Sovereign wealth funds (SWFs) have grown significantly in number, from less than 50 in the first decade of this century to more than 100 today, and with total assets under management tripling to more than $9 trillion. While most SWFs are small, with less than 20 managing assets greater than $100 billion, SWFs have nonetheless become a noticeable fixture in global financial markets and increasingly in national development plans. If the normative tenets of the liberal order hold that markets are primarily the preserve of private actors, SWFs complicate this image. Even if evidence is scant that SWFs invest with political rather than purely financial and commercial goals in mind, SWFs are still state entities. This immutable characteristic has been a cause for concern since SWFs started to gain increasing notice from politicians and market participants alike in the West in the mid-2000s. At issue, furthermore, was that aside from a handful of SWFs like Norway’s GPFG, most SWFs originated outside the West. Large SWFs from the Middle East and Asia, particularly China, were seen by some as potential threats to economic and national security. Continued skepticism in some quarters notwithstanding, SWFs have not been shut out from the world’s deepest capital markets. However, as Mark Thatcher and Tim Vlandas show in Foreign States in Domestic Markets, responses by Western democracies to the direct equity investment of SWFs have been different and they provide an explanation for why this is the case.

With the subtitle Sovereign Wealth Funds and the West, readers are not wrong to assume the book is about SWFs, and thus a contribution to a field already populated with various monographs, handbooks, and edited volumes to which the readers can turn. Thatcher and Vlandas rehash the familiar story of the rise of SWFs in the last decade and half and the regulatory and political debates that have transpired, while adding further empirical depth and nuance to these debates as they transpired in the United States, France, Germany, and the United Kingdom. But readers would be remiss to approach this volume as simply yet another book on SWFs. While the book offers an additional and welcome reading of the political economy of SWFs, its main contribution is to debates in comparative political economy (CPE) and international political economy (IPE) of statism literatures. Although less explicit, the book also contributes to debates on state capitalism. As a contribution to these three areas, Thatcher and Vlandas demonstrate the usefulness of taking SWFs as an empirical terrain through which to examine broader questions of political economy.

The key aim of Foreign States in Domestic Markets is to advance the concept of internationalized statism. Simply put, internationalized statism captures the domestic policy responses of recipient countries of foreign state investment (e.g., SWF investment, but also other forms of foreign state investment) that form part of strategies to govern domestic markets. Here, Thatcher and Vlandas contribute to debates on “new statism,” which have countered claims that globalization and market liberalization have eroded the scope and influence of national policy making. States, especially the more powerful ones, are still capable of promoting the national interest even in the context of liberalized and internationalized markets. But the literature has been silent on making sense of the significance and effects of states internationalizing as economic actors. The growth of SWFs, as well as the internationalization of state-owned enterprises, means that other states are active participants in domestic markets. As host states retain crucial governance capabilities in their domestic markets, as the new statism literature has shown, the influx of foreign state capital can be used by national economic actors to advance economic policy. This is statism, but in an international form, as it relates to bilateral state relations. For example, as Thatcher and Vlandas show in Chapter 6, Germany has attracted large investment from Gulf States’ SWFs in industrial concerns such as Volkswagen to replace the patient block holdings previously held by German banks, as the latter’s role has changed through financial system liberalization and global financial market integration. This has provided, consequently, some stability to Germany’s corporate governance regime despite convergence pressures.

As a contribution to CPE, particular the comparative capitalism literature, Foreign States in Domestic Markets offers some remedy to the strict distinctions of the ideal-typical coordinated versus liberal market economy dichotomy, which, although useful for understanding institutional diversity of economic governance at the national level, has been less effective in making sense of transnational capital flows and broader processes of financialization, of which SWFs form part. Taking forward the internationalized statism concept, Thatcher and Vlandas reiterate the significance of domestic politics and institutional setting in shaping international economic relations. But different outcomes are not necessarily attributed to the liberal versus coordinated market economy distinction, as the outlier in their four case studies under analysis, the United States, demonstrates. Whereas the United Kingdom, France, and Germany all show openness to foreign state investment, although with lower or higher degrees of directedness and targeting of such investment, the quintessential liberal market economy, the United States, has been somewhat hostile, particularly vis-à-vis Chinese state capital. In the case of the United States, while the executive branch has been open generally to foreign state investment, Congress exhibits hostility. Although the limited scope of direct foreign state investment could be attributable to the depth of American capital markets (i.e., the US government has less incentive to actively seek foreign investment and push back against Congress), Thatcher and Vlandas demonstrate across the cases that a key explanatory factor for openness to SWF investment is the strength of the executive and the executive’s capacity to form pro-SWF alliances with major firms and industries that can benefit from SWF investment. Capabilities to address economic problems within national borders have been elevated to the international level.

While not an explicit aim, Foreign States in Domestic Markets also offers a useful contribution to debates on the “new state capitalism.” With the rise of China in particular, but generally the more explicit and aggressive forms of state intervention in recent years, including in the West, as well as the international expansion of SWFs, SOEs, and other forms of state capital, the term state capitalism has become increasingly fashionable across the social sciences and in the popular media. Although what constitutes state capitalism is contested, popular strands include views that pit China and other emerging markets as state capitalists that are at odds with the West, or approaches that see state capitalism as a variety of capitalism. Such approaches generally underestimate and underappreciate that these developments, which are not necessarily new but significant in the current economic environment, and as such are suggestive of a set of processes, interconnections, and relations. Thatcher and Vlandas, in looking at the relations between domestic political actors and foreign state investors, offer credence to such a view. This book, in sum, has much to offer for a range of discussions in political science and beyond.