- Authoritarian Capitalism: Sovereign Wealth Funds and State-Owned Enterprise in East Asia and Beyond by Richard W. Carney
It is widely recognized that state authority comprises various instruments of control. This is usually understood as its monopoly over violence, like the armed forces and the police. Richard Carney's book examines one such understudied means of state control and privilege—sovereign wealth funds (SWFs). The lack of in-depth studies on this subject can be partly attributed to certain governments' preference for operational opacity, especially when the regime is authoritarian in nature. Consequently, data pertaining to SWF are limited, if not minimal, and reveal little about the underlying financial activities. However, despite similar organizational structures across the various Asian SWFs, why are some SWFs more aggressive than others?
Carney outlines the theoretical framework in the first two chapters. According to him, the aggressiveness of SWF tactics depends not only on the organization of the fund, but also the regime type in which it lies ("capacity"), and the political competition that the regime potentially faces ("motivation"). Authoritarian regimes have a desire to cling to power for as long as possible; when faced with competition, they do all they can to prevent power sharing. Instead of playing up the authoritarian-democracy binary, Carney helpfully provides some nuances in understanding the regimes. He provides three subcategories that differentiate the types of authoritarian regimes that exist in East Asia, which are mainly dependent on their respective governance structures. Some come close to a democracy (dominant-party authoritarian regimes [End Page 477] like Singapore and Malaysia), while others remain solidly rooted in authoritarianism (monarchies such as Brunei and Thailand). Carney also offers some examples of democracies (including the Philippines, South Korea and Japan) as a countervailing example. However, unlike his authoritarian examples, Carney does not distinguish between the democracies; most probably due to the book's exclusive focus on authoritarianism. This is a missed opportunity, as it would have been interesting to see how some democracies that are dangerously flirting with authoritarian ideas (like the Philippines of today) have brought about changes, if any, to their financial portfolios. In any case, the author's hypothesis is that such aggressive tactics are non-existent in openly competitive democracies that have strict anti-monopoly checks and balances.
In addition to the regime capacity and motivation, Carney proposes that the SWF type also plays a part in its investment strategies. While a country can have multiple SWF-like organizations, only a few of these bodies are public-facing and/or transparent enough for investors to take part in. The author distinguishes between the different public SWFs across Asia—some are just stabilization funds, intended to act as a buffer in the event of a meltdown, while others are pension reserve funds. The key SWF organizations analysed here are savings funds like Khazanah Nasional and Temasek Corporation, both of which display strong, high risk-return profile and moderately aggressive (or, in Khazanah's case, plainly aggressive) investment strategies. Demarcating the different types of SWF is central to Carney's analysis, as SWFs are usually treated as one homogeneous group, which fails to take the country's political dimensions into consideration. For example, although several SWFs were created following the 1997 Asian Financial Crisis (AFC), this does not indicate greater reserves, as the newer SWFs were mostly savings funds, rather than reserve funds.
It is important to note that the author takes time and care to flesh out his examples. He begins with a case study of Brunei, a narrow authoritarian regime (NAR). Information flow within the country is tightly regulated, if not controlled altogether, as the monarchy does not face any political competition. Further, NARs, and to a certain extent, single-party authoritarian regimes (SPARs) do not have fully developed private investment arenas that can successfully challenge government spending. The absence of political accountability allows government tools—including its primary SWF, the Brunei Investment Agency (BIA)—to pursue the state agenda without any fear of being publicly scrutinized. As...