (State Grid, Sinopec Group, and China National Petroleum Corp). Significantly, these state-capital hybrids have also become increasingly integrated into transnational circuits of capital, including global networks of production, trade, finance, infrastructure and corporate ownership. Does this renewed state activism – and its remarkably outward orientation – indicate a changing role of the state in capital accumulation and the emergence of new political geographies of capital?Read More »
The theme of the 2018 World Economic Forum was, “Creating a Shared Future in a Fractured World.” Its six richest attendees each boasted an estimated net worth of $5.2 billion or more, or the same amount as the total burden of Somalia’s outstanding debt, which, amid the splendor of the event, Somali Prime Minister Hassan Ali Khayre met with IMF Managing Director Christine Lagarde to discuss clearing. In this era of extreme global inequality, it is estimated that the United Nations agenda of seventeen sustainable development goals (SDGs) known as Agenda 2030, will require 4.5 trillion dollars of investment per year to be realized, or more than twice the amount expected to be available from traditional official development assistance (ODA) alone. Due to the increasing concentration of private wealth in the global economy, discussions around development finance have focused on private sector engagement, rather than more traditional, ODA from predominantly Western donor governments and multilateral institutions.Read More »
Towards the end of 2016, something remarkable happened in the relationship between the private sector and state in South Africa. In an effort to keep the big three rating agencies from downgrading the country’s the sovereign credit rating to “junk status” the CEO Initiative was convened at the request of the President and his Deputy and led by the then Minister of Finance. The initiative’s initial goals were to prevent a sovereign rating downgrade and to stimulate inclusive and sustainable growth. To achieve this, three work streams were established: a fund for small and medium sized enterprises (SME), a youth employment scheme, and an investment intervention team. This post critically assesses the theoretical basis for SME development as a tool for inclusive growth.Read More »
For years, policy-makers have used the United Nations’ country classification, based on per capita gross national income, as the measurement of their country’s development. The aspiration to move up the scale assumes that: 1) economic growth is the international standard measurement of development; and 2) the more one produces, the better one’s quality of life will be. The history of political movements and economic policies has witnessed both successful and failed attempts to move up the scale. The countries that have accelerated their economic growth have been celebrated worldwide and the general perception is that the people in these countries now enjoy a more resourceful life. This attitude towards economic growth has created a presumption that pro-growth policies observed in more developed countries and actively promoted by international institutions could be applicable in other developing countries. Can this classification ever be misleading?Read More »
During the 1990s, although the market paradigm was dominant in economics and public policy, a new literature stressing the importance of the role of the state in industrialization rose to fame. We can mention Alice Amsden’s Asia Next Giant (1989), Robert Wade’s Governing the Market (1990) or Peter Evans’ Embedded Autonomy (1995). This literature dwelled on the East Asian miraculous industrialization and showed with empirical and historical evidence how the state apparatus was necessary to spark the economic take off. More recently, these academic attempts multiplied (for instance in the developmental state literature with Ha-Joon Chang’s Kicking away the Ladder, 2002) and gained new interest after the 2008 financial crisis. Yet, this literature is not novel and draws its inspiration from previous economists and social scientists, who for a long time warned us of the danger of disintegrating the state from the economic sphere. On the other hand, mainstream theorists tend to undermine, if not ignore, state intervention and consider it as an exogenous variable to economic growth (see for example Bela Balassa, Lord P. T. Bauer, Anne Krueger and Deepak Lal). The post-1980s era had provoked academic debates around the role of the market versus the role of the state for developing countries: the claim made by mainstream economists and politicians was that countries which pursued a state-led industrial policy failed greatly and that the Latin-American debt crises was an illustration of this (see for example the 1983 World Development Report). On the contrary, it was observed that the East Asian newly industrialized countries (the so-called ‘four tigers’) ‘miraculously’ developed by pursuing market-oriented policies (see for example the World Bank). As heterodox economists, such as Amsden, Wade, and Evans, retaliated by stating the exact opposite, the extent to which the state could be an industrial actor or not become a new agora for both camps.
However, what if the terms of the debate were problematic at the conceptual level from the beginning? Is the dichotomy “state vs. market” as evident as it appears to be in policy debates? A theoretical detour going back to Karl Polanyi might help us shed some light on this issue.
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