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[Welcome author Ian Bremmer, and Host Daniel Altman]
[As a courtesy to our guests, please keep comments to the book. Please take other conversations to a previous thread. - bev]
The End of the Free Market: Who Wins the War Between States and Corporations?
Ian Bremmer, head of the Eurasia Group consulting firm, has his finger on the pulse of a lot of countries that most Americans probably don’t think about very much – and yet we probably should. In The End of the Free Market, he argues that these countries in Asia, Africa, and Latin America will substantially affect our future well-being. They will do so, he says, not just because of the growth of their economies but also because of the economic systems they choose.
Bremmer’s book is a warning about the rise and consequences of state capitalism, which he defines as “using markets to create wealth that can be directed as political officials see fit.” It is the system used most notably by China and several other countries in the G-20, the group of big countries that has essentially replaced the G-7 in managing the global economy. It is also, Bremmer asserts, a system that is “fundamentally incompatible” with the free-market capitalism that exists to varying degrees in the United States, Europe, and other relatively wealthy and democratic countries.
The problem with state capitalism is twofold, Bremmer says. On one hand, state capitalism tilts the playing field in domestic and international politics by putting tremendous economic resources in the hands of politicians. They control these resources at home through state-run industries and abroad through sovereign wealth funds. But the greater threat, according to Bremmer, is that “opportunity can enable dependence.” In other words, companies from free-market countries that have worked profitably with state capitalist systems could face abrupt and serious repercussions if the states’ priorities change.
In Bremmer’s analysis, the combination of these factors could tilt the balance of power in the global economy away from countries that work together to bolster growth and toward countries that are only following their political imperatives. State capitalism also limits overall growth, he says, by stifling dynamic processes like creative destruction.
To fend off the challenge of state capitalism, Bremmer recommends a list of policies, some of which are familiar (such as avoiding protectionism and safeguarding intellectual property) and some of which are more novel (such as solidifying the “hard” power of the United States). But before we debate the solutions to the problem he identifies, we should probably consider his premise. To wit:
1. Are there no cases where state capitalism is an appropriate system for a developing country, for example, when the country is large and difficult to govern, or when the country is at an early stage of economic development?
2. Is there a viable alternative to state control of natural resources, which Bremmer identifies as a crucial component of many state-capitalist models, in most developing countries?
3. Where should countries like the United States be on the spectrum of market control? Though the financial crisis and BP oil spill have spurred calls for greater regulation, the Tea Party supporters want to move in the opposite direction. Are we too close to a command economy, or too close to a laissez-faire economy?
4. Can state capitalism abroad really distort the politics of countries like the United States and its European allies?
5. Is neocolonialism – often achieved by the foreign investments of sovereign wealth funds and state-run industries – an inevitable result of state capitalism?
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Welcome everyone to what I’m sure will be a fascinating discussion with Ian Bremmer. Please keep your comments topical and your questions to the point! I’ve offered a few questions to kick things off, but please send yours in now. Ian, would you like to write a couple of lines in response to my introduction?
Ian, Welcome to the Lake.
Daniel, Thank you for Hosting today’s Book Salon.
Good afternoon Ian and Daniel and welcome to FDL.
Ian I have not had an opportunity to read your book but I do have a question.
Aren’t we seeing the result of the “free market” in operation with the things like the BP disaster, or the Massey mine disaster since so many business interests seem to equate “free market” with “no regulation or oversight from the government?”
How can the statist countries do a worse job than the “free market corporations?”
Great question, dakine01, very topical, and it blends nicely with my question #3 above. Ian, what do you think? Do state capitalist countries do a better or worse job of regulation? Is there a link?
thanks everyone, delighted to be with you…send along your questions and thoughts.. ian
I have a question that was sent in –
Is there any sign of state capitalism in the United States? With the recent BP oil disaster, for example, is there a need for a stronger role for the state when private companies wreak havoc on national, public resources?
Dakine01′s question also brings up a question about the book’s subtitle: Is this really a war between states and corporations, or is it a war between states that use different economic systems?
when corporations are left unchecked by the state, you end up with short-term profit taking…for the shareholders or for the maximizing of executive compensation. and the public is left holding the bag.
in any free market economy, the state always plays a role as judge, arbiter, and enforcer–the question is how much. lots to debate there. i think it’s pretty clear that over the past twenty years in the united states, the government has taken its eye off the road–whether you’re talking about goldman sachs, bp, or countless other examples.
for state capitalist economies, the state is the principal actor in the economy, and rule of law is absent. markets are ultimately used for political purposes. creating a very different sort of problem to an unregulated free market system.
ultimately, i come down with the view that a properly regulated free market system is, as winston churchill said of democracy, the worst system out there…except for all the others…
there’s really no sign of state capitalism in the united states. there’s instead a sign that the government may be starting to take regulatory authority more seriously.
multinational corporates remain by far the strongest economic actors in the economy, and that’s not going to fundamentally change.
the rule of law also matters greatly. the obama administration, and democrats and republicans in congress, were outraged by $165m in aig bonuses. but they ultimately, prudently, decided against ripping up those contracts. because they would’ve been stuck in lawsuits for decades.
I just glanced over at the Facebook fans of FDL and saw one person with a “Boycott BP” graphic. Consumers in free-market economies can also exercise some discipline on companies… that might be less possible in state capitalist economies where some industries are essentially government franchises.
there’s a fundamental conflict between two different types of economic systems…which are ultimately, among states that are comparable in power, incompatible. it’s a game changer for the way we think about the global economy.
that is going to create growing conflict between states and corporations. to be clear, when that happens, corporations lose. we’ve had one such war so far this year–china 1, google 0. we’ll see more. in those cases, corporations have to find ways to get back into the state in question’s good graces…or they’ll have to leave. failure is, of course, an option..
…which goes to your point about opportunity breeding dependence. But China hasn’t necessarily hurt Google’s business in other countries. Could China’s behavior, and similar behavior by other state capitalist regimes, ultimately isolate them from some important parts of the global economy?
that’s true. though interestingly, i’d also say one of the reasons we’ve seen authoritarian states embrace state capitalism (as opposed to the centrally planned economies of old), is because globalized populations are much more aware today of the world around them…and are more demanding of their governments. that’s certainly true of china today.
authoritarian states want to stay in power, and recognize they need to harness the power of markets–under their strong control–to ensure a balance between growth and stability. ultimately, it’s unlikely to work. but it’s looking like a very credible and sustainable model for the near term, especially given the impact of the economic crisis over the past nearly two years.
Would you therefore say that we’ve taken a step forward? I mean, more work to be done, obviously, but state capitalism could be a step along a road. I asked whether that was true for the development path of individual countries above, but I suppose it could also be true in historical perspective.
it certainly could. multinational corporations are upset about what they see as an increasingly inhospitable investment climate in china. with no intellectual property protection, corporates are becoming much less willing to bring new technology into china–which means chinese corporations will have a much harder time innovating than countries with greater transparency and corporate governance.
there’s also growing impulse in the west of protectionism. which ultimately hurts trade flows in both directions.
Ian, does your book get into the issue of corporate involvement in political campaigns in free market societies?
The post offers this observation: “. . . state capitalism tilts the playing field in domestic and international politics by putting tremendous economic resources in the hands of politicians.”
Isn’t the flip side also true? Multinational corporations tilt the playing field in domestic and international politics by putting politicians in the hands of tremendous economic corporations, who all too often labor to put the corporate interests ahead of otherwise neutral domestic and international policies.
Exhibit A: “Too Big To Fail” Banks, who bought via their campaign contributions politicians to deregulate their industry, allowing them to take wildly risky bets — and when the bets failed, got the state to cover their losses.
Thank you for being here Ian. Specifically as it relates to the development of long term energy solutions, is there potentially a case for the government getting more involved in setting industrial policy for investments and development, or can we count on the private sector to take us there.
I’ll step back, Ian, so you can respond to Peterr (and anyone else whose question has just come in).
state capitalism is a step forward from where authoritarian states were in the mid-twentieth century, no question. but looking at the global economy today, the free market economies are under unprecedented strain. the eurozone–the greatest successful experiment ever taken by the free market system–is hanging in the balance. while china, now the world’s second largest economy, has seen an entrenchment of state capitalism (from what had been a slow incremental move towards free market reforms).
for the last forty years, the presumption was that private sector corporations were becoming the dominant global economic actors. think about all our favorite dystopian movies–network, rollerball, robocop… we’ve gotten that very seriously wrong. the state is back.
it’s a good question, peterr. and it really shows how silly the charge is from many that “obama’s a socialist.” corporate lobbies in the us remain tremendously powerful in congress–with both democratic and republican parties. the supreme court remains extremely friendly to the private sector.
in a large, diverse economy, one check is that multinational corporates in very different sectors actually have competing interests–madison’s power of faction at work. so big agriculture pushing corn subsidies, against major cattle ranchers and the fast-food industry. but that’s only one check, and an insufficient one. you still need a strong functioning independent press, an assertive independent judiciary, and insulation of government through effective campaign reform.
on that latter count, the us has fallen short vis many industrialized countries.
It’s enough to read Brzezinski’s ‘The Grand Chessboard’ to realize that the benefits of market capitalism to the people are at best incidental. The objectives of the Washington Consensus are still in place. The New Order will insist on keeping the barbarians (us) outside the gates.
“…To put it in a terminology that harkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.”
-zbig
Take this from global to local and it’s all of the same kind.
Whats the reasoning behind the Tax Cut hedgefunds get for investing in Charter Schools? Why not extend that Tax Cut to Public Schools?
Why do they still get the Tax Cut even if their Charter School fails to raise test scores but No Child Left Behind Teachers who fail get punished?
It sounds like looting either way. In the US I would say it is a question of elites, and the elites who run the economy and the financial system are also the ones who run the government. So how can there be a competition between them when they are essentially the same actors wearing different hats, like Paulson as chairman and CEO of Goldman and Paulson as Treasury Secretary.
To follow up on Hugh’s question, won’t the free market always create an elite? Is that necessary/useful?
hi aoyama,
there’s certainly a case for the government supporting an expansion of research and development, helping to facilitate broader public-private partnerships on investments that may be too large (or too long term) for corporations to take on themselves. the stronger the educational system and underlying support for entrepreneurship, the less micromanaging typically required of a state.
after all, the biggest energy game changer in the world this year–developments in nonconventional gas technology–is dominated by american firms and largely came separate from any direction in us government policy. i suspect we’ll continue to see that going forward from the world’s largest economy…with the largest country expenditures on r&d.
Just how is that different from the way are entire Military Industrial Complex is run? Heck we create hedge finds with low taxes and no regulation plus 36 to 1 leverage. What happens to these gambling entities if our government changes priorities and tries to tax them?
Perhaps this is an irrelevant observation, but isn’t state capitalism just communism evolved as visualized by the 19th and 20th century economists and philosophers?
I hope you will make some comments on capital and the whole concept of property. It seems to me we could, if we choose, be on the verge of resurrecting and expanding the concept of the public commons or common property which really has been lost in governments really giving away the public commons which include minerals, broadcast bandwidth etc. I will be a shiny penny someone is figuring out a way to give GE the sun right now.
It’s interesting that many of the nations who practice state capitalism like China and Brazil are relatively young nations demographically. I wonder if there is some cause and effect. India is youngest of all, but not sure if you’d characterize them as state capitalists. By comparison, you have the relatively older populations of Europe, and Japan.
amuses me greatly that i’m replying to fuckno (hope that doesn’t refer to new orleans. they’ve already been very improperly and repeatedly fucked). very strong argument against the self-regulation of the private sector, whether banking, energy, or anything else. i’ll let my response to peterr stand on that one.
it’s not communism–as it’s very much a statist (and not an internationalist) “ideology”. which is a limitation of state capitalism.
it’s really an evolution of mercantilism with market tools used for political gain. i discuss that quite a bit in the book. as i define state capitalism, it’s a system where the state is the principal actor in the economy, using the markets ultimately for political gain.
Nice parallel by ThingsComeUndone – economic actors will always grow to fill the space available, whether it’s doing business in state-capitalist countries or taking advantage of lax regulations in free-market economies.
“you still need a strong functioning independent press, an assertive independent judiciary, and insulation of government through effective campaign reform.”
that’s assuming this model will survive the lumbering generational pace of civil change. I’m afraid that when Kudlow, agrees that buying gold, over ‘king dollar’ is perhaps not a bad idea, – capitalism is done for, and only pillage (GS), rape (BP) and war remains to keep the rabble at bay for another while.
Zbig’s geopolitical Eurasian model is being studiously implemented by our bipartisan establishment.
You may find us a rather hard audience. Some of us have been looking at the financial reform process for nearly a year now and the one thing can be said about it is that if it was serious it was taken off the table long ago.
Here too you are going to have a difficult sell. No one has a problem or a moment hesitation when a union contract is renegotiated and trashed. This idea that these bonus contracts were somehow sacrosanct is a sick joke. We believe very strongly in the rule of law. But we see is that the current rule of law is only observed at the high end if it favors those in that class. As sites like Naked Capitalism have argued for an age there is in fact nothing written in stone about bonuses and there are about a million ways to break them. What are you going to use next, that the bonuses were necessary to keep the people who blew up their companies?
I argued a couple of years back in the International Herald Tribune that what many people referred to as “neoliberalism” was actually old-fashioned mercantilism, too. If we see state capitalism through the mercantilist lens, it kind of echoes the parallel I noted above (31).
very good point. the military industrial complex is a strong element of state capitalism (though still with the important caveat of the existence of rule of law–airbus can challenge a us government contract that favors boeing, irrespective of domicile…not happening in russia…).
i suspect this will expand. especially as what we think of as national security starts encompassing cybersecurity and advanced technologies more generally. you’ll see companies in that sector not allowed to sell to countries like china, and instead looking more like lockheed martin. which will represent a dramatic change for that sector.
I put up a post here at FDL earlier today, noting parallels between the Chernobyl disaster in 1986 (under the old Soviet Union) and the ongoing BP oil spill in the Gulf of Mexico.
One disaster took place under the auspices of a state-run corporation; the other under a free market corporation. In both instances, pressures from above for production pushed front-line workers to cut corners in ways big and small, eventually setting in motion the two disasters.
As a pastor, I see all too often the underside of life in the US — people whose homes have been foreclosed on, people whose jobs have disappeared, people in lines at soup kitchens for meals and homeless shelters for a bed. I have no desire to live in a command economy country that restricts individual freedom, but living in a country with increasingly unregulated corporations where private greed overwhelms the public good has many of the same perils.
Earlier post here.
not saying they were sacrosanct. i’m saying the precendents were sufficiently unclear that you would have had lawsuits for years.
no question that one of the abuses of the american legal system is that the wealthy have stronger protections as they can hire the best talent. and yet the proliferation of anti-discrimination lawsuits of every sort show that the “lawyering up” of america doesn’t work in only one direction.
that’s a long and very different argument, though.
Thanks so much for talking the time to join us today, Ian.
I’m wondering where on your state-corporate spectrum you might place young, eco-focused democracies that seek to find a judicious balance with industrialization, Costa Rica being perhaps the farthest-emerged example. There, extreme US-style IP protectionism is being forcibly imposed as a condition of broadening trade agreements, even though they have a side effect of hindering public education by making it more expensive to access the same materials that were freely available to educators under the previous IP regimen. This capitulation conflicts with an unusually strong for-the-people bias in CR law generally, as befits its revolutionary origins.
Or does the Costa Rica growth model lie along a different axis?
Why won’t it work? Seems to be working pretty good for China so far.
i think it’s important to distinguish between russia and china, which are strongly state capitalist, and brazil and india–which are actually moving in a much more regulated, free-market direction.
the BRICs are a very problematic distinction in that regard–only looking at the emerging market countries that are going to be largest, not necessarily places that are going to prove sustainable for trade and investment (or, indeed, ultimately sustainable..)
Thanks for the clarification.
I took so long editing I think you may have missed this.
I hope you will make some comments on capital and the whole concept of property. It seems to me we could, if we choose, be on the verge of resurrecting and expanding the concept of the public commons or common property. This has has been lost in governments really giving away the public commons. I am speaking of things beyond parks and preserves to include minerals, broadcast bandwidth etc. I will be a shiny penny someone is right now figuring out a way to give GE the sun.
The analogy with Chernobyl is interesting, since it brings up the question of state capacity. When the state can’t perform the functions that people expect, it’s in trouble – people don’t want to pay their taxes, they don’t take care of public goods, etc.
I wonder if people will ever feel this dissatisfaction more broadly across state capitalist countries. I mean, the whole idea is that the politicians use national resources to keep their constituents happy, or at least pacified. The Sichuan earthquake was one example… but in many other cases, people seem happy enough to trade rising incomes and a functioning state for other freedoms.
it’s working exceptionally well for china so far. and probably will continue to for the near to medium term future. i wouldn’t want to bet on china falling apart in the next five years. even the next 10.
longer term, though, china’s ability to provide the 8% plus growth necessary to keep the population in check will be seriously undermined by unfavorable demographics (which start to bite after five years), a more unfavorable geopolitical and geoeconomic climate, massive environmental degradation, and difficulties in indigenous innovation given the nature of the political–and educational–system.
the way it’s going, Lee Kuan Yew’s Singapore model is the one the old capitalist western democracies are looking to emulate.
the future of capitalism lies with an authoritarian political structure, if we let it.
In Financial Gambling not making stuff our wealth is based on we make cool stuff people want. If you want cool you need creative students getting liberal educations not No Child left Behind memorization.
If you want kids to make stuff banks must lend to industry we are falling behind in Wind, Solar, electric car, hybrid car tech Tech Japan, Denmark, China etc all their governments have a stake directly or indirectly in this and you know what/
Its working they Passed us.
Cable tv, cell phone rates, high speed internet we pay more but we are slipping behind. When the first I phone came out it didn’t sell well in Europe because it was built for America’s slower network.
State Run/National Healthcare people live longer pay less. America pays more for drugs than anywhere else in the world.
If you want to end tariffs fine start with the drug industry!
Only workers get downsized, big firms in trouble get their losses Socialized and get bailed out in a sense the Capitalistic world you describe does not exist and never existed.
no question, underregulation leads to very serious problems. i find it as ironic as everyone here that sarah palin criticized obama for being too close to the oil companies, but the fact is there’s been a complete lack of effective oversight on offshore drilling, cdo mortgage bond offerings, and lord knows what else. becomes much more obvious when a serious economic downturn leads corporates to take more aggressive risks–and cut more corners–to make their quarterly numbers.
underregulation on the free market side leads to short-term profit maximization for the individual private sector actor at the expense of the public good. state capitalism leads to long-term power maximization for the authoritarian public sector actor at the expense of the public good.
as you might imagine, i’m not a fan of either of those extremes.
What proliferation of anti-discrimination lawsuits. Let’s face it most people don’t have the wherewithal to “lawyer up”. There was data from 2007 that showed that the top 1% had 13 1/2 times the wealth of the bottom 50%. I would think that ratio has only worsened since then. In any case, it is clear how important discrimination lawsuits were. All we have to do is look at who had and conintues to have the money.
the singapore model is pretty unique–3.5 million people, extraordinary per capita wealth, an extremely diversified economy, globalization (and immigration) to nearly unprecedented degrees, and an incredibly close-knit ruling elite. that’s a model that might conceivably work for abu dhabi. i can’t see it working for an economy of 100 million plus.
Yes – Ian, It’s probably worth asking what the effect of state capitalism is on innovation. Can state-capitalist countries really encourage innovation to the same level as in free-market economies? They certainly can invest a lot in government-supported research, which has proven returns. They might not have the right incentives, however, to breed innovation in the private sector.
From the intro:
The reference to Schumpeter looks like a pretty clear tagging you as an Austrian and that what you are espousing is a libertarian brand of economics. The problem with creative destruction is all the lives of people it destroys along the way. I would trade slower growth for that anyday.
one of the biggest challenges of the american and chinese systems are a very rapidly expanding gini coefficient–much bigger gaps between rich and poor. again, longer story. but i think you’d agree the american legal system remains vastly superior.
I think the idea of “corporations” vs “state” is a false distinction in many ways. Especially if the corporations are persons who own the state. But even if they aren’t, the idea that corporations represent capitalism in some synonymous way is off the mark.
State–as in nation state–is supposed to be sovereign. Whether communist, socialist, dictatorship–it is what it is. What it is not, it seems to me, is an economic “heavy” to be ruled undesirable by “corporate persons” in the name of some Divine Free Market.
um, nope. but if you read my responses above, will be pretty clear to you i find libertarianism problematic for long term economic prosperity and social justice.
My opinion, based on some years of observation. The greatest failing of capitalism is in its incapacity to innovate. I know the claims that justify its practice claim just the opposite ie to centralize wealth ins small numbers of hands is to magnify geometrically the power of the resources. It may be helpful in the development of some technologies but my claim is it is an utter failure at the development and application of new ideas. The sciences have been stagnant in this country for at least the past 40 years. No great ideas in any area including the arts have been generated. All we have done is learn how to manipulate the system to the advantage of some.
i think that’s right. state capitalist economies can direct large sums of cash at innovation projects–and quickly. china’s clearly doing this on the alternative energy front (look at the impact on wind and solar development, where they’re rapidly becoming world leaders).
but the educational system remains far too focused on rote, and there’s much less support for innovation among mid-level (never mind lower-level) management. much of china’s innovation to date has been international ip, let’s say, “emulation.” that’s going to become much more challenging for them going forward.
Yes indeed, but that’s assuming that we have sane leaders. Considering that the top 1% of our elites regard the people on the outside as mere means to their ends, their numbers (what count’s) is exactly the Singapore number you cited.
Ian, it appears you believe in a “free market” with adequate regulations. However, do we have a “free market” when very few players are involved, and often the corporations are controlling the market? Example, Walmart, Comcast, etc.
have to tell you, i’m really testing my typing skills here…
Why isn’t China’s disregard of other territories’ IP laws & treaties simply a flat-out win for them, economically speaking?
Wow, TalkingStick, I hope you’re not saying a command economy would do things better? Maybe an economic system with more support for public goods (e.g. art), like some in Western Europe… but plenty of important innovations have come from US investments (e.g. in basic research). I’ll let Ian take over the argument….
Their Island nation works pretty well. But so did/does the Catholic Church. :-)
we don’t have a free market when a sector is dominated by a single actor, or small numbers of actors that collude.
worth keeping in mind that companies like walmart, when competing in state capitalist countries, are now facing off against increasingly powerful local champions. i don’t think google is a one off…we’re going to be seeing these challenges in automotive, aviation, telecom, retail. i consider this the biggest shift in the global economy in decades.
So then how does creative destruction, a core concept of the Austrian school, fit into your views? You invoke free markets, decry state capitalism, much as a libertarian would. For someone who is not a libertarian, I sure wish I knew what the difference between you and them was.
Our military industrial complex is Crony Capitalism done to protect the rich.
True State Capitalism done for the benefit of the people lowers the cost of things people need.
Vestas in Denmark with government help built windmills and now they have so much electricity they are building their own economy up rather than spend it on oil.
http://www.mnn.com/transportation/cars/stories/denmark-plugs-in-to-electric-cars
http://www.ft.com/cms/s/0/c6d29704-6926-11df-aa7e-00144feab49a.html
http://www.bizjournals.com/sanfrancisco/stories/2010/05/03/story10.html?b=1272859200%5E3277551
We fight a $1 trillion war for oil ( Bush let Ossama go but he never let go of the oil) Why because big Business thinks short term oil makes money for them now.
Big Business lacks the discipline to say no to shareholders who want profit now forget the future.
Big Business buys our government then to give them wars for oil and kill National Healthcare.
The Id, the six year old is telling the parent how much halloween candy they will eat. That is our problem.
it is a win–as long as the other companies continue to provide those technologies (and we’re not even considering the cybersecurity issues, and related industrial espionage, which is becoming a top priority for multinationals with any china presence/exposure). but that won’t continue, it’s not sustainable for the corporates. which means you’re going to have more pressure coming from western governments, and more economic decoupling. ultimately, the chinese will face much more pressure in that environment.
Sounds like a lot of people feel like our free markets in the US aren’t so free. Perhaps we need a more active antitrust regulator as part of our legal framework? Or are we just facing some natural monopolies? In a state capitalist economy, state monopolies can make this point irrelevant.
I agree. Look at net neutrality. Corps want to do away with it because it will then allow them even more to sell poor service at high prices to a captive audience.
my understanding was that libertarians oppose state regulation of markets. and generally brand obama as a socialist. which is sort of analytically uninteresting for me.
It may work well for them, but it’s model’s application to a country bristling with nuclear weapons and bent on World dominance, – god forbid we let it go that far (which isn’t that much farther).
Not entirely their fault, they do it because the fiduciary responsibility laws require them to do it. We should rewrite those laws to mandate a longer-term reckoning. rather than the current per-quarter orientation.
I fail to see how state-run industries threaten the supposedly free US market. They might threaten global corporations, but that is not the same thing and we have to be careful assuming the interests are the same.
no question, we do. there’s a great deal of discussion of this point presently (and paul volcker has been one of the more coherent), but i suspect we’re going to fall short, at least in the near term. not enough feeling of crisis (unlike europe).
if obama really wanted to create a proper state balance, he would’ve followed up the tarp immediately with financial regulation. and then worked on getting the fiscal deficit in order. but that would have come with greater political risks. so instead we had a year of healthcare. not the long term prioritization the country needs to ensure future well being.
I really wonder how this future economy, ever more reliant on automation and robotics will take care of the masses?
I doubt it but given what happened with BP maybe we need state control?
Dude – my comment wasn’t about state-run industries in the US. It was about a perceived lack of competition in the private sector (the Walmart, Comcast, military contract examples cited above).
Ir’s really a cultural comment. I am really speaking of the cultural and intellectual enfeeblement that results from cultures based on the accumulation of property/wealth and the worship of selfish-competition vice collaboration. I have had some years of experience in the evolution of the monetization of the sciences. I see wealth accumulation as game playing and have no objection to game playing by basketball players and cowboys. But there are areas of common interest that simply can’t flourish in a competitive or authoritarian environment.
btw you don’t have to command people to work< nor do you have to threaten them with starvation.
I suspect the search for better gas extraction technologies was driven by electricity restructuring, which created a huge market for gas-fired power plants and open access to the grid — at least in half of the US. Without that, I don’t think the regulated utilities would have been nearly as interested in gas plants. And investor uncertainty about regulation of coal probably also played a role. In other words, that innovation was likely driven by government efforts to restructure the markets and change regulation.
That may be rare exception. In most other areas, it seems corporate interests were driving government restructuring of market rules. Banking, insurance, health care, Big-Ag/Chem are examples.
True but until then our system produces more short term thinking and Crony Capitalism.
Okay, Talking Stick, but how does your observation relate to our discussion of state capitalism versus free markets? Do you think one or the other does what you want better?
a very good point. they overlap, of course, insofar as american pensions/jobs/etc come from those corporations. but they are absolutely and clearly separate issues.
with the rise of state capitalism, we end up with three main global economic changes that, in my view, are worth taking note of.
1) lower global economic growth
2) more regionalized/less globalized trade and capital flows, based on more primarily political considerations
3) negative impact (as you suggest) on multinationals in a host of sectors
Only if you assume another country will emerge that’s able to offer the manufacturing capacity that China has, at the same or lower price than China’s been able to provide. That’s doubtful, especially since China’s pretty much amortized its facility costs by now. Where else are those companies going to go? See, their contribution of IPR to China isn’t a voluntary step, it’s an unavoidable side effect of manufacturing in China. The knowledge transfers.
and my comment suggests that maybe it takes state-run industries to compete against the likes of Walmart, et al. That– in some circles– is ‘competition’ and would be greeted as a better regulator.
More anti-trust actions are needed, but there is nothing natural about our monopolies, or rather cartels, small networks of large interconnected actors. You have to remember in most cases their lobbyists write the laws which regulate them.
Healthcare took the financial Ponzi scheme off of the front pages. BP has taken it’s place now.
When a tree falls in the forrest it makes no sound.
So, dude, you think we should have government companies in direct competition with the private sector. Do you see good examples of this in state capitalist systems? (This is starting to sound like the health care debate!)
one of the major issues with state control, of course, is that you just can’t pay or keep your talent. that’s also a challenge with regulation–particularly in the financial sector–where the private sector runs circles around the regulators.
mid-levels of the american bureaucracy are considerably more competent than in china, no question (though i’d probably give the japanese highest marks on the industrial side…us and britain for foreign policy). something that gets little attention but that the us government really needs to spend some time on if they ever want to get regulation right over the long term–how to attract and keep talent.
Hence there love of creative destruction. Bad actors will be punished by the markets allowing good actors to flourish.
Obama is a Blue Dog status quo corporatist. Most of our political controversies are pseudo-fights to obscure the fact that both parties back a strongly corporatist agenda.
** Ian, **
We’re coming to the end here – five minutes left in my participation, at any rate. Do you want to sum up the discussion a little bit? Your comment #81 conveys the main points in the book. What do you think of people’s reactions here?
Thanks,
Dan
Well, I guess the question would be, can you name a major industry that has substantial effect on GDP that is not highly concentrated either nationally or as experienced at the local level? In other words, where do these theories apply in today’s America?
If the financial services industry owns a huge percentage of GDP and annual profits, and that industry is itself very concentrated — e.g., only five banks control 75-90% of the trillion dollar derivatives markets or more than a majority of the deposits — then that leaves energy (highly concentrated) health (highly concentrated), bigAgra/Chem (both highly concentrated), media (highly concentrated and getting worse [Comcast]). What’s left worth tallking about?
If by hard power you mean our army well we are bogged down in 2 wars with third world nations and thanks to those wars we are broke. We have no money to solidify our hard power and even if we did we would waste it on missile shields
That was the part that sparked my question @39 about how Costa Rica fits into Ian’s model. They seem to be attempting a middle path, so I wonder whether to Ian that looks reasonable, vs. a doomed attempt to square the circle.
I heard you on NPR. I will have to read your book. But tell me: do you really mean lower economic growth, or just slower economic growth?
Don’t take me too seriously. I am prodding people to not just take free market capitalism and private property as God and Country.
There is a place for it but not in the business of protecting and providing for human rights. I don’t like either form of capitalism exclusively.
Scandinavian countries, notably Norway with their nationalized Oil Industry.
So, assuming that the electorate is well informed, socialized common wealth industries serving the citizenry is a must. Let the corporations knock themselves out competing in the production of trinkets.
this is a very good point. we need to recognize that in many state capitalist societies, they see western multinationals as having made the lions share of profits–and exported them–for decades. and now it’s their turn…if that means they use the state and the court system to help them, so be it.
not an argument that’s going to win much favor in the states or europe. but we need to be cognizant of very different–and natural–national viewpoints on these issues.
a critical point for me–it made very good sense, from the chinese perspective, to kick google out of the country. you’ve got a company that was collecting all sorts of data on citizens across the nation. no idea what they’re going to do with it long term. you’re risk averse…you know that they provide support to the us government to help track down potential terrorists. what happens if us-china relations deteriorate in the future (as they’re likely to). why would you want that exposure.
again, from the chinese perspective, i’m surprised they let google stay there as long as they did. probably was because they were getting good intel through tracking gmail accounts on dissidents and the like. but it wasn’t a smart long term strategy.
I haven’t researched it, but I take your point. My point, however, is that people who talk a lot about “free markets” are very often the very corporate enterprises who prefer to own the table and make the rules. I find it more than ironic those same people whine about having unfair competition when really all they mean is that there are economic entities out there that can play has hard, as rough, and have the economic wherewithal to last every round of a “fair” competition with them…. and they don’t like it.
i’ve had to defend against obama being a socialist. now i’m defending against him being a status quo corporatist. maybe i just don’t like politicized labels. i’m a political scientist, not a politician…
Dan, Thanks for Hosting today’s salon.
Ian, please feel free to stay the last half hour.
Bev
i mean slower economic growth.
Many agree with the premise that China is not in a bubble. However, the current measures to restrain the burgeoning asset valuations could cause a reduction in growth severe enough to curtail its epic, neo-mercantilist ascendancy.
Should the China miracle devolve into an economic “China syndrome” the world will enter a regime of synchronized deflation as the global growth engine stalls, spins and augers in.
The onset of world wide deflation is not only very real but also very imminent — especially if Europe and the US continue with severe debt deflation, thus depriving China of both primary export markets.
The risk of renewed Chinese militarism stems from this high-risk outcome of our failure to sustain our domestic, consumer driven recovery. The end-game of economic hegemony is war. Just ask Bush…
Will a Communist Chinese equivalent to Bush take the world down in flames?
Five major actors is not necessarily what economists would call highly concentrated. There’s a big difference in the interactions of two companies and the interactions of five; the latter is a lot more dynamic and unpredictable.
And yes, there are some industries that are virtually monopolies at the local level. But that’s not true for a lot of core consumer items: cars, appliances, restaurant meals, clothing, shoes, etc. You can still pick from many brands in each of these categories.
How Does one have a free market when a cartel controls the money supply?
http://www.youtube.com/watch?v=DxQ_Ck08jcU
It’s been my pleasure – thanks for having me, thanks to all the commenters, and thanks to Ian for his participation and his excellent, though-provoking book!
Best regards,
Dan
Thanks so much for this interesting conversation. I look forward to reading the book. I have to leave now but will read the comments once I return.
thanks daniel, and thanks all. wish we could do this live in a town hall style meeting–strikes me we have some exceptionally interesting views here, and i love the fact that people are passionate about this topic.
i’m profoundly appreciative that my book has sparked so much debate, both here at firedoglake and more broadly. i do hope people enjoy the book. feel free to send comments separately on facebook, review on amazon, or otherwise be in touch with any thoughts you might have.
thanks all, and with best wishes,
ian
The polio vaccine I thought was given for free. As far as our talent goes I promise you I can lose money half as fast as the banks can by going to Vegas, so should I get paid double what the Talented Bank Ceo’s get?
GM, Ford they argued and got a tax cut for their gas guzzlers while Bush was fighting an oil war. A tax to make gas savers cheaper would have helped them and helped America.
Why because we doubled down on an American victory and low gas prices we did not hedge our bets by pushing gas saving cars.
So can I be CEO of GM now?
Dang. Would have liked a reply on Costa Rica. Or China.
Thanks for that insight, Hugh. I knew I was having a problem ‘getting’ this author’s point. Now I know why.
I agree a change in the relative strength and wealth of the US economy (or European ones) would be uncomfortable for us. I am not cheering for the other side. I just feel in my bones that we are making the wrong assumptions about what “free market capitalism” must do in order to function effectively for us. I particularly dislike the effect of corporate-personhood because it is the most corrosive –not to the growth of an economy per se, but to the sovereignty of our state. It certainly is a cultural perspective and I think it is the very one that is being lost.
Thanks Mr. Bremmer–and you type faster than I do by a long shot.
Seconded!
So, what is your conclusion? Who wins the war, the State or the corporation?
It seems that you would not agree with the statement: The state is not the solution, it is the problem; i.e. are you saying that smart regulation is the answer. If so, did you have a view of the de-regulation of the 90s and the Bush years, and do you have any links to those views?
Although I don’t believe the government should be involved in manufacturing of “goods” in this country, when corporations become to large, monopolistic, and powerful…the citizens are willing to look at other alternatives. It seems to me that if corporations in the U.S. want to continue the current system, they better start changing their practices and consider the “common good”. Otherwise, citizens will be far more open to alternatives if they view the “free market” system as corrupt.
Ian, Thanks for stopping by the Lake and discussing your new book with us.
Ian’s website
Dan’s website
Thanks all.
He is setting up a false conflict. Centralized power whether you call it corporations or government is dangerous to the people. The conflict is in how to defend and deliver the the rights of the people from both corrupt governments and businesses.
I agree with you. I don’t think you overcome corrupt government with corrupt corporations, or vice versa. I think America needs to use its power to reform the entire concept of “corporate”. If it does not, it guarantees being unduly influenced by them. We need at least a fighting chance for equity and fairness within our own ranks, let alone the world’s.
A democratic government is, by definition, not dangerous to the people.
Who fashioned that definition pray tell?
Oh I get it. Your handle says it all.
Webster’s. You can look it up.
Main Entry: de·moc·ra·cy
Pronunciation: di-ˈmä-krə-sē
Function: noun
Inflected Form(s): plural de·moc·ra·cies
Etymology: Middle French democratie, from Late Latin democratia, from Greek dēmokratia, from dēmos + -kratia -cracy
Date: 1576
1 a : government by the people; especially : rule of the majority b : a government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections
2 : a political unit that has a democratic government
3 capitalized : the principles and policies of the Democratic party in the United States
4 : the common people especially when constituting the source of political authority
5 : the absence of hereditary or arbitrary class distinctions or privileges
—Merriam Webster
Corporations versus the “State”. I think this is not what the authors intend. It is the Corporations working with the state to socialize risks and losses, while profits remain private, except for a percentage kicked back to politicians as campaign donations.
My question to the authors is about nomenclature: Do you believe the facts on the ground and process you are describing fits under the name “corporatism?”
am SO sorry I missed this thread
I WISH I was here to point out;
there is NO such thing as “a free market”, there never was, there never will be, the very slogan was a scheme produced by profiteers who do not want to pay their own bills so they came up with the propaganda
the entire concept is simply rediculous, in order to have ownership, laws, sanctity of contracts you MUST have regulations
what a “free marketeer” REALLY wants is lack of the regulations that force them into paying their bills, an ABUNDANCE of regulations that force the labor class into paying them
the entire concept of “a free market” is nothing but propaganda, the very principles of a monetary system require regulations in in the first place
so sorry I missed this thread
“I don’t think you overcome corrupt government with corrupt corporations, or vice versa. I think America needs to use its power to reform the entire concept of “corporate”.”
I do not think this is where the authors are going. Corporations, like humans, can be “corrupt,” break or bend a regulation or law to its interest. The topic is not about regulation or deregulation or the nature of the corporation as an economic structure: the last is not questioned at all.
It is the nature of the alliance of the corporation and the state. Not that corporation resists regulation of its products, but much more profitable, has the people, via the State, guarantee its profits whatever it produces.
One could say the guarantee of products in the military market is traditional–but the government is the only consumer. Newer is the guarantee of profits in relationships not necessarily involving the state, the “bailouts”. Essentially the Democratic Party in the last 20 years has become the party of financial capital, so it the new relationships are most demonstrable in the financial industry bailouts.
I agree with the sentiments of your post, but suggest you not use the word “regulations.” Deregulation of regulations is a profit increasing motive of businesses, and that is what most people think of when using the term. For example, deregulating cleanliness laws so corps pay less on safety.
What you are talking about is socializing losses via the State’s taxation or deficit spending, while profits remain privatized. I call this corporatism. True, it could be done by new regulations, but there are simple laws which need nothing new, and can be contorted to serve the same purpose. For example, Paulson’s and Bernanke’s new interpretation of Fed powers.
Put it this way, there are two ways to juice up profits via influence on the state, and they should be seen as a different two. One, deregulation or underfunding enforcement, the traditional way, to increase profits. Two, and newer, using the taxpayer via the government to insure losses.
I’m late, but I agree. That’s precisely what he’s doing.
Good question!
ALL markets are determined by the government and community – it is called political economy.
In black off the books markets, the “government” and “community” are the mafia and the russian mobs and the various drug empires …
In robber baron fuck the public goldman-aig-fannie-freddie… the “rules” are made by legalized criminal gangs who wear suits and don’t go to jail for their crimes against humanity.
There are NO free markets – why can’t we start without accepting bullshit lies?
rmm.
Jon Walker is upstairs!
House Drops COBRA Extension, Democrats Cede Moral High Ground on Health Care
Obama to unemployed! FUCK YOU!!!
You say:”The topic is not about regulation or deregulation or the nature of the corporation as an economic structure: the last is not questioned at all.”
I suppose that is my problem with the entire flow of the discussion. As a business structure, corporations are not the problem. It is that they are also a political structure, and I don’t think they should be. I am not as concerned about regulating their business practices as I am regulating their governmental presence. So long as we imagine they are essentially and Constitutionally the same as air-breathing human beings, we give them undue standing and influence.
And the second part of my argument is simply that if we allow the corporate person to become as powerful as a nation-state (for their profit and our expense), then they should have some competition that is of equal resources and power. Let them bring to market –our market–whatever they wish unfettered if you truly think “free markets” are the One True Way.
We agree “state capitalism” is bad, gives corporations the powers of the state, and is a road to economic slavery if there is no democratic control of the state.
Where we disagree is I don’t think anything has changed in 60 years.
We re-purposed the CIA under Dulles and Ike to promote the success of “US Companies” over companies from the EU – and indeed MI-6 did the same chore for the Brits, and so on. What China has done is just dropped the pretense of “free market capitalism” in an effort to get more back to the state – and thus to the people – than is coming back to the US via our corporations as rulers system. Indeed based on our regulatory controls – only slightly better than China, official dump on unions – only slightly better than China, and low corporate taxes – much worse than China, it is hard to say who has the more evil corporate system relative to the good of the common folk – the good of the common.
Based on providing jobs and a bit better green I’d say we are still ahead – but it is a close race to the bottom, and with our corporate controlled gov, I think we can beat China to the bottom. State capitalism may be the only way to defeat the dictatorship of the American international corporation – but it does need the addition of democracy.