The End of the Free Market: Who Wins the War Between States and Corporations?
In his newest book, Ian Bremmer argues that state capitalism differs from free-market capitalism in that politics rather than profit is the main driver for decision-making. For this reason, it poses a threat to free markets and the global economy.
Capitalism takes many forms, but all of them can be distinguished by their "use of wealth to create more wealth, a broad enough definition to capture both free-market and state capitalism," notes Bremmer. In the free-market form of capitalism, the job of the state is to "enable" capitalism's success by enforcing contracts, as well as by limiting the influence of moral "bads" (such as greed) that can lead to market failures--something that has been occurring at least since the Dutch tulip craze of 1637. Free-market governments ensure that the economic game is played fairly.
In contrast, the economy in state capitalist regimes is dominated by state interest and power. As Bremmer explains, "Forced to choose between the protection of the rights of the individual, economic productivity, and the principle of consumer choice, on the one hand, and the achievement of political goals, on the other, state capitalists will choose the latter every time." To use a sports analogy, state capitalists would control the referees as well as the main players.
Bremmer acknowledges that state capitalism is not new. He traces the first reference to the phrase in a speech by Wilhelm Liebknecht, a founder of the Social Democratic Party of Germany, in 1896. But given recent questions regarding the merits of free markets after the 2008-2009 financial crisis, the need for job growth and economic stability in less than democratic regimes, and the growth of the economies and influence of state capitalist countries, this form of capitalism has gained momentum worldwide. While Bremmer believes the free market will eventually prevail over state capitalism, he foresees tensions between the two systems emanating from differences in incentives, transparency, and accountability.
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|Title Annotation:||Briefly Noted|
|Publication:||Ethics & International Affairs|
|Article Type:||Book review|
|Date:||Sep 22, 2010|
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