By Milan Babic, 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. You can find him on Twitter (@mbabic_1) or on milanbabic.com. Originally published at openDemocracy as part of its Decolonising the economy’series
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 Almost two decades later, this very corporate power is at least up for debate; and neoliberalism is slowly being superseded by a new logic of weaponizing the existing ties of globalization instead of deepening them.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.
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thanks for this post.
(why is the text in Italics and in bolded headline font orange?)
And unclosed i tag somewhere.
“Reclaiming the commons locally, sustainably and democratically”
Consider a literal Common – Midsummer Common in Cambridge. The landowner was and is the town council aka Cambridge Corporation: you could hardly get more local and democratic. But in the 19th century the Corporation stole the Commoners’ grazing rights.
You’ll still see cattle on the Common – they are owned not by several Commoners but by an individual who pays the Corporation a rent for the grazing.
And the other Commoners (whom may not own cows (cattle)) gain, since they are the Corporation personified. The “commons” was rarely treated sustainably and democratically; that’s why Garret Hardin termed it a “tragedy”.
“Tragedy of the Commons” is not a persuasive argument.
https://climateandcapitalism.com/2008/08/25/debunking-the-tragedy-of-the-commons/
I agree “The Tragedy of the Commons” is not a persuasive argument. Garret Hardin was a professor of Biology at UCSB. I was a student there during his tenure. The tragedy he was describing was an unregulated Commons. Just like an unregulated market system (US), an unregulated commons leads to control through proximity, power, or numbers.
The US Forest Service was created (1906) as an attempt (however faint) to manage the Western forests for the common utility of the Nation. Local governments (Counties) regularly lament that national control. It’s a tragedy that we can’t all agree that healthy forests (that create clean water, recreation opportunity, and a vibrant ecosystem) are good for ALL of us (and our heirs).
(As an aside: I had this same discussion with Carl Pope, when he was at the Sierra Club.)
The “commons” was rarely treated sustainably and democratically
On the contrary, in England common grazing was routinely treated sustainably. Whether it was managed democratically tended to depend on who had most power of the Manor Court – was it the Commoners or the Lord of the Manor? It varied.
the other Commoners (whom may not own cows (cattle)) gain, since they are the Corporation personified.
I see that you don’t understand who Commoners were/are.
What about worker owned cooperatives?
Yes; it’s alarming that they’re neglected. They represent a true, self-managed commons. Commons aren’t “tragic” when they’re managed, preferably by the participants.
I found the title misleading; state investment funds are not a commons. They’re just one more kind of investment company.
You want a good example of a state-managed commons? Parks. School systems, too, but they aren’t as hopeful an example. (My wife was a teacher for years – a substitute, so she sample a lot of classrooms in a number of districts. Overall, she was unimpressed – and this is in a prosperous, sophisticated town (the others less so).)
Again, whose commons? State/sovereign wealth funds are so flush with cash from oil that they look to invest their money just to preserve the principal at this point. It seems absurd to expect SWFs like Norway or SA to think they will earn some huge interest/profit on their funds. So the commons, which were once very local concepts, should go back to being local. Well being happens on the local level, not derived from external extractive investments. The two don’t mix. And when it comes to avoiding taxes via offshore financial centers in order to achieve some profit the whole thing is an oxymoron. The best thing this essay points out is that local, bottom-up ownership and green projects are the way to achieve a viable “commons”. Or else this could easily become an argument of the commons v. the commons.
I think that economic democracy is of fundamental importance, regardless of the ownership structure of particular companies. Large public and private companies can be internally democratic or authoritarian, often authoritarian. Even the worker-cooperative Mondragon is undergoing some problems in regards to internal democracy, given its size and given that an increasing share of its workforce are not actually owners of the enterprise. Workers usually have little to no say in the running of the enterprises, and public enterprises are not often under much popular control. I do like Robin Hahnel’s idea that people should have a say in decisions an enterprise makes in rough proportion as to how they are impacted by the decision. That is difficult in regards to nationalized industries, but some level of popular control and transparency seems doable. If public companies exist in the same environment as private companies and don’t operate using any different logic, then they won’t be tons different than private companies. They will try to create internal surpluses by lessening labor costs as much as possible and they will, like their private competitors, profit from externalizing costs. They also, it seems, try to prioritize “efficiency”, which involves the externalization of many costs off on to the public, the environment and future generations. But, public companies SHOULD have a wider purpose. The postal service, for example, delivers packages to parts of the country where it simply isn’t profitable. State owned enterprises in China have long had responsibilities in regards to housing, education, basic healthcare and food that private companies didn’t. To the extent that has changed, it hasn’t been for the better. But, if a company is publicly owned, non-market social and environmental impacts should be more important than profitability, especially when non-market impacts are increasingly dominant in the world we exist in. It seems that implementing large structural changes in state owned enterprises should be easier and less clunky than offering carrots to private companies. In China, their state owned energy companies can pretty quickly change, but there are constant conflicts between private companies and the state in regards to things like price controls. I think public ownership of the energy infrastructure does make sense, Fossil Capital is a great book that goes into that in detail. I also think that we need at least far greater social control over the use of natural resources and using the environment as a sink for wastes, and I also think, because of the non-market nature of the environmental crisis, that there are clear problems in regards to leaving investment decisions largely to private capital. Having said that, I personally agree with Elinor Ostrom and think that institutional diversity makes sense. In some contexts, goods and services should be communal, in other public, in others maybe private. Depends on a number of factors. There are also differences in municipal ownership versus national ownership. At the municipal level, governments are increasingly taking back control from previously privatized utilities and a number are owning and running ISPs. There are moves also nationally for municipalities to at least look into public banking. A number of cities are also doing a number of things to support worker ownership. New York Madison, Oakland, Austin, among others. Getting back to China, people often focus on SOEs, but there are things called Township Village Enterprises (TVEs) that were publicly owned, but at the local level, and they were dominant for a good portion of the period following the initial market reforms. But, in regards to the environmental crisis, I do think there is a strong case for national public ownership of the energy system, public banking, among other things.
Hugh Stretton had series of questions that I think are pertinent to figuring out whether an enterprise delivering a service is “efficient”. From his book Economics: A New Introduction.
Which is the most efficient, or ideal, system? Which system would planners and/or local governments prefer?
System one makes a profit.
System two has the lowest costs, charges the least for its services, and breaks even.
System three loses money and has to be subsidized by taxpayers, but it serves the greatest number of people, uses the least amount of energy and produces the least amount of pollution.
In Stretton’s questions, private companies overwhelmingly care about profit, but also power relative to workers and states. Kalecki talked a lot about that. Public companies often have to concern themselves with the other things he is getting at, or at least they should be.
The state has more power in the long run, at least statepower is ultimately far more resilient, it needs far less resources and preconditions to work, and it can be combined with all kinds of economic systems, work at pretty much every level of technology.
Capitalism needs the state far more than tbe other way round, though the people in charge of it genuinely don’t realize that anymore, or don’t care, because they identify with that transient phenomenon so much, at least the elected office holders.
But even if all came crashing down, as long as there are enough people, that live together in communities lager and more complex than those of hunter gatherers, with division of labor, some kind of state structure is going to arise, no matter what collapses a society went through, even if it reverted to a neolithic level of technology, it’s just a matter of time.
And it has happened independently over and over again, all around the world (with the exception of Australia I guess).
Capitalism is fluke in comparison.
The Incas demonstrated that you can have a powerful, well organised state without iron, without horses, without the wheel, without a written language.
And obviously without proto capitalist markets.
The only way for capitalism to not be outlasted by the state, is by truly killing off all of humanity, which right now seems pretty likely of course.
But even if humanity survives, whatever rises from the ashes of capitalism is likely to be horrible too, and seeing as a total collapse is probably the only way to get rid of it…..
It’s a problem of numbers and diversity. What works in a small tribe can’t work to control 300 million diverse and antagonistic people. “Diversity” is evil.
This state capital is still a capital controlled by capitalists. The state is still representing the interests of capitalists and will act on their behalf. It is also operating within a economically capitalist framework that will erode anything that resists the demands of capital and the free market for ever increasing growth and profit.
Perhaps, there may be an argument made for other variants like a Marxist-Leninist democratic centralist state capital that use its collective power to quickly enact changes on behalf of the common good. This version of state capital has abolished the capitalist class (though that gave rise to a managerial class) and it is operating within an economic system that attempts to swap the free market for central planning of resources (it was theorized that money would have to be abolished to fully achieve this, but it was never achieved.) The original intention was for this state to wither away as society advanced towards communism, but what happened instead was a regression to liberalization and capitalism. If anything, this shows that even state socialism can carry class contradictions and struggle.
The managerial elite slowly eroded into becoming stagnant and parasitic oligarchs in the case of Russia. The case of China continues the “traditional” grand strategy of a breakneck focus on industrialization but one that is half capitalist, with all the contradictions and struggles that follow. Other states like Cuba or North Korea remain isolated and cut off (not 100% necessarily due to their policies but how capitalist nations have tried to starve them off). Being cut off, they remain trapped in second/third world standards of living (yet still better off than most of the third world).
Then from these failures or stagnation, maybe the path forward would be to empower the common people and establish stronger bottoms-up support. This mentality has been key to the overwhelming support for Maduro in Venezuela in opposing the more right-wing opposition as Chavez’s legacy empowered the poor of the country politically. The establishment of the commons would be one way forward. Worker cooperatives would be another. However, these still face the difficulty of operating within a capitalist economic framework that would cut them out for profit. The political and economic system would then have to be reformed (ideally swiftly revolutionized) to make these ideas sustainable and viable and “economically rational” in the long-term.