Tools of regime stability: the political economy of sovereign wealth funds in Gulf rentier states

Why have Gulf resource-dependent countries transformed the role of their sovereign wealth funds (SWFs) from passive global investors to ubiquitous drivers of economic development? How does this role-change operate amidst fiscal scarcity, confounding macroeconomic expectations of commodity-based SWFs...

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Bibliographic Details
Published in:Review of international political economy : RIPE 2024-09, Vol.31 (5), p.1446-1471
Main Author: Montambault Trudelle, Alexis
Format: Article
Language:English
Subjects:
Bonds
Capital
climate change
Economic development
Economic stabilization
Elasticity
Elites
Governance
Investors
Macroeconomics
Patronage
Political economy
Political elites
public investment funds
rentier state
Saudi Arabia
Scarcity
Sovereign wealth funds
Stability
State
Wealth
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Summary:Why have Gulf resource-dependent countries transformed the role of their sovereign wealth funds (SWFs) from passive global investors to ubiquitous drivers of economic development? How does this role-change operate amidst fiscal scarcity, confounding macroeconomic expectations of commodity-based SWFs? Beyond a narrow view of funds as apolitical economic actors, this article puts forward the logic of SWFs as tools of regime stability to explain SWF development in Gulf rentier states. This logic advances that SWFs are adaptive strategies through which rentier states respond to evolving external pressure without compromising the fundamental pillars of regime stability underpinning allocative frameworks. Drawing on the Saudi case, the article finds that SWFs create de-risking pathways to mobilize private finance capital through environmental, social and governance (ESG) practices and market-based instruments like green bonds. Simultaneously, SWFs allow incumbents to revisit rentier governance by enhancing economic steering capacity while upholding, but restructuring, patronage networks. By shedding light on the political role of SWFs, this article contributes to debates surrounding rentier states and financialization literatures. It highlights how the elasticity of rentierism as financialized forms of state-led economic development does not erode state capacity but rather empowers ruling elites with a new range of tools and resources to upgrade rentier governance in times of economic transitions.
ISSN:0969-2290
1466-4526
DOI:10.1080/09692290.2024.2325394