The twenty-first century has evidenced a remarkable worldwide shift away from both the market economy model and the socialist economy model in favor of state capitalism. While the shift is undoubtedly beneficial for those who labored under socialism, it is unequivocally disastrous for those who thrived under market economy conditions.
In this column, I shall focus attention primarily on state capitalism in so-called emerging countries. China and Singapore are usually paraded as examples of high-performing state capitalist economies. China, indeed, is now the leading practitioner of this pervasive phenomenon. Its relative success, however, is an unreliable indicator for the rest of the emerging nations.
First, for state capitalism to have any chance of success is must be directed by a competent state. China has a strong Mandarin culture which was not entirely destroyed by the evil dictatorship of Mao Zedong. India, Brazil, South Africa Argentina, Venezuela and many other emulators do not have such a strong administrative culture.
Second, well-directed state capitalism performs best when copying the innovations of others. This is so because governments are prepared to ignore the property rights of others and are eager to steal technology. They tend, because of lengthy experience, to be efficient thieves. Notably, however, they are not effective innovators. So as soon as they have to produce new ideas of their own, puff there goes the market miracle! Japan is the outstanding example of this blow-out phenomenon.
Third, state capitalism always favors well-connected insiders over more innovative outsiders. In China, for example, unproductive princelings have seized almost all the state capitalist spoils. In Russia, a clique of oligarchs dominates both the Kremlin and business, such as that is. Thus, the state capitalist model induces cronyism, inequality and, eventually (one hopes) revolution.
Fourth, state capitalism always supports its losers through bail-outs and other subsidies. Americans should be fully aware of this given the hand-outs so recently provided to financial institutions, automobile producers, so-called energy-savers, rapid-transit rail systems and other political boondoggles favored by the President and compliant members of Congress because of campaign donations received from unscrupulous state capitalist beneficiaries such as Warren Buffet and George Soros.
Tags: China, George Soros, Mandarin culture, market economy, socialist economy, state capitalism, Warren Buffet
January 28, 2012 at 6:29 pm |
“In Russia, a clique of oligarchs dominates both the Kremlin and business, such as that is.”
- Not any more. Over 80% of the key positions in the government, business and capital ownership are occupied by people who used to work for the KGB. Of course, they still work for it, just not officially. The KGB has imprisoned and driven into exile all of the all-powerful oligarchs of the 1990ies.
January 28, 2012 at 11:16 pm |
We have to first understand that there is no market economy. It is simply a brainwash by capitalism. There cannot and does no exist a free market. It never existed.
Capitalism is headed by the central bank. Central bank is a dictator. It is the king. If king does not follow free market then no one immediately below the king, that is, the large banks, will also not follow the free market. Therefore no one will follow market economy.
Federal Funds Rate (FFR) is arbitrarily set by the Fed or the central bank. It is never based on the free market. Thus money is controlled at the top based on the global plan of the central bank. There is no freedom or free market here.
Moreover, interest charging, profiting, printing free money, creating recessions by controlling FFR are all illegal and violate the laws of conservation which are laws of nature. Thus the foundations of capitalism are immoral and illegal. Capitalism must be eliminated. The laws of nature are the ultimate truth. Nothing in our man-made world should violate them.
Those who want to understand the core idea of capitalism must try to understand how the central banks work, what are their policies, and goals. Capitalism is only a front-end show of the central bank to achieve their goals.
Over the centuries banks eliminated all Kings from all over the world to become king. First they removed kings of Spain, then England, then India, Russia, China etc. All the wars and revolutions, all over the world, were financed by banks to achieve one simple goal – remove king, install central bank – and finally become king. They have successfully done that.
Next big question is who will remove them to give freedom to people. Milton Friedman, Nobel Laureate in economics said, one unsolved problem of the day is how to get rid of the Fed.
January 29, 2012 at 5:41 am |
People fail to understand that state capitalism fails to create wealth in the usual sense. It only makes the state richer. Not the people. Hence the failure to develop a true middle class. The people continue to receive allotments from the state hiding the lack of wealth formation for individuals.
April 14, 2012 at 4:14 am |
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