Foreign States in Domestic Markets

Political economy debates have focused on the internationalization of private capital. But foreign states increasingly enter domestic markets as financial investors. How do policy makers in recipient countries react? Do they treat purchases as a threat and impose restrictions or see them as beneficial and welcome them? What are the wider implications for debates about state capacities to govern domestic economies in the face of internationalization of financial markets? In response, the book develops the concept of ‘internationalized statism’—governments welcoming and using foreign state investments to govern their domestic economies—and applies it to the most prominent overseas state investors: Sovereign Wealth Funds (SWFs). Many SWFs are from Asia and the Middle East and their number and size have greatly expanded, reaching $9 trillion by 2020. The book examines policies towards non-Western SWFs buying company shares in four countries: the US, the UK, France, and Germany. Although the US has imposed significant legal restrictions, the others have pursued internationalized statism in ways that are surprising given both popular and political economy classifications. The book argues that the policy patterns found are related to domestic politics, notably the preferences and capacities of the political executive and legislature, rather than solely economic needs or national security risks. The phenomenon of internationalized statism underlines that overseas state investment provides policy makers in recipient states with new allies and resources. The study of SWFs shows how and why internationalization and liberalization of financial markets offer national policy makers opportunities to govern their domestic economies.

Introduction

This introductory chapter offers an overview of the book. It identifies the growing size and importance of overseas state investors and how they challenge current political economy analyses of the state. The phenomenon is well illustrated by Sovereign Wealth Funds (SWFs): state-owned investment bodies, often from Asia and the Middle East, that have bought shares in major firms in strategic sectors ranging from finance to communications and transport, as well as landmark buildings. The chapter presents the puzzle of the widespread acceptance of SWF investments: national responses to SWF purchases might have been expected to be hostile, especially as they represent entry into Western stock markets by non-Western overseas states. Yet many Western governments have accepted and often actively encouraged SWF investments, seeing them as an additional means to govern their domestic economies and pursue their political strategies. The chapter then situates this puzzle in the wider political economy literature on the role and power of the state in an increasingly internationalized economy. It argues that recent political economy works focus on the internationalization of private capital, ignoring the capacity of the state itself to become a cross-border economic actor. It summarizes the book’s findings that several Western governments have engaged in internationalized statism, underlining that the patterns of policy differ sharply from those that might be expected given popular and academic views of economic openness.

Foreign States in Domestic Markets

Comparison of the four countries shows that internationalized statism has developed in the UK, France, and Germany in ways that appear surprising given both popular and academic writings, although there are important cross-national differences in its forms. The US has seen the lowest level of internationalized statism, whereas the UK has pursued extensive and undirected internationalized statism. France and Germany occupy intermediate and more directed forms of internationalized statism. The findings cannot be fully explained by the Sovereign Wealth Funds’ (SWFs’) countries of origin and their choice of investments and also run counter to several expectations about the role of the state and general economic openness. Instead, the chapter offers a political and statist analysis of the growth of internationalized statism by looking within the state, notably at its structure, and the political strategies of policy makers. It also develops wider implications for political economy debates. The findings add to new statist arguments that the state is an active participant in internationalized and liberalized financial markets. Policy makers can use overseas state investors to pursue their domestic political strategies and adapt traditional forms of ‘industrial policies’. Internationalized statism shows that states can use developments in financial markets to find new resources and allies from overseas states to govern their domestic economies. By bringing in the state as an international investor, it shows how liberalization and internationalization can offer novel opportunities for states.

Internationalized Statism

This chapter sets out the analytical framework of ‘internationalized statism’ developed and applied in the book. Although the West is said to be living in an age of internationalized ‘economic (neo-)liberalism’, where capital flows have been liberalized, a ‘new statist’ literature argues that the role of the state has not declined as it adapts and finds novel instruments and forms of action to govern economies. Building on new statist studies, the chapter introduces the concept of ‘internationalized statism’: policies to use foreign states to govern domestic economies. It develops the concept, notably by distinguishing between the extent and form of internationalized statism. It underlines that whilst most political economy studies have focused on private international capital flows, states themselves can use liberalization of financial markets to cross borders, offering new opportunities for policy makers in recipient states to find allies and resources for economic governance Policies towards equity investments bynon-Western Sovereign Wealth Funds (SWFs) offer an empirically and theoretically important example of internationalized statism: SWFs are large and growing; most SWFs are in non-democratic countries; equity purchases offer the potential for overseas influence or control over companies. The chapter then sets out the book’s research design: four country case studies are chosen because of variations in different relevant explanatory factors. It concludes that the concept of internationalized statism contributes to understanding how national policy makers use state economic internationalization to govern their domestic economies.

Economic activity vs generation of local budgets’ revenues: Regional disparities in COVID-19 instability

In the last two years, Ukraine and the world have been living in economic instability caused by the COVID-19 pandemic, which has fundamentally changed the trends in global and domestic economies, public and local finance. This study aims to estimate the trends of economic development of Ukrainian regions in the coronavirus crisis and their impact on the local budgets’ tax revenues generation. Main findings show the impact of the COVID-19 crisis on the development of Ukrainian regions is territorially differentiated. It is determined that in quarantine restrictions, the regions were developing under the impact of behavioral and institutional factors. Although a range of enterprises terminated their activities and there was a decline in income from business activities in 2020, the tax revenues of local budgets increased. The growth of tax revenues was accompanied by decreasing interbudgetary transfers and growing expenditures on containing the spread of pandemics and supporting healthcare. Reduced transfers to local budgets from the public budget affected the funding of investment programs of regional development. The abovementioned effects of falling business activity and consumer expenditures of the population along with falling investment can be considered the delayed effects of economic activity curtailment in the short-term period. An intensive increase of public investment that stipulates projects co-funding from budget funds and resources of businesses and establishment of cooperation between public, regional, and local levels of government should become among the primary steps to overcome the negative trends.

International Cooperation and Natural Disasters: Evidence from Trade Agreements

Environmental shocks in the form of natural disasters are well known for their impact on domestic economies. Less known, however, is their impact on the global economy. The scant existing literature suggests that macro-economic impacts manifest in observed empirical decreases in international trade. The literature, however, does not examine whether the impact of natural disasters on trade varies for trading partners with differing levels of market integration. This paper examines if preferential liberalization serves to protect or buffer against the negative economic consequences of natural disasters. I show that deep preferential liberalization can not only protect countries against the negative macro-economic impact of natural disasters but can actually allow countries to increase exports during natural disaster events that otherwise induce trade decline. These findings suggest that by allowing countries to expand the quantity and the range of exports, preferential trade agreements lead to enhanced resilience against exogenous shocks.

Hittite Cuisine: fire installations, cooking pottery and foodways in central Anatolia of the Late Bronze Age

Food and cooking methods are crucial in defining group identity and social relations and in examining the domestic economies. The Poster aims to study, from a functional and typological point of view, the fire installations and the contextual kitchen pottery in the Central Anatolia during the Late Bronze Age (1650-1200 B.C.). In particular, the archaeological contexts of the main Hittite sites of Anatolian Plateau, subjects of major interest in recent years, will be examined. The analysis and the comparison of the cooking tools (fireplaces, ovens, pots and baking plates) will allow to obtain some conclusions on the “Hittite Cuisine”, namely on the cooking techniques and the types of food consumed in the heart of Hittite kingdom. Archaeobotanical and archaeozoological data will also be integrated with the aim of a better comprehension of diets and cooking methods. In addition, some ethnographic observations will be discussed, in order to compare ancient and modern cooking practices in Anatolia.

The Effect of Early Age Involvement to Individuals' Financial Literacy and Financial Well-Being

Financial literacy is an essential skill, and it is even more critical during economic crises. The COVID-19 pandemic affected the global and domestic economies. While some of its aspects are beyond individual control, financial knowledge can help mitigate the economic crisis, manage income, and help people manage their respective finances. In the past decade, Malaysia experienced a volatile financial environment domestically, but the reverberations were also felt regionally and globally. Variations such as inflation, currency and interest rates fluctuation, and increased living costs affected a significant change, not only to the Malaysian economic landscape but also to individuals. These shortcomings were exacerbated during the COVID-19 pandemic due to its resulting cash-flow problems, where some companies reported “zero income” and reversed the economic growth to -6% in 2020. Youth unemployment tripled (11.7%). Cash-flow imbalances occurred due to payroll, business loans, utilities, and other fixed costs that business owners were obligated to meet.

The Impact of Global Economy and Global Liquidity on Domestic Economic Growth

Economic globalization has considerably accelerated in recent years. Therefore, they are expected that developments in the global economy have an impact on domestic economies. The chapter aims to analyse empirically the effects of global economic growth, global import demand, and global liquidity on Turkish economic growth. The method of the study is NARDL. The analyses include the 1987-2019 period. According to the empirical results, the growth in global economic output and global import demand has a positive effect on Turkish economic growth. Interestingly, the contraction in global economic output and global import demand also increases more strongly Turkish economic growth. In addition, while the increase in global liquidity has a positive effect on Turkish economic growth, the effect of the decrease in global liquidity is statistically insignificant.

EUROPEAN LABOUR MARKET IN PANDEMIC REALITY

The beginning of 2020 was marked by an outbreak of the global pandemic COVID-19, which forced almost all governments to adopt restrictive measures in which social distance played a key role. In order to stop the spread of the virus and ensure the safety of people, many businesses were temporarily shut down and millions of workers were absent from their workplaces for long periods. So far, it is difficult to predict how much time, financial resources and effort it will take various actors to recover the world, European and domestic economies. Individual sectors and enterprises will continue to be adversely affected by the effects of the pandemic for a long time to come and will have to increase costs to ensure safety for operational process and labour force. The global impact of the coronavirus pandemic in social, economic, demographic, financial, political and other areas has yet to be comprehensively assessed and analyzed by experts. The article provides insight into analysis of the European labour market and measures adopted by the EU on smoothing the consequences of the coronavirus crisis in the social and labour spheres.