The New Economics of Sovereign Wealth Funds

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SWFs in the Geopolitics of the Twenty-first Century

The process of ever-closer economic integration across the world which is synthetically referred to as ‘globalization’ is propelled by momentous forces: demographics, financial liberalization, advances in computer science, diffusion of telecommunications and revolution in logistics. An analogy can be drawn with an equally momentous phase of globalization at the end of the nineteenth century when the telegraph, the railroads and the steamships transformed international commercial and financial relations, paving the way for the integration of the Western Hemisphere into the world economy dominated by Europe and its colonial empires.

The current wave of globalization – set in motion by the fall of the Berlin Wall, the Single Market in the EU, regional trade agreements (NAFTA, Mercosur, Asean Free Trade Pact) and the advent of China as a manufacturing powerhouse – became an irresistible, earth-shattering crescendo after the creation of the WTO on 1 January 1995 under the Marrakech Agreement (which superseded the General Agreement on Tariffs and Trade, GATT) at the completion of the so-called Uruguay Round of negotiation. Custom tariffs were slashed drastically across the board through a multilateral framework applying to all major exporters and importers. More importantly, the international legal framework on import and export rules became clearer and subject to the judgment of an independent international court rather than national ...