Saturday, June 15, 2019

Structural Coupling Among Leadership-Center Based Networked Trading Groups in the "New Era"--The OMFIF Report, Global Public Investor 2019

(Source OMFIF interactive databank)

This post continues the Coalition for Peace and Ethics Working Group on Empire examination of the question of paths to empire performed through the choices being made by stakeholders as they adjust their operations to the emerging new era of global trade and production organized around leadership cores [领导核心] of states and undertaken by corresponding leadership cores of enterprises within demarcated market groups.

The focus this time is on the changing to projections of public power into private markets (on this theme generally in the context of sovereign investing, see, e.g., here, here, here, here, here, and here). In the face of the emerging decoupling of a singular global markets into "leadership center" networks (discussed here) sovereign investing appears to be acquiring a new character.  Where once it was focused on projections of public power into private markets and in that way to couple projections of  national interests (and in some cases regimes of public law and policy) through private, market regulatory mechanisms (e.g., here), sovereign investing appears to be moving toward a mediating role among decoupled "leadership center" networks of states. In this sense, it is useful to begin to consider the growing importance of sovereign investing as a form of structural coupling among competitive leadership network systems. 

To that end we consider the role of sovereign investing in the new global economic order. For that purpose the Official Monetary and Financial Institutions Forum (OMFIF) Report: Global Public Investor 2019

Structural Coupling provides the means by which systems can interact but retain their independence.  It is the way in which they absorb and project stimulus that serve themselves and enhance their space within a complex system of multiple bodies.
 Structural couplings have thus a double effect – inclusion and exclusion. They connect and disconnect at the same time. Everything what is included, can be used by the coupled systems, everything else cannot be used. Through these couplings, a system is able to react on “irritations and causalities” in the relevant area and transform its structures if necessary.34The couplings lead to mutual self-irritation and to reciprocal interpenetration. In the long run, the couplings thus cause a structural drift of the coupled systems. The systems remain independent, but they do have connection points and their structural developments are coordinated. Structural couplings appear in various forms. To give some examples: Property is a structural coupling between the economic system and the legal system, the Central Reserve Bank between the economic and political system, a university between the economic and scientific systems and the constitution is a coupling between the political system and the legal system. (Clemens Mattheis, "The System Theory of Niklas Luhmann and the Constitutionalization of the World Society"  in GoJIL 4(2) (2012)  625-647 quote at pp. 631).
Where production systems decouple--as appears to be occurring among what had been an increasingly integrated production system built around the U.S.- China relationship,  then finance appears to be the mediating means through which the decoupled structures can continue to interact.  More importantly, it is the means through which private markets mechanisms can be used to project power and soften differentiation. To that end, both private and public cross investment become a critical factor in producing communication, as well as in anchoring different systems to a core set of operational principles. In a sense, then, sovereign investing should serve as a critical multilateral device for the continued unification of the system of production (through finance and cross investment) even as those chains of production become subsumed within state based leadership core networks (e.g., here).

I had noted the rise of this effect in the operation of sovereign investing through Sovereign Wealth Funds (see, e.g.  Sovereign Investing and Markets-Based Transnational Rule of Law Building).  But over the last several years, the line between SWFs, Central Banks, and Development Banks have begun to dissolve (e.g., Sovereign Wealth Funds, Capacity Building, Development, and Givernance), at least with respect to their increasing willingness to project power or to satisfy public objectives through market investments abroad. But that projection is apparently taking on a new significance.

That appears to be the underlying insight in a very interesting report recently distributed by the Official Monetary and Financial Institutions Forum (OMFIF) Report: Global Public Investor 2019.

According to its self-description:
OMFIF is an independent forum for central banking, economic policy and public investment - a neutral platform for best practice in worldwide public-private sector exchanges. With offices in London and Singapore, OMFIF focuses on global policy and investment themes relating to central banks, sovereign funds, pension funds, regulators and treasuries. Global Public Investors with investable assets of $33.8tn are at the heart of this network (OMFIF, Dialogue on World Finance and Economic Policy)
The Report noted that 2018 saw a widening of the investment radius of SWFs, Central Banks, and public pension funds. It Press Release (here) explained:
The policies of 750 institutions with worldwide assets of $37.8tn have a profound effect on global markets. They are crucially important for growth prospects, the investment climate and capital markets. In monetary, financial, trade and regulatory policies, they are deeply bound up with the international economic currents of co-operation and conflict.

The 2019 annual edition of the Global Public Investor surveys GPI's performance and practices across a wide range of investments as well as their activities in the digital economy, sustainable investment and Islamic finance. Contributors include governors and economists from central banks and pension funds in Greece, Austria, Hong Kong, Singapore, France, South Africa, Mexico, Hungary, Netherlands, Japan, Philippines, and the United Kingdom.
In addition, OMFIF offers a useful comprehensive interactive online databank.

Comprehensive data analysis looks at the global distribution of GPIs and the full GPI top 750 ranking by assets under management, where registered users can filter six years’ worth of GPI data by type of institution, and region, to chart changes in AUM and other trends.

The data suggests the obvious: that sovereign investing has become more intense, it has become more political (in the sense of effectuating public policy through and in financial markets), and it has been moving toward a more comprehensive system fo cross holdings.  That last point is important, a potential ramification was pointed out in the context of Japanese capitalist organization decades ago (Katsishito Iwai, Persons, Things and Corporations: The Corporate Personality Controversy and Comparative Corporate Governance (1997)).  A dense pattern of cross holdings can produce a context in which the financial entities themselves become liberated form theory shareholders and can begin to serve as the next generation managers of market order, but more than that, of the consensus ideology of behaviors that will serve as the basis of the discipline of players in global production. It also reminds us of the hierarchy of economic power that invests finance with a leadership role over production. 

The Preface, Table of Contents and portions of the Databank of the  Report: Global Public Investor 2019. follows.

The Working Group on Empire (WGE) of the Coalition for Peace and Ethics looks to study and theorize the construction of systems of management and control of human activities, that is of empire in the 21st century. In a series of essays that will be made available form time to time (CPE EmpireSeries), WGE considers the re-construction of Empire that has shed its old glosses (which elites everywhere have been taught to conflate with the form and thus to amalgamate a normative judgment about technique with an evaluation of the form of empire) in the context of the now heated contest for the control of the structures of global economic trade within which these new forms of empire might be developed (first described in Economic Globalization Ascendant: Four Perspectives on the Emerging Ideology of the State in the New Global Order). What will emerge is something quite distinct--a form of organization and management of institutions and individuals within a "leadership center" network that will be quite distinct from what preceded it. WGE is composed of members of the Coalition for Peace and Ethics of whom Flora Sapio, Larry Catá Backer, and James Korman have taken a leading role; its work product is collaborative.

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