The Scarecrow of State Capitalism
Is state capitalism really a scheme to paralyze free-market democracies, as some prominent analysts argue?
July 30, 2010
U.S. analysts of world affairs seem to have a penchant to oscillate between extremes. On the one hand are triumphalist texts such as Francis Fukuyama’s "The End of History" — in which he proclaimed a heroically victorious United States. His argument was so overstated to be considered badly delusional.
On the other hand are voices like Ian Bremer, who peddle a worldview according to which Americans, or so it sadly seems, must always be afraid, very afraid, of something that is going on in the world and that may not be to their unquestioned advantage.
There is, of course, a third variant, where the same analysts may be found to oscillate between the two extremes — switching seamlessly between triumphalism and dark pessimism, depending on whether the United States finds itself ascendant or descendant in the cycle of world affairs.
Such a psychopolitical approach to analysis may betray the entire notion of what analysis means, but who’s to worry? It’s a hot streak/cold shower world out there. If the others like us, we Americans are exuberant — if they don’t, we get moody.
To be sure, unlike the early 1990s, the early 2010s are not a period to exclaim triumphantly about the U.S. of A. The country certainly faces a vast array of challenges. If one thing is for sure, it faces longer odds and more daunting challenges than in some time.
But for America to be less exceptional actually is a good thing, because the breathless proclamations of exceptionalism have for quite some time now been misused as a ready-made mechanism to cover up things that definitely needed mending.
In addition, the United States being far less superior to other nations than it is accustomed to does not mean that the rest of the world is up to anything devious. It simply means that the United States has lost its previous margin — and needs to work harder and in a more concentrated, collaborative fashion at home in order to get the backlog of problems solved.
Alas, faced with this constellation, Ian Bremer’s answer is the worst one — creating a seemingly solid, ostensibly elegant framework of analysis to explain that it is the ill intentions of other nations that undermine the United States’ standing and future prosperity.
His scarecrow is state capitalism. In his eyes, this monster is marrying political power motives with oligopolistic, if not state-owned, business structures to choke off the breathing space of free-market democracies.
This new attack wave, he says, is an unfortunate but predictable consequence of the financial crisis of 2007/8. It is especially Chinese leaders who are using these crass failures for a counterattack on the West’s free markets.
More state control is good, they say. That, counters Mr. Bremer, undermines the process of globalization, access to low-cost capital and labor as well as, in the ultimate analysis, consumer gains all over the globe.
What is truly breathtaking about this analysis is its way of equating more competition on the global stage and the rise of emerging market economies with state capitalism.
Yes, there is Petrobras, Brazil’s state-owned oil company — and many of the other companies that have replaced the once-dominant seven sisters. But who in his right mind would question the right of these countries to manage their own oil resources, assets that are after all located in their own territory?
Does anybody really want to claim in the 21st century that there is any God-given right for outsiders to do it? Anybody with a sense of fairness and equipped with historic memory must realize that there is a long record of a lack of fair treatment as to the distribution of the gains generated from the production of those resources.
And does one really need to be reminded that Western companies such as BP were state-owned until not so long ago — and/or still serve as an extended arm of their country’s foreign policy in some domains?
And in what way are China’s oil companies, to take the leading paragons of state capitalism, more mischievous than, say, BP, with its long history of intermingling British commercial and geopolitical interests? Libya, anyone?
To write an entire 200-page book about state capitalism and not to mention BP’s less-than-venerable record as the Anglo-Iranian Oil Company — a geopolitical projection mechanism if there ever was one — is intellectually dishonest, to say the least.
Surely, the leading companies from the emerging market countries still need to go through some transformation. But so have, and so continue to do, Western companies. They live in a world of constant jockeying — for position, self-preservation, advantage and so on.
To equate the emergence of these competitors with state capitalism is neither clever nor fair nor historically grounded. It is an only thinly disguised form of lese majésté thinking — of betraying a sense of the royals feeling insulted that there are new forces possibly in a position to topple the established order.
In that sense, the book may well have the opposite of its intended effect. CEOs of large emerging market companies who read this treatise must come away with a sense of wonderment — that the West (read: the U.S. establishment) is crying foul on false grounds before the competition has even begun.
If anything, that should give them a sense of confidence and mission as they embark on conquering world markets, utilizing to the fullest their dual benefit — being upstarts and being headquartered in the world’s most dynamically growing markets.
To them, it is the 1890s (so to speak) all over again. That was the period when the American upstarts brought their natural advantages to bear to upset the apple cart established by European companies in global markets.
And just why did the Americans succeed in their new-found mission back then? Because they were the upstarts and were headquartered in the world’s most dynamically growing market. Go figure.
Now that the wheel has turned and it may be somebody else who has the erstwhile American advantage, it must come across as sour grapes to claim that this dynamism is wedded to state capitalism — and illicit ways of combining political aims with corporate ones.
To equate the emergence of emerging market competitors with state capitalism is neither clever nor fair.
U.S. analysts of world affairs seem to have a penchant to oscillate between extremes: triumphalism and dark pessimism.
It comes across as sour grapes to claim that competition from the emerging markets is wedded to state capitalism — and illicit ways of combining political aims with corporate ones.
Breathless proclamations of U.S. exceptionalism are a ready-made mechanism to cover up things that definitely needed mending.