Across the world, the free market is being overtaken by state capitalism, a system in which the state is the leading economic actor. How should the United States respond?
Submitted by Rick . (Apr. 22, 2009) on April 22, 2009 - 9:50pm.
I think it is unfortunate that the author thinks government controlled entities can engage in capitalism. The U.S. economy is a mixed economy with government control on the rise. What we are seeing is a rise in statism not state capitalism. As more governments seize the wealth of private corporations, capitalism will get the blame when it is the government controlled entities that are the cause.
One final point, the proper term for "sovereign wealth funds," should be "stolen wealth funds."
Submitted by Loyd E. (Apr. 24, 2009) on May 1, 2009 - 3:50pm.
Mr. Bremmer's article merits serious consideration - not the usual throwing about of inflammatory political labels, or flippant attempts at witticisms.
One point in the article, however, is deficient - his claim that Smoot-Hawley tariffs deepened the Great Depression. Our 1929 net imports of goods and services was 0.3% - the loss of which could hardly prolong the Great Depression.
America's unmanaged economy has outsourced millions of jobs over the past several decades. Despite Adam Smith's warning, we can no longer defend ourselves from rapacious resource-rich countries or even new strains of influenza, and our merchant navy has followed the Rust Belt into oblivion. Soon, Asia's lead in electronics and nanotechnology, combined with China's continual upgrading of its military, will threaten Pax Americana.
Fundamental Questions: Will China's leaders continue their recent record of amazing economic growth via intelligent "state capitalism," or ultimately commit another "Great Leap Forward" blunder? Will the U.S. continue to ignore Adam Smith's warnings against outsourcing one's security, and the reasons for China, Japan, Singapore, and South Korea's successes?
Submitted by Aditya M. (May. 8, 2009) on May 9, 2009 - 7:45am.
The article mentioned that governments encourage corruption within their ranks, when they indulge in business and encourage business houses. However, in certain nations, this is required, because the business houses are not conversant with the social realities of the nation. Developing democracies have to answer to their respective voting constituencies. Even Great Britain, a developed economy, had many state run enterprises. I believe, that France and Italy, to this day, have many state run enterprises, too. Business, in its nature, is not ethical, because the businessman looks to maximize his profits, to his fullest extent. If a government official is paid like an executive, because of executive functions served in a state run company, then let us berate the CEO of a privately run company for drawing a huge salary, apart form perks. I do not condone the high salaries drawn by government civil servants, in some governments. Perhaps, the salaries could be brought down.
Submitted by Dave C. (May. 10, 2009) on May 10, 2009 - 11:09am.
The most alarming of your observations is the reality of the tremendous state support for energy security in China and other raqpidly developing countries, and the shabby treatment energy industries get in the United States. Alternatives won't come close to cost effectively replacing oil for probably 100 years, while our government seeks to actively disable the energy industry. For those cheering the supposed demise of capitalism, you are sadly misinformed. As this article attempts to point out, self interest and greed work exceptionally well to produce wealth and create opportunity because self interest motivates us to create wealth, we work under a common easily understood set of rules Most importantly under caqpitalism, wealth ceases to be a zero sum game. Each productive person creates additional wealth, so there is a much bigger pot of cash for all of us to access. Few of us have millions, but the more we put in circulation and make available for business loans, mortgages, etc, the greater actual wealth creation.. European "social" democracies, and now even the US, distort their own economies and impair oppertunity and possible wealth creation through corruption and policies designed to favor political friends rather than the population at large. A good current example is the forced sale of Chrysler to Fiat with the controlling interest going to the politically connected UAW, leaving the rule of law and the secured debtors out in the cold. Economic activity in the US is currently suppressed because investors no longer know what the rules are, some political groups are favored over others, and the rule of law has, in some cases, been set aside. I have a much better chance of making good decisions, and money, in an environment of uniform greed than for me to take a chance of being in a favored group when the government decides to manipulate markets for political gain.
Submitted by Joseph K. (Mar. 14, 2009) on May 17, 2009 - 4:26pm.
"The shabby treatment energy industries get in the United States"? How are energy companies being persecuted? Profits in the tens of billions are not enough?
"Self interest and greed work exceptionally well to produce wealth"? The current international financial crisis demonstrates the opposite. Self interested bankers and money managers exploited the system for their own benefit, leading to a collapse of unparalleled proportions. The government could not do much worse.
Submitted by Joseph K. (Mar. 14, 2009) on May 17, 2009 - 6:38pm.
Ian Bremmer decries the increase in state interventionism as a response to the current financial and economic crisis. His fealty to free markets betrays a hostile attitude toward policies that serve the people: “The rise of state capitalism has introduced massive inefficiencies into global markets and injected populist politics into economic decision-making.” The notion of economic policies being designed with the people’s interests in mind is associated with the pejorative “populist politics”.
“One essential feature of state capitalism is the existence of close ties binding together those who govern a country and those who run its enterprises.” As if this “binding” doesn’t occur in the “free market” states of North America and Europe.
“The motivations behind investment decisions may be political rather than economic. The leadership of the Chinese Communist Party, for example, knows that generating economic prosperity is essential to maintaining political power.” He sees economic prosperity as a tool of power politics, not a path to providing a desirable quality of life for its people.
“State capitalism ultimately adds costs and inefficiencies to production by injecting politics, and often high-level corruption, into the workings of markets.” As if politics and corruption don’t already exist in the supposedly “free” U.S. financial markets. A cursory review of financial scandals and government enabling over the last decade will suffice to proving this point.
Bremmer discusses how the interests of China and India diverge from the economic interests of the developed states and that “The problem is amplified by the tendency of politicians, in both the developed and the developing worlds, to design stimulus packages with their constituencies, not the need to correct macroeconomic imbalances, in mind.” As it should be in a democracy; political leaders representing and attending to the interests of those who brought them to power.
Bremmer puts markets over people. Markets that have recently failed miserably.
Submitted by miriam c. (Mar. 30, 2009) on June 8, 2009 - 3:03am.
By observing some changes in the
investment behavior and governance of some leading SWFs, I would suggest that a
new configuration of sovereign capitalism which is increasingly building up a complex and
integrated set of financial vehicles, is making its mark. Its objectives go well beyond classical Keynesian state interventionism at times of market failure, so frequently experienced both in Europe and in the USA.
Submitted by miriam c. (Mar. 30, 2009) on June 8, 2009 - 3:11am.
I would suggest to define new players' state capitalism as sovereign capitalism. This new configuration differs from traditional European state capitalism, as it projects the
sovereign financial power on the international scene rather than in the domestic
environment.
Submitted by Mark M. (Jun. 8, 2009) on June 8, 2009 - 10:17am.
Earlier comments suggest sovereign capitalism or statism as more informative names for "state capitalism." There is another name with ample historical precedent for exactly the same economic transformation, where political factions run business through government: national socialism.
Submitted by JAMES W F. (Mar. 18, 2009) on July 5, 2009 - 8:33pm.
Having read the output of numerous consultants over my 30 years in business, it is very apparent that Mr. Bremmer has already left behind his academic credentials and donned the trappings of his new career, political consultant.
This is unfortunate since his chosen topic certainly merits a serious and comprehensive analysis. Instead we were served a seven course meal of political and economic platitudes laced with fuzzy terminology and unexplained conclusions.
His definition of state capitalism, "a system in which the state functions as the leading economic actor and uses markets primarily for political gain". This is broad enough to drive the proverbial truck through!! Does it demand full state ownership or does the existence of a common business and political oligarchy meet the requirements. Both the US and Russia could easily be molded to fit this definition.
He then refers to "a new global competition, not between rival political ideologies but between competing economic models". Mr. Bremmer might want to review the history of the cold war but the last time I looked it was considered to be a very critical economic competition which I believe, the West won.
While Mr. Bremmer comes with great credentials, this article certainly doesnt live up to them nor does it meet the normal high standards of Foreign Affairs. Very Disappointing!!
Submitted by Nowhere M. (May. 3, 2009) on July 17, 2009 - 12:55am.
The US Government is propping up GM, rescuing failing banks and prostituting itself to connected companies like Goldman Sachs. It has also repeatedly interfered in private transactions by foreign companies looking to buy US assets (CNOOC bidding for Unocal, the Dubai Ports authority deal). What right does it now have to lecture other countries about deregulation and privatization?
Submitted by kutty k. (Oct. 3, 2009) on October 3, 2009 - 11:32am.
The term “State Capitalism” is frequently used in two different ways: first, as an economic form in which the state performs the role of the capitalist employer, exploiting the workers in the interest of the state. The federal mail system or a state-owned railway are examples of this kind of state capitalism. In Russia, this form of state capitalism predominates in industry : the work is planned, financed and managed by the state; the directors of industry are appointed by the state and profits are considered the income of the state. Second, we find that a condition is defined as state capitalism (or state socialism) under which capitalist enterprises are controlled by the state. Webbtrend
Submitted by vivek m. (Nov. 16, 2009) on November 21, 2009 - 4:05am.
This is well defined as capitalism in an environment wherein the capitalist enterprise is a component part of the state bureaucracy and the receivers of capitalist surplus value are state appointed bureaucrats. Sometimes it works well and sometimes not. It depends on the way it has been implemented in the country. Medical Travel Insurance
The Chinese-Russian relationship is more opportunistic than strategic, Bobo Lo argues. The United States is stuck watching from the sidelines and may be pushing Moscow further into Beijing's pocket.
Does the current financial crisis resemble Japan's "lost decade" of the 1990s? It may be even worse, argues Robert Madsen. Not so, replies Richard Katz.
Compares the processes of economic liberalization in the USSR and China, to the latter's advantage, and considers that "China may be a more receptive environment for economic reform", possibly because the reform process has been going on longer there, possibly for cultural reasons, i.e. willingness to undertake labour-intensive activity "regarded as exploitative and beneath Soviet dignity" (in other words, because China is at a lower stage of development). Both countries have embarked upon a venture for which there is no blueprint and which may spill over beyond the economic realm.
Washington's repeated attempts to bring peace to Somalia with state-building initiatives have failed, even backfired. It should renounce political intervention and encourage local development without trying to improve governance.
Comments
State Capitalism: A Contradiction in Terms
I think it is unfortunate that the author thinks government controlled entities can engage in capitalism. The U.S. economy is a mixed economy with government control on the rise. What we are seeing is a rise in statism not state capitalism. As more governments seize the wealth of private corporations, capitalism will get the blame when it is the government controlled entities that are the cause.
One final point, the proper term for "sovereign wealth funds," should be "stolen wealth funds."
Adam Smith's "Invisible Hand" or China's "Intelligent Design?"
Mr. Bremmer's article merits serious consideration - not the usual throwing about of inflammatory political labels, or flippant attempts at witticisms.
One point in the article, however, is deficient - his claim that Smoot-Hawley tariffs deepened the Great Depression. Our 1929 net imports of goods and services was 0.3% - the loss of which could hardly prolong the Great Depression.
America's unmanaged economy has outsourced millions of jobs over the past several decades. Despite Adam Smith's warning, we can no longer defend ourselves from rapacious resource-rich countries or even new strains of influenza, and our merchant navy has followed the Rust Belt into oblivion. Soon, Asia's lead in electronics and nanotechnology, combined with China's continual upgrading of its military, will threaten Pax Americana.
Fundamental Questions: Will China's leaders continue their recent record of amazing economic growth via intelligent "state capitalism," or ultimately commit another "Great Leap Forward" blunder? Will the U.S. continue to ignore Adam Smith's warnings against outsourcing one's security, and the reasons for China, Japan, Singapore, and South Korea's successes?
The nature of business.
The article mentioned that governments encourage corruption within their ranks, when they indulge in business and encourage business houses. However, in certain nations, this is required, because the business houses are not conversant with the social realities of the nation. Developing democracies have to answer to their respective voting constituencies. Even Great Britain, a developed economy, had many state run enterprises. I believe, that France and Italy, to this day, have many state run enterprises, too. Business, in its nature, is not ethical, because the businessman looks to maximize his profits, to his fullest extent. If a government official is paid like an executive, because of executive functions served in a state run company, then let us berate the CEO of a privately run company for drawing a huge salary, apart form perks. I do not condone the high salaries drawn by government civil servants, in some governments. Perhaps, the salaries could be brought down.
State Capitalism
The most alarming of your observations is the reality of the tremendous state support for energy security in China and other raqpidly developing countries, and the shabby treatment energy industries get in the United States. Alternatives won't come close to cost effectively replacing oil for probably 100 years, while our government seeks to actively disable the energy industry. For those cheering the supposed demise of capitalism, you are sadly misinformed. As this article attempts to point out, self interest and greed work exceptionally well to produce wealth and create opportunity because self interest motivates us to create wealth, we work under a common easily understood set of rules Most importantly under caqpitalism, wealth ceases to be a zero sum game. Each productive person creates additional wealth, so there is a much bigger pot of cash for all of us to access. Few of us have millions, but the more we put in circulation and make available for business loans, mortgages, etc, the greater actual wealth creation.. European "social" democracies, and now even the US, distort their own economies and impair oppertunity and possible wealth creation through corruption and policies designed to favor political friends rather than the population at large. A good current example is the forced sale of Chrysler to Fiat with the controlling interest going to the politically connected UAW, leaving the rule of law and the secured debtors out in the cold. Economic activity in the US is currently suppressed because investors no longer know what the rules are, some political groups are favored over others, and the rule of law has, in some cases, been set aside. I have a much better chance of making good decisions, and money, in an environment of uniform greed than for me to take a chance of being in a favored group when the government decides to manipulate markets for political gain.
State Capitalism, Energy, Wealth Creation
"The shabby treatment energy industries get in the United States"? How are energy companies being persecuted? Profits in the tens of billions are not enough?
"Self interest and greed work exceptionally well to produce wealth"? The current international financial crisis demonstrates the opposite. Self interested bankers and money managers exploited the system for their own benefit, leading to a collapse of unparalleled proportions. The government could not do much worse.
Markets over People
Ian Bremmer decries the increase in state interventionism as a response to the current financial and economic crisis. His fealty to free markets betrays a hostile attitude toward policies that serve the people: “The rise of state capitalism has introduced massive inefficiencies into global markets and injected populist politics into economic decision-making.” The notion of economic policies being designed with the people’s interests in mind is associated with the pejorative “populist politics”.
“One essential feature of state capitalism is the existence of close ties binding together those who govern a country and those who run its enterprises.” As if this “binding” doesn’t occur in the “free market” states of North America and Europe.
“The motivations behind investment decisions may be political rather than economic. The leadership of the Chinese Communist Party, for example, knows that generating economic prosperity is essential to maintaining political power.” He sees economic prosperity as a tool of power politics, not a path to providing a desirable quality of life for its people.
“State capitalism ultimately adds costs and inefficiencies to production by injecting politics, and often high-level corruption, into the workings of markets.” As if politics and corruption don’t already exist in the supposedly “free” U.S. financial markets. A cursory review of financial scandals and government enabling over the last decade will suffice to proving this point.
Bremmer discusses how the interests of China and India diverge from the economic interests of the developed states and that “The problem is amplified by the tendency of politicians, in both the developed and the developing worlds, to design stimulus packages with their constituencies, not the need to correct macroeconomic imbalances, in mind.” As it should be in a democracy; political leaders representing and attending to the interests of those who brought them to power.
Bremmer puts markets over people. Markets that have recently failed miserably.
sovereign capittalism
By observing some changes in the
investment behavior and governance of some leading SWFs, I would suggest that a
new configuration of sovereign capitalism which is increasingly building up a complex and
integrated set of financial vehicles, is making its mark. Its objectives go well beyond classical Keynesian state interventionism at times of market failure, so frequently experienced both in Europe and in the USA.
sovereign capitalism
I would suggest to define new players' state capitalism as sovereign capitalism. This new configuration differs from traditional European state capitalism, as it projects the
sovereign financial power on the international scene rather than in the domestic
environment.
National Socialism
Earlier comments suggest sovereign capitalism or statism as more informative names for "state capitalism." There is another name with ample historical precedent for exactly the same economic transformation, where political factions run business through government: national socialism.
The notion of economic
The notion of economic policies being designed with the people’s interests in mind is associated with the pejorative “.
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State Capitalism -- A Consultant's Report
Having read the output of numerous consultants over my 30 years in business, it is very apparent that Mr. Bremmer has already left behind his academic credentials and donned the trappings of his new career, political consultant.
This is unfortunate since his chosen topic certainly merits a serious and comprehensive analysis. Instead we were served a seven course meal of political and economic platitudes laced with fuzzy terminology and unexplained conclusions.
His definition of state capitalism, "a system in which the state functions as the leading economic actor and uses markets primarily for political gain". This is broad enough to drive the proverbial truck through!! Does it demand full state ownership or does the existence of a common business and political oligarchy meet the requirements. Both the US and Russia could easily be molded to fit this definition.
He then refers to "a new global competition, not between rival political ideologies but between competing economic models". Mr. Bremmer might want to review the history of the cold war but the last time I looked it was considered to be a very critical economic competition which I believe, the West won.
While Mr. Bremmer comes with great credentials, this article certainly doesnt live up to them nor does it meet the normal high standards of Foreign Affairs. Very Disappointing!!
The Pot calling the kettle black
The US Government is propping up GM, rescuing failing banks and prostituting itself to connected companies like Goldman Sachs. It has also repeatedly interfered in private transactions by foreign companies looking to buy US assets (CNOOC bidding for Unocal, the Dubai Ports authority deal). What right does it now have to lecture other countries about deregulation and privatization?
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The term “State Capitalism”
The term “State Capitalism” is frequently used in two different ways: first, as an economic form in which the state performs the role of the capitalist employer, exploiting the workers in the interest of the state. The federal mail system or a state-owned railway are examples of this kind of state capitalism. In Russia, this form of state capitalism predominates in industry : the work is planned, financed and managed by the state; the directors of industry are appointed by the state and profits are considered the income of the state. Second, we find that a condition is defined as state capitalism (or state socialism) under which capitalist enterprises are controlled by the state.
Webbtrend
This is well defined as
This is well defined as capitalism in an environment wherein the capitalist enterprise is a component part of the state bureaucracy and the receivers of capitalist surplus value are state appointed bureaucrats. Sometimes it works well and sometimes not. It depends on the way it has been implemented in the country.
Medical Travel Insurance