An Analysis of Changing Trends in the International System of Capitalism Emphasizing the Role of Sovereign Wealth Funds

Abstract

This paper will examine some fundamental shifts that have taken place in the international system of capitalism beginning with the Bretton Woods agreement and address the consequences these changes have had for both proactive and reactive governmental action, global trade, and economic integration. The analysis will utilize an interdisciplinary approach drawing upon the academic fields of Economics, Political Science, History, and Sociology. Additionally, I will draw selectively from portions of Regulation Theory and Social Structures of Accumulation Theory in order to show how crises of capital accumulation necessitate innovation in the global capitalistic system. Assumptions fundamental to structure of this paper include the premises that markets are institutions embedded in society, that global trade increases the interdependence of nations, that trade necessarily creates imbalances and those imbalances strain the interdependent relations between nations, and that globalization creates expected adherence to political and economic policies that potentially damage governmental legitimacy.I will demonstrate that the global capitalistic system creates antonymous pressures for nation states most readily identified by the competing ideological vantages points known commonly as Neo-liberalism and Keynesianism. The contradistinction underlying this supply-side/demand-side debate is evinced, in this paper, most poignantly in the financial system. This academic investigation hypothesizes that Sovereign Wealth Funds (SWFs) are instruments possessing the capabilities to alleviate these antithetic pressures. Although any determinative effects related to SWF proliferation concerning the stability of the international financial system remain ambiguous, this paper will conclude with normative suggestions as to how SWF investment activity can become a stabilizing force while warning of potential threats they hold inherent that can undermine the stability of the international financial system.