The State and Globalization
SWF's show the complex relation of nation states and transnational capital
JP Morgan, Goldman Sachs, BlackRock – all familiar names of global financial giants. But what about Sovereign Wealth Funds (SWFs)? These are institutions, largely based on profits from nationally owned resources, run by either state or national governments. They also include publicly owned pension funds. Although the capital is officially owned by citizens of the nation, investments aren’t limited to nationally owned companies, or geared to creating jobs at home. That is part of what SWFs do. But they also are major owners of foreign assets and huge players in the field of foreign direct investments (FDI).
This is state-directed globalization, overseen by transnational political elites. There is no leading sector of the ruling class in any country that doesn’t believe national development is by necessity linked to global capitalism. Economic progress is understood as successful integration into world markets, production, and investments. This is linked to building local infrastructure, setting up export zones, creating jobs, and attracting the capital necessary for modernization. Of course, it doesn’t always work out that way. But that is the neoliberal dogma, still supported in financial circles. For many ordinary people, this led to deindustrialization, the devastation of social services, and political disillusionment. But surprise, surprise! It was widely successful for the transnational capitalist class, i.e., those who built the current global economic structure, whether in the public or private arena.
For many years FDI mostly came from corporations. But with $35.2 trillion in assets SWFs have become active foreign investors. As capital grew from $4 trillion in 2008, SWFs expanded from public markets to direct investments in real estate, infrastructure, alternative energy, and private companies.1
Let’s take a look at some major SWFs transnational deals (Table 1). We’ll start with the United Arab Emirates (UAE), often referred to with the name of its capital, Abu Dahbi.
ADQ, one of UAE’s SWFs, announced a $35 billion investment in Egypt to develop the new city of Ras al-Hekma, plus 11 other projects (Figure 1.) The Ras El-Hekma plan is to turn a large peninsula into a business hub, financial center, and free trade zone, with an international airport and residential districts. ADQ also led a consortium that paid $18.9 billion for the elevator division of German steel conglomerate Thyssenkrupp.
The UAE has also entered the green economy in a big way. Masdar, a clean energy subsidiary of ADQ, has put up $30 billion for renewable energy in 44 countries, making it one of the world’s top ten alternative energy investors. One of Masdar’s acquisitions was a 49 percent stake in the world’s biggest offshore wind farm, Dogger Bank in the UK, which it operates alongside the German power company RWE. Moreover Mubadala, another SWF run by the UAE, is co-developing a green hydrogen project in Mauritania to the tune of $34 billion.
Other Gulf states also use SWFs to flex their global financial power. Consider:
Qatar Investment Authority, Saudi Arabia’s Public Investment Fund, and Canadian pension fund CDPQ have major stakes in Thames Water and Heathrow Airport in the UK.
Saudi Arabia’s SWF took a $3.5 billion stake — and a board seat — in Uber. It also built a majority stake in US electric vehicle producer Lucid, and Lucid has opened an EV assembly factory in Saudi Arabia.
The Gulf states are also looking towards big investments in India. The UAE set plans to spend $75 billion in India, and Saudi Arabia established a $100 billion investment fund.
The largest SWF is Norway’s massive $1.6 trillion fund, which owns 1.5 percent of the world’s listed shares across 8,800 companies. 1.5 percent may not sound like much, but that amount of stock in any company will put you among the top ten investors.
Just seven of the world’s 100-odd SWFs are behind 84 percent of the industry’s direct investing: Singapore’s Temasek (30 percent) and GIC (16 percent) were the biggest, followed by the Gulf funds Mubadala (15.7 percent), ADIA (8 percent) both from the UAE, from Qatar are QIA (7 percent) and ADQ (3 percent), and then Saudi Arabia at 4.5 percent.
Some SWFs have a commitment to political and ethical principles that affect investments. Norway’s fund withdrew from Adani Ports because it was tied to human rights violations in Myanmar, sold its stake in Caterpillar because the company’s equipment is used in human rights abuses in Gaza and the West Bank, dumped the US company L3Harris Technologies that develops components for nuclear weapons, and withdrew from China’s Weichai Power because of its sale of military equipment to Russia. Furthermore, the Ireland Strategic Investment Fund sold its position in six Israel companies due to “activities in the occupied Palestinian Territory.”
Investments by SWFs drive strategic developmental goals, creating access to knowledge and technologies, which governments can use to build their own capacities. While sovereign investors do not usually oversee assets day-to-day, they are increasingly sitting on boards and taking part in decision-making and governance. Moreover, as they invest their political clout grows through commercial diplomacy. These strategies, developed by China, are now spreading to other rapidly developing states.
SWF activity points to the growing power of transnational elites from the Global South. It may be multi-polarity, but it’s multi-polarity based in co-investments and collaboration with Western transnational corporations and financial institutions, as well as global partnerships with development agencies and through thousands of special economic zones. It’s not simply independent national economic activity on the international stage. National and transnational interests are mixed in a tightly integrated relationship, particularly from the viewpoint of capitalist elites. Yet often national social tensions are in contradiction with transnational economic priorities, leading to political instability. Understanding the links are key to understanding global capitalism.
Jerry Harris is the national secretary of the Global Studies Association of North America, and on the international board of the Network for Critical Studies of Global Capitalism. His articles have often appeared in Race & Class (London), Science & Society (New York) and International Critical Thought (Beijing). His last book was Global Capitalism and the Crisis of Democracy. His work has been translated to Chinese, Spanish, Portuguese, German, Czech, and Slovak.
Data for this article were gathered from“Sovereign investors are the new conduits of FDI,” Danielle Myles, FDI Intelligence, 4-11-24; “Abu Dhabi SWF gives Egypt $35bn FDI Bailout,” Danielle Myles, FDI Intelligence 2-26-24; “AI Adoption and Geopolitical Shifts Influences Flows of Sovereign Wealth Fund Capital,” SWF Institute News, 5-21-24.
Take the time to ready this carefully. It will help all of us understand the world, and thus be able to change it, in ways that old dogmas cannot.