The End of the Free Market: Who Wins the War Between States and Corporations?
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A number of authoritarian governments, drawn to the economic power of capitalism but wary of uncontrolled free markets, have invented something new: state capitalism. In this system, governments use markets to create wealth that can be directed as political officials see fit. As an expert on the intersection between economics and politics, Ian Bremmer is uniquely qualified to illustrate the rise of state capitalism and its long-term threat to the global economy. The main characters in this story are the men who rule China, Russia, and the Arab monarchies of the Persian Gulf, but their successes are attracting imitators across much of the developing world. This guide to the next big trend includes useful insights for investors, business leaders, policymakers, and anyone else who wants to understand major emerging changes in international politics and the global economy.
economic planning. The mobilization of national resources during World War II benefited what outgoing President Dwight Eisenhower christened the military-industrial complex in 1961.9 All governments, including those presiding over a relatively free market, provide for the defense of the country’s territorial integrity. b In the process, they create space for a state-guaranteed market in which privately owned defense companies can develop a privileged position, distorting the competitive playing
billion. In 2006, an Italian bankg was allowed to buy 80 percent of the Bank of Alexandria, making it the first state-owned financial institution to be privatized. The regime has since adopted a more market-friendly approach to regulation, cut corporate taxes, and streamlined investment policies. Crucially, since the onset of the financial crisis, Egyptian authorities have reaffirmed their commitment to free-market policies. As global recession took hold in 2009, Mubarak chose not to fire anyone
directing private sector investment.” The resolution also called for construction of an “effective, democratic, and developmental state,” which will “intervene in the interest of the people as a whole.” Central to this plan is continuation of a state-led infrastructure investment program. The financial crisis and global recession pushed the government further in this direction, encouraging efforts to prop up failing industries and to prevent the loss of huge numbers of jobs—particularly among
trigger a financial crisis than that NATO will launch an invasion. Saudi royals fear the power of domestic terrorist cells to sow disorder more than any attack from a neighboring state. That’s why, though state-capitalist governments have no monopoly on protectionism, they are far more willing to use it. Their first concern is domestic, and their primary goal is to buttress the power of the state. Concerns for relations with other states are important, but secondary. They are also better able to
direct loans toward national champions or other domestic firms at the expense of companies in other countries. But the extraordinary circumstances of the financial crisis aside, state-capitalist governments are much more susceptible than free-market democracies to protectionist temptations, for three reasons. First, there’s an important qualitative difference between short-term measures meant to protect jobs and jump-start growth, on the one hand, and the institutionalization of protectionism as