Public Investment and Sustainability of World Economy

8
DOI: 10.20542/0131-2227-2024-68-6-5-17
EDN: DGMWHA
Moscow State Institute of International Relations (MGIMO University), 76, Prosp. Vernadskogo, Moscow, 119454, Russian Federation.
S. Chebanov, scheb@imemo.ru
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.
 

Received 25.03.2024. Revised 03.04.2024. Accepted 04.04.2024.

Abstract. As history shows, in difficult periods, there is invariably an increase in the state’s involvement in economic life. As of now, there is a number fundamental macrotrends showing that the world fell into a highly dangerous situation of so called polycrisis. These include more and more evident dysfunction of the US-centric model of globalization, the inexorable formation of new independent centers of international power, extremely high level of geopolitical turbulence. The global financial and economic sphere continues to function due to massive debt pumping which translates to its underlying fragility. That is why the formation of an efficient system of sustainable development, as proclaimed in the UN SDG program, is so urgent. In order to overcome the current state of instability the world economy needs to found and engage stable and reliable sources of long-term capital instead of borrowed money. Such capital is available with the institutional investors, primarily the sovereign wealth funds and pension funds. As for the first ones, in recent years, they have noticeably diversified the goals, directions and objects of their operations. The changes are so serious that a term “sovereign wealth funds 3.0” entered into the analytical discourse. In the activities of most state investors, there is a tendency to shift the focus from the external to the internal one, which does not allow capital to completely dissolve in the global financial system. The geographical priorities of investment are changing: if initially the focus of state funds was on the most developed economies of the world, now it is beginning to shift towards the world majority, which in the future should contribute to a more equal distribution of productive forces and wealth and, as a result, to increase the stability of the world economy and improve the quality of its dynamics. “Sovereign wealth funds 3.0” are also characterized by new methods of funding, when it is provided by giving the fund the right to use cash flows generated by the state assets entrusted to it. Some sovereign wealth funds, having reached a certain level of maturity, enter the global private capital market, partially filling the deficit of reliable debt instruments observed there. Due to the peculiarities of financing and a long-term planning horizon, large sovereign wealth funds are able to painlessly absorb temporary financial losses, compensating them in the long-term perspective. This allows them to carry out the most important long-term projects. Thus, the state investment funds make a significant, though not always visible and appreciated, contribution into the stabilization of the financial market and the global economy at large.

Keywords: world economy, sustainable development, investment, sovereign wealth funds, global assets


REFERENCES

1. Roubini N. Our Megathreatened Age. 24.11.2023. Available at: https://www.project-syndicate.org/onpoint/megathreats-remain-despite-moderation-of-pandemic-and-other-shocks-by-nouriel-roubini-2023-11 (accessed 29.11.2023).

2. Irvin D. Universal Owners, Shareholder Primacy, and Stakeholderism. Emory Corporate Governance and Accountability Review, 2022, vol. 10, iss. 1, pp. 104-146.

3. Mikulskis D. Universal Owners: The Idea Reshaping Asset Management. 21.01.2019. Available at: https://realreturns.blog/2019/01/21/universal-owners-a-new-culture-of-weighing-externalities/ (accessed 18.01.2024).

4. Das U. The Key to a Sovereign’s Resilience. London, OMFIF, 21.12.2023. Available at: https://www.omfif.org/2023/12/the-key-to-a-sovereigns-resilience/#:~:text=As%20economic%20data,Research%20Foundation%20America (accessed 10.01.2024).

5. Kannan P., Tan M. Three Trends to Watch in the Long-Term Macro Landscape. London, OMFIF, 09.01.2024. Available at: https://www.omfif.org/2024/01/three-trends-to-watch-in-the-long-term-macro-landscape/#:~:text=REPORT-,Three%20trends%20to%20watch%20in%20the%20long%2Dterm%20macro%20landscape,This%20article%20was%20published%20in%20OMFIF%E2%80%99s%20Global%20Public%20Pensions%202023%20report.,-JOIN%20TODAY (accessed 10.01.2024).

6. López D. SWF 3.0: How Sovereign Wealth Funds Navigated COVID‑19 and Changed Forever. Journal of International Business Policy, 07.02.2022. Available at: http://dx.doi.org/10.2139/ssrn.4026109

7. Schena P., Dixon A. Investing in Transition: Annual Meeting 2023. London, IFSWF, September 2023. 9 p. Available at: https://www.ifswf.org/sites/default/files/Annual%20Meeting%202023%20Write%20up.pdf (accessed 01.04.2024).

8. Summers L. Sovereign Funds Shake the Logic of Capitalism. Financial Times, 30.07.2007.

9. Poenisch H. Outlook 2024: China Unusually Candid about Economic Challenges. London, OMFIF, 08.01.2024. Available at: https://www.omfif.org/2024/01/outlook-2024-china-unsure-over-direction-to-take-economy-in/?utm_source=omfif+update&utm_medium=email&utm_campaign=omfif+update#:~:text=Xi%20acknowledges%20difficulties,for%20International%20Settlements (accessed 11.01.2024).

10. Capapé J. Sovereign Wealth Funds 2023. Investing in a Different World Order. Segovia, IE Center for the Governance of Change, Madrid, ICEX–Invest in Spain, 2023. 76 p.

11. Kyriakopoulu D., Ortlieb P. Funds Explore Liabilities Side of Balance Sheet. Global Public Investor 2020. London, OMFIF, 2021, pp. 75-78.


SOURCES

1. Global Risks Report. Cologny/Geneva, WEF, January 2024. 124 p.

2. Chief Economists Outlook 2024. Cologny/Geneva, WEF, January 2024. 31 p.

3. World Economic Outlook. A Rocky Recovery. Washington, IMF, April 2023. 206 p.

4. World Economic Outlook. Navigating Global Divergences. Washington, IMF, October 2023. 182 p.

5. World Economic Situation and Prospects 2024. New York, UN, January 2024. 196 p.

6. Geopolitical Risk Dashboard. New York, BlackRock Investment Institute, October 2023. 7 p.

7. 2024 Global Investment Outlook. Institutional Investor, 18.12.2023. Available at: https://www.institutionalinvestor.com/article/2cjw3xkw69f8px7u05r0g/innovation/2024-investment-outlook-a-problem-of-interest (accessed 17.01.2024).

8. Asset and Wealth Management Revolution: Investor Perspectives – Rethinking Purpose and Performance. Available at: https://www.pwc.com/gx/en/industries/financial-services/publications/awm-investor-perspective.html (accessed 17.01.2024).

9. Flagship Economic Report Highlights Why Global Cooperation Is Key. New York, UN, 04.01.2024. Available at: https://news.un.org/en/story/2024/01/1145282 (accessed 17.01.2024).

10. 2024 Annual Report. State-Owned Investors Powering through Crises. New York, London, Singapore, Global SWF, 2024. 60 p.

11. The Asset Owner 100–2021. The Most Influential Capital on the Planet. London, Thinking Ahead Institute, November 2022. 65 p.

12. The Asset Owner 100–2022. The Most Influential Capital on the Planet. London, Thinking Ahead Institute, November 2023. 67 p.

13. Sovereign Wealth Funds Take Record Share of Global Asset Ownership. London, Thinking Ahead Institute, 27.11.2023. Available at: https://www.thinkingaheadinstitute.org/news/article/sovereign-wealth-funds-take-record-share-of-global-asset-ownership/ (accessed 30.01.2024).

14. 2024 Global Outlook. Grabbing the Wheel: Putting Money to Work. New York, BlackRock Investment Institute, September 2023. 16 p. Available at: https://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2024.pdf (accessed 30.01.2024).

15. Post-Inflation Realities: Evidence from Institutional Investor and Sovereign Wealth Fund Activity. New York, State Street, March 2023. 13 p.

16. Asset and Wealth Management Revolution 2023: The New Context. London, PwC, 07.07.2023. Available at: https://www.pwc.com/gx/en/industries/financial-services/asset-management/publications/asset-and-wealth-management-revolution-2023.html (accessed 22.01.2024).

17. 2023 Invesco Global Sovereign Asset Management Study. Hong Kong, Singapore, Taipei, Invesco, 2023. 47 p.

18. CIC Annual Report Shows Assets of US$1.24 Trillion. SWF Institute, 04.12.2023. Available at: https://www.swfinstitute.org/news/100840/cic-annual-report-shows-assets-of-us-1-24-trillion (accessed 11.01.2024).

19. Temasek to Issue Bonds. SWF Institute, 30.01.2024. Available at: https://www.swfinstitute.org/news/101772/temasek-to-issue-bonds (accessed 05.02.2024).

20. Temasek US$5 Billion ECP Programme. Temasek Official Website. Available at: https://www.temasek.com.sg/en/our-financials/euro-commercial-paper (accessed 05.02.2024).

21. PIF Raises US$3.5 Billion in Islamic Bond Sale. SWF Institute, 19.10.2023. Available at: https://www.swfinstitute.org/news/100150/pif-raises-us-3-5-billion-in-islamic-bond-sale (accessed 25.02.2024).


For citation:
Strelets I., Chebanov S. Public Investment and Sustainability of World Economy. World Eonomy and International Relations, 2024, vol. 68, no. 6, pp. 5-17. https://doi.org/10.20542/0131-2227-2024-68-6-5-17 EDN: DGMWHA



Comments (0)

No comments

Add comment







Indexed

 

 

 

 

Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies

 

Current Issue
2024, vol. 68, No. 7
Topical Themes of the Issue:
  • The Supporting Structure of Global Security
  • Institutional Features of the Fourth Energy Transition
  • The Evolution of Modern German Christian Democracy
  • The Monarchies of the Persian Gulf and Central Asia
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.