Who benefits from state investment? Interrogating distribution under (urban) state venturism

Abstract

This commentary traces the longer history of what Su and Lim refer to as urban state venturism as a means of posing questions about the distribution of benefits and risks which result from this model of state investment. Drawing upon the history of the Hudson Bay Company's role in both securing profits and building the British settler colonial empire, we ask how these state projects shape political economic processes beyond regional economic competitiveness. Specifically, we focus on how political projects of stigmatization and marginalization may interact with the geographies unleashed by urban state venturism and how they articulate with other priorities of the state. Through this generative critique we hope to build upon the potential of Su and Lim's work to contribute to debates in economic geography over state capitalism, the blurred lines between public/private finance, and questions of who benefits from these arrangements.

Introduction

In many ways, the state is back in fashion in economic geography. While decades of scholarship on neoliberalization focused on the transfer of state power to the private sector, literatures on state capitalism (Alami and Dixon, 2023; Dolfsma and Grosman, 2019; Whiteside, 2024a), on the empirical differences presented by China's state-led growth (Petry, 2020; Su and Lim, 2023), and on the renewal of industrial policy in the United States (Battistoni and Mann, 2023) have awakened a focus on the blurred lines between state and capital (August et al., 2022; Bryant and Spies-Butcher, 2020; Hall, 2018).

In their piece on ‘Urban State Venturism’, Su and Lim (2025) build on some of this work, specifically focusing on urban processes of capital accumulation and the role of state-led venture capital investments in urban entrepreneurialism. Going beyond state facilitation and direction of capital accumulation, however, Su and Lim ask the provocative question of what happens when urban government ‘becomes capital’ through investments in firms. Through their analysis of Local Government Financing Vehicles (LGFV) in China, they highlight how urban governments in that country have leveraged the value of their land in order to invest in local high-tech firms and spur economic development. Hardly unique to the Chinese context, Su and Lim connect LGFVs to the use of similar funds in the United States in the 1950s. In doing so they identify multi-dimensional roles for the state: both in investing in firms and in shaping regional economies through targeting urban regions for growth. Here, they argue, we see a differentiation between venture capitalism and urban state venturism where governments are interested in not only realizing profits through their investments, but also achieving goals such as boosting competitiveness, driving development, and ameliorating geographies of underinvestment. In Su and Lim's conceptualization, when the state is both supplying and demanding urban spatial fixes, we are witnessing a historically specific type of state venturism that can help explain the urban process under twenty-first-century global (state) capitalism.

Su and Lim's work thus contributes to understanding the blurring of the lines between public/private and state/capital that has recently gained attention across economic geography (Alami and Dixon, 2023; August et al., 2022). Furthermore, by placing this work in specific conversation with debates over urban processes of capital accumulation and entrepreneurialism, the authors highlight how regional economies are altered through the alternative logics of urban state venturism. In this system, the potential for rebalancing uneven geographies becomes part of the state's investment calculus.

In this commentary, we advance a sympathetic critique of this work with the aim of expanding its horizons historically to emphasize questions of inequality and distribution. We argue that, while Su and Lim highlight economic logics that shape the process of state investment beyond a pure focus on profit, these logics largely still analytically privilege economic competitiveness over other political-economic state priorities. As we outline, the imbrication of state/capital in individual firms has a longer history that expands beyond the urban scale. Notably, colonial projects have required a similar blending of state/capital, creating economic geographies which advanced colonial political goals and created socioeconomic inequalities. Through a case study of the Hudson's Bay Company (HBC) in Canada, we highlight how the state's support of that firm not only generated profit but served the settler colonial project by dispossessing Indigenous peoples and furthering Britain's geopolitical goals (Whiteside, 2023, 2024b). Through this example and literature on the imbrication of state-capital processes and marginalization, we raise questions about who benefits and who is left behind in processes of contemporary urban state venturism and expand Su and Lim's focus on how (urban) state venturism is related to distribution – not just of profits and risks, but of resources, capital, and material privilege and deprivation more broadly.

Hudson's Bay Company: State settler-colonial venturism

As advanced by Whiteside (2023, 2024b) in her work on state capitalism, the history of the Hudson's Bay Company (HBC) is revealing of many dynamics raised by Su and Lim, albeit in an earlier historical period and at a different scale. A joint-stock company that received a British royal charter to operate in 1670, the HBC was simultaneously an arm of settler-colonial empire and a predecessor of the type of financial ownership that dominates today's economy. As outlined below, in the actions of the HBC, state projects of geopolitical rivalry (with France) and racist colonial practices of dispossession of Indigenous peoples were intertwined with the production of profits for investors who were closely tied to the state. In this case, state-led investment not only sought to achieve profits and regional development, but also advanced processes of dispossession and colonialism which served the goals of the British Empire. Through the example of the HBC we outline a relationship between state venturism, distribution, social difference, and processes of marginalization, arguing that this history may signal the need to further explore the relationship between the economic and political aims of urban state venturism.

The company's 1670 charter granted the HBC a commerce monopoly over the entire drainage basin of the Hudson's Bay, an area of 3.8 million square kilometers. The HBC was just one of many similar chartered companies that helped establish the colonial institutions of the British Empire, with the Virginia Company in the United States and the Royal African Company in the African continent serving similar roles (Cavanagh, 2011; Smith, 2018; Whiteside, 2023, 2024b). Cavanagh (2011), drawing on Stern, refers to HBC as an example of company-states, which were given the state-like power (e.g. managing land and persecuting criminal authorities); and, in the case of HBC, used this power in ways that dispossessed Indigenous peoples by establishing new settlements on Indigenous land.

While the HBC was not formally owned by the state, it was given monopoly rights over the vast geography of the Hudson's Bay basin based on the explicit understanding that it would serve the British Empire's purposes in undertaking settler colonization processes and combating the trading empire of France (Whiteside, 2023). Further, the first investors in the HBC were all connected to the royal family and included an array of princes, dukes, and earls. Highlighting this articulation of profit-seeking and empire-making goals, Smith (2018) describes a 1749 British parliamentary inquiry into the HBC's monopoly that was centered on whether the company was fulfilling its charter by serving British national interests. As Smith (2018: 78) writes, ‘when the crown chartered the HBC in 1670, the drafters explained that the privilege of incorporation was not solely for the benefit of its investors but “to promote all Endeavours that may tend to the publick Good of Our People”’. The goal of the inquiry was to ensure that this advancement of British empire was occuring, with the potential revocation of the charter if the HBC was not achieving the goals set by the state.

To fulfill these purposes, the HBC engaged in often-violent campaigns against rival French traders and established settlements in Manitoba and Vancouver Island that dispossessed Indigenous peoples. In these matters, the company not only took on state powers, but did so in the pursuit of goals that were driven as much by settler colonial empire as by profit. Whiteside (2023: 1552), theorizing the HBC within contemporary debates on state capitalism, highlights that ‘with joint-stock royal charter companies empowered to make markets, create laws, wage war, and govern colonies for England, the connection between state and capital (or Crown and merchant adventurer) points to an English domestic alliance otherwise unexamined up to this point in the discussion’. These relationships linger historically: today, HBC is the longest continuously operating company in North America and remains an important touchstone of the Canadian cultural imaginary in its newest form as a luxury retail brand steeped in a particular type of Canadian nostalgia (Opp, 2015). In effect, the history and influence of HBC demands that we view the company in a more expansive sense than just ‘a firm being supported by the state’. And it leads us to suggest several points on contemporary urban state venturism.

First, the scale of risk/profit/loss in the analysis of urban state venturism must not be confined to the level of the firm or the firm–state relationship. For questions of distribution and development, the ways the state-as-investor may or may not privilege certain firms, how the state competes with private investors, and whether profits are reinvested into ‘socially progressive programs’ – that is, the criteria by which Su and Lim suggest that the efficacy of SVC as a developmental tool might be evaluated – must be broadened and more clearly linked to material outcomes and distribution which result from this investment. While Su and Lim (28) note that SVC works very differently than private VC in its ends – that is, the former attempts to generate ‘positive social impacts that transcend the maximization of efficiency and profit’ (28) – there is more potential for elaboration of how these impacts might be assessed in terms of where they occur and who they benefit (or not). While Su and Lim make broad reference to the benefits of state venture capitalism across the globe, they are referring to these benefits in terms of certain firms and sectors and in a few familiar global cities (New York, London, Shenzhen). Several meso-level processes are missing here: between state-firm relationships, and abstractly theorized global relations of uneven development and urban hierarchy. How is the authors’ proposed new structural process of urban state venturism linked to distribution of wealth and poverty, social marginalization, financial risks, and other processes at the scale of the city or region?

This brings us to our second point, which is that older alliances between state and capital, as materialized in the HBC case, have lessons to pursue in new manifestations of urban state venturism. What are the power differentials in new practices of state venturism and how are they shaped by state projects which may exceed narrow conceptions of the economic? Here we gesture to how state support of profit-seeking investments – visible in many of the urban processes the authors survey from the 1950s to the present – is facilitated by socially constructed forms of stigmatization (Dantzler, 2021). For example, HBC's production of profits was dependent on Indigenous dispossession while also contributing to the production of further dispossession. Rather than simply a consequence of state venturism, uneven development and unjust distribution of risks and consequences is racialized in a material sense. As Dantzler (2021) writes, capital's tendency to differentiate along lines of social difference is present not only in North American forms of racialization but also around the world through place-specific ethnic-, caste-, and class-, and gender-based marginalization.

Any consideration of urban state venturism's consequences for distribution would be strengthened by analysis that incorporates wider, and also place-specific, contexts of structural social differentiation – and how political and economic decision-making both leverages this difference and produces it in forms new and familiar. Distribution is one of the primary points of contention in contemporary urban development and politics, and we see much potential for Su and Lim's framework to contribute to conceptualizing its roots. Furthermore, the long history of relationships like that between HBC and the British and then Canadian state should remind us that certain state–capital relationships often linger as processes of nation- and city-building evolve over time. When the state ‘becomes capital’, we should ask which political relationships state investment is bolstering, and how those ostensibly economic projects are enabled and advanced by social and political relationships that produce contemporary uneven geographies.