ANÁLISIS DE SUPERVIVENCIA

In this thesis I argue for a reassessment of how capital flows are linked to

economic development in marginal places. I suggest that the use of trust funds can

reverse the flow of capital for the benefit of developing states. Typically, domestic

resources are invested locally. But what if investment opportunities in the country

are all high risk and low return? An alternative is to invest outside the country.16

This policy is taken for granted in developed countries, in which capital is always

seeking out the highest returns. American, European, and East Asian capital has

flowed into the rest of the world, seeking new investment opportunities. Yet

developing countries are told that they should invest locally.

Two sub-themes emerge within this analysis. The first is that of the

spatiality of investment and how marginal places can pursue a global investment

policy. ‘Local’ development suggests that capital generation and development

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Investing outside the country of capital origin is not new, of course. For example, Queen

Elizabeth I of England invested a substantial portion of the booty obtained from Sir Francis Drake’s privateering voyages in the Ottoman Empire through the Levant Company, rather than in England itself. And individuals—in what is known as ‘capital flight’—invest outside the source region of capital. These point are discussed in Chapter 8.

investment take place at the same site. My analysis suggests that ‘local’

development—in the periphery—can take place when investment is made in global

financial markets, themselves based in core countries, rather than at the site of

capital generation. In this way, local development is not limited to the remote or

marginal place where the benefits are to be felt. Instead, peripheral capital flows

into the core to seek out the best investment opportunities. The local development

process becomes differently spatialised by engaging global financial markets.

The second sub-theme is that of sustainability. Resource benefits often

come in temporary streams, and decline or are removed when the resource is

depleted. How is a sustainable economy built on non-renewable resources, which

are inherently finite? Non-renewable resources can be transformed into renewable

fiscal ones when the capital generated from resource extraction is invested in

financial markets. This is consistent with Adam Smith’s contention that

development springs from savings and the accumulation of capital. To make non-

renewable resources renewable, they can be converted from a physical form into a

financial form, thus extending the benefits of capital into perpetuity. A trust fund is

one mechanism to do this.

This thesis examines how reversing the flow of capital can benefit

developing countries and regions. I look at six cases where trust funds have been

established as a mechanism to reverse the flow of capital. These trust funds invest

capital generated in developing countries or marginal regions within developed

states in global financial markets, generating new capital for the originating state.

Trust funds are an example of state-led development that invests in the non-local

private sector through global financial markets. Assuming the continuation of

reliant source of income for places on the margins. They engage the global to

develop the local. I explore the paradoxes of state-led development in the periphery

through investment in the private sector of the core and suggest that trust funds

reduce the risk, and enhance the profits, of peripheral states’ investment by

respatialising the field of investment to include the entire world, and that this

process leads to a sustainable stream of economic benefits that return to source and

enhance the livelihoods of peripheral residents. Through the mechanism of a trust

fund, peripheral states can cast their bread upon the global financial waters, and

watch it return to them after many days with interest.

Four of the six cases considered here are Pacific island countries: Nauru,

Kiribati, Tuvalu, and Tonga. These are among the most marginalized independent

states on earth, in terms of their distance from larger neighbours and markets, and

in terms of their own resource base and potential. The two other cases, Alaska and

Alberta, are marginal spaces within developed countries and within the global

economy, as they are largely producers of raw materials with limited input into

global capital movements. Each of these six places has set up a trust fund to

manage and invest non-renewable resource revenues.17

Mainstream and alternative development models imagine the core as either

the source of beneficial capital or as an exploitative and neo-colonialist force. In

my analysis, I view the core rather as a fertile field for investment, through a kind

of reverse colonialism in which Albertans, Alaskans, and Pacific islanders profit

from their investments in London, New York, and Sydney, rather than the other

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The establishment of trust funds does not guarantee development. The funds must be properly managed and fund policy is important. Some funds have performed well, and some have not. The cases selected here illustrate both successful and unsuccessful funds. The conditions for success are described in Chapter 7.

way around. If the periphery will never become core, then the periphery must adapt

to remaining the periphery and take advantage of its position within a global

economy. Trust funds provide a means by which these marginal spaces in the

global economy can both ‘jump stages’ and ‘jump scale’. By jumping stages,

developing states can avoid the usual path of movement from agriculture, to

manufacturing, to services, and then to information-based economies. By jumping

scale, developing states can move from the local economy to direct engagement

with the global economy.