Sovereign Wealth Funds and the Acquisition of Power

Sovereign wealth funds (SWFs) are increasingly powerful actors in the international political system and world economy. The current discourse often focuses on SWFs as political versus market actors. In this exploratory article, however, it is shown that SWFs may be both. They may be employed as a means to increase a state's relative economic power, even when their individual investments are generally made on the basis of economic, market-driven, logic. After a brief overview of SWFs, and literature review of the issues that attend them, I examine the traditional neorealist understanding of internal balancing and argue that there is evidence to support the claim that SWFs can be employed as tools of this state strategy. Four methods, and two cases (Singapore and China), of internal balancing through SWFs are then examined. I find that some SWFs are used for internal balancing purposes in the conventional sense, but that the phenomena may be better captured by the newer concept of non-military internal balancing (in which a state's relative economic power is enhanced without damage to the overall relationship they currently maintain with the target state).