The Rise of State Capital Transforming Markets and International Politics by Milan Babić

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Introduction: states and markets are different 
things – or are they?
State capitalism: what’s in a word?
The early twenty-first century was in many ways the perfect unipolar moment. 
A decade after the end of the Cold War, major events such as the ideological 
triumph of liberal democracy, the resolution of violent conflicts in the Balkans 
and elsewhere and the declaration of the UN Millennium Development Goals 
promised a future in which the United States, as primus inter pares, would over-

see the supposed end of history. For the global political economy, this unipolar 
imagination left little room for alternatives to neoliberal globalization. US 
President Clinton summarized this conviction by stating that “globalization is 
not something we can hold off or turn off. It is the economic equivalent of a 
force of nature, like wind or water” (Clinton 2000: 2549). Following this logic, 
the modern state could only be expected to play a mildly moderating role 
and be a bystander in the great game of globalization. Western policy-makers 
and voters seemed to broadly accept that the world is now “flat” (Friedman 
2005) – and that alternative ways of organizing their political economies were 
inconceivable

It was not long before reality caught up with this imagining. The unipolar 
project was visibly shattered by 9/11 and the subsequent endless wars waged 
by America and its allies. But also in the economic realm, alternative modes 
of organization appeared on the horizon. Countries like Brazil, Russia, India, 
China and South Africa (collectively known as the BRICS) embraced what 
has at times been dubbed “state-led market economy”, “political capitalism” or 
most commonly “state capitalism”, and seemingly rearticulated the notion of 
state power in the global economy. Many state capitalist economies developed 
their own stance towards globalization that was different to what the neolib-

eral playbook suggested. Instead of submitting state power to quasi-natural 
economic forces, these countries employed state-led economic tools and 
practices to deal with the adamant forces of globalization. Soon, academia 
and media formulated a narrative around their rise: a “war between states and 
corporations” (Bremmer 2010) was on the horizon; the “return of statism” 
was “transforming the world” (Kurlantzick 2016); and this would lead to a 
new state capitalist challenge to the liberal economic order by countries such 
as the BRICS (see, e.g., Nölke et al. 2015). The emergence of a state-led alter-

native to neoliberal globalization successfully crushed the unipolar moment 
of the early 2000s. Today, state capitalist economies, spearheaded by China, 
are expected to tighten the reins of neoliberal globalization in world politics.
In this book, I challenge this narrative of the rise of state capitalism. I argue 
that it was not primarily statist economies, but rather state-owned capital, 
that rose to prominence in the global political economy. What is commonly 
described as the state capitalist challenge to neoliberal globalization is in fact 
a consequence of neoliberal globalization itself. It gave states the ability to 
become global owners and investors, to enter global markets and to control 
large assets outside their own borders. As a consequence, the effects of the 
economic participation of states on international politics are not as straight-

forward as the narrative of the state capitalist challenge might suggest. States 
that become global owners are to a large degree invested in the functioning 
and the rules of a globalized economy. The idea that they represent a coun-

termovement to neoliberal globalization is therefore inaccurate. I contend 
that the consequences for international politics lie rather in the fact that some 
states, like China or Norway, have become large cross-border owners in other 
states, where they compete with other economic actors for relative gains and 
often cause heated domestic debates about the nature and extent of foreign 
state ownership. International politics hence becomes more competitive, and 
global rivalries are exacerbated by the role of states as global owners of capi-

tal. This is a different set of issues than the state capitalist challenge suggests. 
States as different as France, Singapore and Qatar have taken advantage of the 
opportunity structures offered by neoliberal globalization and compete with 
each other and other economic actors. They have risen not against but within

The Rise of State Capital The Rise of State Capital Transforming Markets and International Politics by Milan Babić