Sinews of Control

How state-capitalist geopolitics is reshaping global networks and power

Mar 15, 2025

This summary is based on the following article: The new frontline: The US-China battle for control of global networks by Ilias Alami, Jessica DiCarlo, Steve Rolf, Seth Schindler. State of Power 2025. Transnational Instituion. Available from: https://www.tni.org/en/article/the-new-frontline

Sinews of Control

How state-capitalist geopolitics is reshaping global networks and power

Jessica DiCarlo, Ilias Alami, Steve Rolf, and Seth Schindler

The international order is in tatters. Geopolitical rivalry is at its most intense since the end of the Cold War. While there are similarities with the Cold War, geopolitical rivalry today—chiefly between the United States (US) and China—is novel in fundamental ways. During the Cold War, the US and USSR competed to integrate countries into territorial blocs. Containing the territorial expansion of the Soviet and later Chinese sphere of influence was the cornerstone of US foreign policy for four decades. Today’s rivalry centers on something less visible yet arguably more pervasive: control over transnational networks that underpin globalization—from semiconductor supply chains and electric vehicle (EV) production to undersea internet cables and digital platforms, financial flows, and transport infrastructure. It, thus, turns on the ability to shape, direct, and sometimes block access to the global economic networks that connect multiple countries and industries.

This pivot toward the pursuit of “network power” began in the wake of the 2008 financial crisis and accelerated during the COVID-19 pandemic. In attempts to foster macroeconomic stability and secure strategic supply chains, states of all stripes expanded their role as industrial strategists, planners, and investors. Many states established novel institutions and harnessed everything from state-owned enterprises and sovereign wealth funds (SWFs) to policy banks and techno-industrial policies. This represented a sea-change after years of neoliberal globalization in which the primary role of national governments was to implement institutions that supported free markets.

It is in this context that geopolitical rivalry has exploded since 2016. What started as a ‘trade war’ launched by Trump against China, has evolved into comprehensive competition over the global order. And as tensions have soared, the institutions introduced to foster macroeconomic stability have been repurposed to pursue geostrategic objectives – namely, control over transnational networks deemed essential to national security. We term this state-capitalist geopolitics.

How have we arrived at this new geopolitical moment, what characterizes it, and what possible strategic considerations exist for progressive causes in an increasingly consolidating, complex world?

From containment to connectivity

The last great shift in the way geopolitics is practiced came at the end of the Cold War. During that conflict, Washington and Moscow were fixated on controlling territorial spheres of influence, drawing newly decolonized nations into rival ideological blocs. ‘Containing’ the spread of Soviet influence was the principal strategic imperative underpinning US foreign policy. Once the Soviet Union collapsed in 1991, the US emerged as the sole superpower and set about championing a project of unbridled capitalism amidst neoliberal globalization. The assumption was that open markets and multinational corporations would automatically foster shared prosperity, reduce conflict, and bind states into a U.S.-led international order. Washington’s primary strategic imperative shifted from containing a superpower rival, toward connecting people, countries, and regions with the global economy – peacefully where possible, but by force if necessary.

That vision began to fray by the early 2000s. Political backlash against trade and financial liberalization, especially in developing countries, helped derail the Doha Round of the World Trade Organization (WTO), as countries struggled to reconcile global free-trade rules with domestic demands. The 2008 financial crisis, meanwhile, dramatically exposed the fragility of the system—forcing governments, including the US and China, to intervene with massive bailouts and stimulus packages.

As China’s economic weight and technological capabilities soared, Western businesses and policymakers grew uneasy. Under President Trump, the US recast China as a strategic rival. The idea that pursuing a connectivity strategy with Beijing might subordinate it to the US order gave way to the notion that Beijing was rapidly developing its own industrial champions—often with state support—while controlling the technology and manufacturing processes that the West had once assumed it would monopolize. Past visions of global integration were replaced by a more fragmented landscape, in which countries—big and small—scramble to secure and shape the investments and networks that matter most.

State capitalism and state-capitalist geopolitics

Today’s geopolitical competition exhibits a logic distinctly different from the previous periods characterized by containment and connectivity. With territorial conquest neither feasible nor particularly desirable for many powers, the US cannot assume that the forces of globalisation will continue to neutralise geopolitical rivals. States are racing to exert greater control over key networks, sectors, as well as choke points in global commerce—such as semiconductor supply chains, the nascent EV industry, logistics networks, digital platforms, and global payment systems – prompting the US to scramble to reassert its centrality within and control over these globe-spanning networks. This intensifying competition is, in turn, prompting countries to pivot even further toward state capitalist and interventionist agendas.

The state capitalist toolkit doesn’t signal a retreat from globalization in the aggregate – indeed, global flows of goods, finance, and data remain at all-time highs. Instead, states are consciously working to secure networks to achieve economic and geopolitical advantages. The goal for most powerful states is to channel the benefits of globalization while neutralizing “threats.” To do so, conflict increasingly surrounds governments’ efforts to write the rules of participation and leverage within these networks.

Many countries now rely on an array of state-capitalist instruments to enhance their geopolitical influence and economic security. Sovereign wealth funds (SWFs) purchase stakes in strategic firms, strengthening domestic control over supply chains. Policy banks provide concessional loans to nurture selected industries, while public-private collaborations bankroll breakthrough technologies. Meanwhile, state-owned or state-affiliated enterprises extend government influence through everything from heavy machinery and EV batteries to artificial intelligence research.

Not de-globalization, but selective reshaping

Technology sectors exemplify this trend. The US, South Korea, and others are racing to expand their domestic capacity for semiconductor fabrication, offering tax breaks and subsidies to firms that promise to build plants within their borders. China, for its part, aims to reduce its reliance on foreign chip technologies by pouring resources into homegrown chipmakers. This competition does not spell the end of cross-border commerce—global chip trading is still massive—but it does suggest far more complicated rules and controls around who gets to trade with whom and under what conditions.

Infrastructure has also emerged as a central battleground. China’s Belt and Road Initiative (BRI) coordinates policy banks, construction state enterprises, and SWFs to finance roads, ports, and digital connectivity across Asia, Africa, and beyond. The US, Japan, and the European Union (EU), have responded with their own state-financed or state-backed infrastructure projects, hoping to prevent “excessive” dependence on Chinese financing. Similarly, the US, once hesitant regarding state-led development banking, has created the US International Development Finance Corporation to fund infrastructure and other projects in emerging markets and is mooting the formation of its own Sovereign Wealth Fund—partly to counterbalance Beijing’s global reach.

The upshot is that the logic of free-market global integration has given way to an environment in which states actively channel (rather than merely liberalize) cross-border activity, often in an effort to bend the arc of trade and investment to national security aims.

Polyalignment and opportunities for the Global South

For many countries in the Global South, the shift away from a unipolar US-led order and the weakening of Washington consensus-style neoliberalism has created opportunities and dilemmas. Gone are the days when, under neoliberal globalization, states were expected to open their markets to multinational capital, often in exchange for limited industrial growth and precarious labor conditions. Today, states across the Global South are discovering an expanded set of possibilities, albeit laced with new risks.

For instance, Vietnam and Indonesia are striking deals with both Chinese and American companies, using their strategic location or resources to attract diverse investment. Brazil is proving equally deft, balancing partnerships with China, the EU, and the US, often pivoting based on immediate national interests rather than ideological loyalties. Some countries function as “connectors,” turning their location into an economic asset. Hungary, for instance, seeks to balance ties with China, the EU, and even Russia, leveraging its central position in Europe to become a transit hub. Morocco similarly cultivates links to Europe, Africa, and the Middle East, hoping to become a crucial junction for trade, logistics, and even emerging industries like green hydrogen.

This approach—which we describe elsewhere as “polyalignment”—recognizes that developmental gains may come faster by playing multiple suitors against each other rather than choosing a single strategic patron. Polyaligners instead cultivate ties with multiple powers—China, the US, the EU, Russia, or regional powers—leveraging their relationships to attract investment and secure technology transfers. Mexico, for example, takes advantage of “nearshoring” trends as Chinese manufacturers relocate to North America to avoid US tariffs, boosting local jobs. Meanwhile, the near-paralysis of the WTO’s dispute-settlement body has emboldened some governments to enact resource nationalist policies. Indonesia banned the export of raw nickel to spur higher-value battery manufacturing at home, and when the WTO ruled against the ban, Jakarta was able to delay any compliance indefinitely. Similarly, countries such as Morocco and Saudi Arabia deploy state-controlled enterprises and investment funds to secure bigger roles in green hydrogen or advanced manufacturing.

Yet, states in the Global South face familiar risks, from “resource curses” to environmental damage, if they become sacrifice zones for industrial expansion taking place elsewhere. Additionally, the International Monetary Fund has warned that refusing to align decisively with either Washington or Beijing could deter long-term foreign investment. And those poorest economies with the weakest state capacity face the highest hurdles to pursuing state capitalist policies. Consequently, the opportunities and expanded policy space that come with polyalignment are accompanied by potential new dependencies on external capital and uncertain long-term outcomes.

Meanwhile, parts of the developed world that had been hollowed out by deindustrialization are latching onto the zeitgeist of industrial policy. Regions like Ohio in the US and Dresden in Germany have attracted large semiconductor factories, thanks to lavish state subsidies and political pledges of “technological sovereignty.” These projects, however, often serve narrow strategic or political goals—like winning domestic elections or outmaneuvering rival suppliers—and do not always translate into broad-based community benefits. Unless carefully regulated, a single mega-plant can become a new form of dependency, subject to global corporation or national-security priorities.

Implications for progressive forces?

For labor movements, civil society, and environmental activists, the story of state-capitalist geopolitics is complicated. On the one hand, the visible resurgence of the state in economic life undermines the neoliberal claim that markets operate best when governments remain on the sidelines. If states are now flexing their financial muscles—through public banks, SWFs, and strategic ownership stakes—why not redirect these tools toward deeper decarbonization, worker protections, and social welfare?

On the other hand, the entanglement of national security with economic policy can feed authoritarian tendencies. Defensive tariffs, foreign-investment restrictions, and technology curbs often arrive wrapped in xenophobic rhetoric. Decades of neoliberal policies have also left many parliaments and civic institutions hollowed out, limiting their ability to hold executives accountable. The risk is that newly empowered states could double down on repression at home while using state-owned enterprises to prop up unsustainable or exploitative projects abroad.

Still, there are openings for transformative organizing. Progressive advocates can lobby for “green industrial strategies,” urging that any government stimulus or subsidies be tied to strict labor and environmental standards. They can also push for public ownership in polluting industries and demand that state-led investment be redirected from fossil fuels to renewable energy. Since global supply chains are intimately linked, local struggles—be they in Indonesian nickel mines or Ohio chip plants—can coordinate across borders, amplifying each other’s demands for fair wages and responsible sourcing.

Crucially, these movements might reframe “security” to encompass social needs and ecological survival rather than cede that ground to militarized definitions of national interest. Indeed, when states devote trillions to buttressing strategic industries, it highlights the absurdity of claiming that serious investments in public health or climate adaptation are somehow impossible.

Charting a path in a fragmented world

As state-capitalist geopolitics seek control over global networks—semiconductors, energy, and digital finance—this power shuffle offers a chance for civil society to renegotiate social contracts and exercise a new kind of leverage. But it also poses familiar dangers: elite capture, overexploitation of resources, and the specter of authoritarian nationalism cloaked in strategic imperatives. For progressive forces, the challenge is to seize on the renewed recognition of the state’s economic agency without endorsing coercive nationalism. Environmental coalitions, labor unions, and community groups could demand that government-controlled capital serve common goods rather than elite or geopolitical agendas. Transnational networks of activists might find novel ways to connect local struggles, pressuring corporations and governments alike to uphold environmental and labor standards across entire supply chains.

The story of state-capitalist geopolitics and its effects is still unfolding. But by recognizing powerful countries now treat control over networks as a geostrategic imperative and primary form of leverage—policymakers, activists, and local communities can better map out strategies that secure a more just and sustainable world order. This means neither retreating from global engagement nor uncritically accepting it but shaping and contesting it with an eye to equity and ecological balance.

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