An era of government lead globalization
(posted by jackson)
I recall in the 1990s there was a period when the media was full of fairly euphoric descriptions of the current era as one in which market forces were winning out over the state. The collapse of the Soviet Union, and the collapse of a world wide Communist movement, initiated a wave of triumphalist rhetoric about market economies. Those of a libertarian mindset thought they had something to celebrate. Nevertheless, despite the rhetoric, government agencies might be playing a bigger role in the process of globalization than ever before. Brad Sester explains:
A line in the FT’s recent leader on sovereign wealth funds jumped out at me. The rise of sovereign funds, the FT opined, was an irony in a era of market-led globalization.
The irony, then, is that an era of market-led globalisation is making government-controlled funds more important than ever before.
That argument didn’t ring quite true to me.
The part about the rising importance of government-controlled funds is hard to dispute, especially given their role in the recapitalization of the US financial system. But I would argue that the rise of sovereign wealth funds — and more generally, the rise of what Martin Wolf called “state capitalism” — is the almost inevitable result of the state’s leading role in the current process of globalization, not a irony in a market-led era.