Transnational state capital can be just as harmful as its private counterparts. We need local, democratic and sustainable alternatives.
Milan Babic is a PhD candidate at the Corpnet research group at the University of Amsterdam. He works on the implications of the rise of transnational state capital and global corporate power.
Cross-posted from Open Democracy
Rosneft/Zuma Press/PA Images
In a 2001 essay, Naomi Klein passionately called for “reclaiming the commons” in a world increasingly dominated by corporate power and shaped by a neoliberal political logic. Almost two decades later, this very corporate power is at least up for debate; and neoliberalism is slowly being superseded by a new logic of weaponizing the existing ties of globalization instead of deepening them. At the same time, the call to reclaim the commons found an unexpected answer in the rise of transnational state ownership. Today, some of the largest FDI-transactions ever are being conducted by state-owned enterprises and sovereign wealth funds (SWFs), which are rising as the new large-scale owners of assets and equities around the world.
Some observers interpret this unprecedented rise as a direct reaction to the excesses of a globalized financial system on steroids pre-2008: state capital is often portrayed as “patient” capital, representing a welcome alternative to the volatile nature of short-term oriented equity and debt investment. Some sovereign investment vehicles like the Norwegian SWF achieved a reputation of being a role model for sustainable and alternative ways of investing in global markets. Others are being praised for their role in directing catch-up economic development in emerging economies.
But how close is this form of transnational state capital to an idea of public or common ownership? Is state ownership really a viable alternative for a post-neoliberal, more inclusive and emancipatory global economy? While this is an open question, I lay out three arguments in the following that challenge this emancipatory promise – with the hope of stimulating a discussion about the nature of the role of state ownership in a globalized economy.
Transnational state capital often mimics its private competitors
As has already been discussed for a while, sovereign investment tools in the global economy often “have identifiable commonalities of form and function that match the core institutions of Western financial markets”. This is not only the case for the engagement of the Norwegian SWF and Swedish AP Pension Funds in North American stock markets, but also for the immense investments of Middle Eastern funds in European multinationals and infrastructure projects. Research in progress by our CORPNET team in Amsterdam estimates that the lionshare of transnational equity investment by states is actually flowing into the core of the global economy – Eastern Asia, North America and Europe.
New evidence also suggests that states as owners are equally busy with using Offshore Financial Centers (OFCs) in order to avoid taxation or regulatory burdens, just like many of their multinational peers do. It is hence fair to say that, at least from a political economy standpoint, state investment capitalizes on and strengthens the structures and incentives of the global political economy without representing a viable alternative to existing practices.
Transnational state capital is often controlled by domestic elites
Forms of state ownership can be equated with “real” public ownership like in the case of most pension funds around the world. However, vehicles of sovereign investment are often rather closely tied to domestic elites who use them, amongst other things, as rent-seeking devices. A well-known example of this is the Qatar Investment Authority (QIA), which was established by the then-ruler of Qatar in 2005. While the QIA has served as a vehicle of economic development for Qatar, it is also entirely controlled by its ruling Al-Thani family.
Another example is the role that Russian multinational Gazprom plays in the advancement of the (geo-)political ambitions of the current Russian government. Research has furthermore documented the close ties between Chinese corporate and state elites in the transnationalization of state capital. A recent book shows the connection between dominant-party authoritarian elites in East Asian countries and the propensity of these states for aggressive usage of state investment in foreign corporations. These examples illustrate that some forms of transnational state investment are closely tied to the interests of domestic elites rather than being some sort of public good shared by the majority of citizens.
Transnational state capital is concentrated in large, often fossil-fueled state-owned enterprises
While a lot of attention is given to institutional investors, we found in a recent working paper that the majority of transnational state capital is stored in majority-owned companies. This means that large state-owned enterpises (SOEs) still very much shape the landscape of global state ownership. Those are at the same time often either energy-intensive or energy-producing firms that play a key strategic role in areas like national energy security or revenue generation.
Large oil firms like Saudi Aramco, Sinopec or Rosneft, agrichemical multinationals like Syngenta or energy giants like Vattenfall are at the heart of transnational state investment. None of these large, strategically important firms has stood out in the recent past as pioneering or even advocating a transition to a green and sustainable economy and energy supply. A lot of them are, on the contrary, profiteers and carriers of a fossil-fuelled, exploitative and destructive vision of energy production and economic growth: in 2012, nationalized oil companies owned 73% of global oil and 68% of global gas reserves. This makes them rather unlikely candidates for a much-needed radically progressive stance concerning the looming environmental catastrophe.
Rebuilding the Commons after Neoliberalism
The three angles on state ownership sketched above illustrate that reclaiming the commons is not automatically going to be a progressive, let alone an emancipatory project for rebuilding our economies out of the shatters of neoliberalism – if reclaiming the commons simply means state ownership. Large public companies as well as state-invested firms and state-owned vehicles are unlikely to be the tools of a democratic overhaul of the global political economy. Two core messages follow from this:
First, a simple re-nationalization of key industries is not going to do the trick, since the rules of global capitalism, domestic rent-seeking elites and the environmental footprint of large SOEs are shaping the reality of contemporary transnational state capital.
Second, this very transnational and global reality of state capital suggests that even public ownership has become a force for globalization rather than a tool for protecting societies from its impact. The example of the “privatized” British Railways that ended up in the hands of the profiting German, Dutch and French states illustrates that reclaiming the commons cannot be just a matter of more state ownership – it needs to happen bottom-up, involve local ownership initiatives, green alternatives and the insight that we are fated to solve this issue on a global scale.
Nationalization plus protectionism, as currently advocated by many on the left, cannot be a viable, progressive alternative when the problems concern our shared global economy. Localism and an emphasis on the globalized nature of our economies might seem like a contradiction, but they are in fact two sides of the same coin: local alternatives enhance the democratic aspects of public ownership, while awareness of the global intertwinings of our economic activities ensures that we do not fall for the protectionist trap that ignores or even weaponizes these global relationships for national gains.
Reclaiming the commons locally, sustainably and democratically remains, 20 years after Klein’s call, the better alternative to a simple re-nationalization of firms.