The End of the Free Market?

February 10, 2012 6:32 PM

We're All State Capitalists Now 'No, according to some commentators, the contest between the two Asian superpowers is also fundamentally a contest between economic models: market capitalism vs. state capitalism.'

But what is state capitalism?
The term State capitalism . . . is usually described as commercial (profit-seeking) economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist.

The Economist on state capitalism.

BusinessWeek on China's state capitalism trap.

Financial Times: 'Putin Stands By State Capitalism'

The Economist Debates: State capitalism
'This house believes that state capitalism is a viable alternative to liberal capitalism.'

Peter Binn's article on State Capitalism, 1986

Khan Academy: When Capitalism Is Great And Not-So-Great

Yes, they refer to the United States as an 'Asian superpower.'

posted by the man of twists and turns (29 comments total)

State capitalism is as old as history, re: Greeks, Romans, Hams, Aztecs.
posted by Mblue at 6:41 PM on February 10

managed/mixed economies, etc. see Scandinavia, et al.
posted by squorch at 7:01 PM on February 10

God and Noam Chomsky both love the FT. One can easily see why, with all the zings included.

state capitalism... strong, paternalistic government... unprecedented protests... zing
This isn’t Putin 2.0. it isn’t even Putin 1.0 – it’s Putin 0.1. zing
This is a return to the chaebols of South Korea. zing
posted by nickrussell at 7:01 PM on February 10

Niall Ferguson is an idiot.

Nor is it only about the pace of China's growth, though any Asian exporter forced to choose between China and America would be inclined to choose the former; their trade with China is growing far more rapidly than trade with the United States.

Last year you sold $1 worth of stuff to X, and this year you sold $10. So naturally if you had to choose between them and the people you've been selling $100 worth of stuff to every year for the past 50 years you'd pick them, right? Since Growth was faster?

Anyway, his article doesn't really seem to have much of a thesis. He runs some numbers that show it's Europe, not China where the government spends the most compared to GDP. The Chinese government has more investments then the west, but that's because they run huge surpluses, so why is that even surprising?

Then there is the basic confusing about 'democracy' meaning the ability for billionaires to suck money out of the economy. Yes, obviously if the government invests money directly there will be less opportunity for Goldman Sachs. Who cares?

The problem with China is that it's not a democracy. It's also totally corrupt, which isn't surprising since there's no democratic accountability. Lots of western countries have or have had state owned business.

The problem is that China proves all the people who say capitalism = liberty wrong. Clearly they have a lot of capitalism, but no liberty. Now they're trying to make up a bunch of excuses.
posted by delmoi at 7:07 PM on February 10 [6 favorites]

The Economist article:

"Studies show that state companies use capital less efficiently than private ones, and grow more slowly. In many countries the coddled state giants are pouring money into fancy towers at a time when entrepreneurs are struggling to raise capital."

BusinessWeek article:

"He said some Chinese entrepreneurs, unable to compete with state-supported giants at home, have taken their skills abroad, costing China a vital source of energy and innovation."

The Economist Debate:

"State capitalists cannot tolerate the two things that make for dynamic economies: the free flow of information that empowers entrepreneurs and consumers and the creative destruction that allows vigorous new firms to replace tired old ones."

Translation:

"The John Galts of your countries need your assistance and/or permission to get enough money to do awesome things."
posted by edguardo at 7:08 PM on February 10 [3 favorites]

The problem is that China proves all the people who say capitalism = liberty wrong. Clearly they have a lot of capitalism, but no liberty. Now they're trying to make up a bunch of excuses.

Put another way, No True Capitalist System is without liberty.
posted by squorch at 7:10 PM on February 10

I'd like to see that true capitalist system one day.
posted by edguardo at 7:12 PM on February 10 [2 favorites]

"Niall Ferguson is an idiot. "

That just about covers it.
posted by carping demon at 7:17 PM on February 10 [3 favorites]

"State capitalism" is usually a descriptor for Leninist-style "communism"; it replaces a private capitalist class with the Party elite, but it's still an enormous mass of labor being done by a working class that does not direct or control its own labor for the benefit and under the direction of an elite that lives not by labor but by skimming off surplus value from the labor of the working class.
posted by Pope Guilty at 7:25 PM on February 10 [14 favorites]

We need to start acknowledging that economic systems are just another form of politics: they are political systems governing the distribution of resources. Any one of them has the potential to work as long as almost everyone involved consents. Hell, even the Soviet Union would have (hypothetically) worked so long as every single member of society were completely on board with it.

Evidence shows that the societies with the highest human development (life expectancy, good crime rate, overall happiness, etc.) are the ones with the most equality. It doesn't matter how you get that equality, it just matters that you do it.

Give everyone an equal say in how the society is run, and what happens in their lives. That generally manifests itself as democracy and wealth equality. China doesn't have much of either.
posted by XerxesQados at 7:28 PM on February 10 [9 favorites]

I wouldn't say Niall Ferguson is an idiot, but, like Krugman, he has cultivated a public persona that uses simplistic (and often bombastic) arguments in order to pander to a popular audience.
posted by KokuRyu at 7:32 PM on February 10 [2 favorites]

Give everyone an equal say in how the society is run, and what happens in their lives. That generally manifests itself as democracy and wealth equality. China doesn't have much of either.

Yeah, but neither does the US.
posted by bradbane at 7:44 PM on February 10

Hasn't this been true for a while now?

"What do you think the Russians talk about in their councils of state? Karl Marx? They pull out their linear programming charts, statistical decision theories, and minimax solutions and compute the price-cost probabilities of their transactions and investments just like we do. We no longer live in a world of nations and ideologies, Mr. Beale. The world is a college of corporations inexorably determined by the immutable by-laws of business. The world is a business, Mr. Beale!"

Free markets do not equal free people, and I am deeply skeptical of anyone who demands the former more vocally than they demand the latter.
posted by compartment at 7:56 PM on February 10 [8 favorites]

The problem is that China proves all the people who say capitalism = liberty wrong. Clearly they have a lot of capitalism, but no liberty. Now they're trying to make up a bunch of excuses.

My understanding is that after Tiananmen, China introduced market changes to avoid Tiananmen 2.0. Clearly it is a liberty of a sort, maybe just not the type the people envisioned. And if you add in in cultural aspects, it may be the most workable solution for this present moment in time (I point to the idea that even the most totalitarian system would be perceived as freedom by the people there as long as their aspirations never approached the boundaries of the system. A theocracy would be more free to those of a fundamentalist mindset than outright democracy.).

But all this misses the point in my eyes, which is addressing corruption within a system. It hardly matters whether it is capitalism or state capitalism, and we could pontificate for decades the intrinsic corruption of either, with data points to support either side, but the expression of each can be vastly different, even within the same type. Not to mention the assumption that there can only be one perfect system. Even if I favor capitalism, I can think of a few circumstances where it would be an absolute disaster.

So it seems reducing corruption should be the primary goal, and the basics of that is fairly well understood (reduce complexity and choose laws judiciously. Simplify, simplify, simplify). And especially since most of the corruption from either system is wealth transference (or resource distribution), the tax code is the means for most corruption.

Geoism seems the obvious answer, but I'm certain it's not the only one.
posted by quintessencesluglord at 8:11 PM on February 10

"State capitalism" is usually a descriptor for Leninist-style "communism"

Not the way I see it. State capitalism in the current Chinese style is far from collectivist. As a matter of fact, it hardly pretends anymore. State Capitalism in China has very few things in common with Leninist-style communism -- aside from China being run by the "Communist Party" I think you'd be fairly hard pressed to find much in common, economically, between 1925 Russia and 2012 China.

Politically there remains an entrenched cadre of technocrats, and dissent is equally (and violently) put down -- clearly they share an authoritarian streak, but that's just about it.
posted by chimaera at 8:25 PM on February 10 [2 favorites]

"We're all State Capitalists Now"

How is the U.S. State Capitalist? And yes, not a new concept. Lenin actively wrote about avoiding state capitalism in the early days of the revolution.
posted by destro at 8:36 PM on February 10

"State capitalism" is usually a descriptor for Leninist-style "communism"
Not the way I see it.

I wonder if "state capitalism" as in Tony Cliff's 1955 State Capitalism in Russia is still a big point of contention among all the Trotskyites. The ISO isn't including it in their current "What We Stand For" page, but they're still including it in the PDF distribution of their "Where We Stand" pamphlet.

When this issue of the Economist arrived I actually laughed out loud: I could only imagine some Spartacist somewhere pumping his fist because the Economist had proved what he'd been saying about those ISO running dogs all along, which is that they're no better than Economist editors.
posted by mph at 9:07 PM on February 10 [7 favorites]

Not the way I see it.

I was giving the usual use of the term; the term I would use for China would be "authoritarian capitalism", for its similarity to the Pinochet regime. I was not attempting to claim that China is run on Marxist-Leninist-Maoist lines and I'm not sure what gave you the idea that I was.


Lenin actively wrote about avoiding state capitalism in the early days of the revolution.

Which is hilarious, in retrospect.
posted by Pope Guilty at 9:59 PM on February 10 [2 favorites]

The USA as an Asian superpower - the Pacific century - who is the PR agency on this job?
posted by infini at 10:20 PM on February 10 [1 favorite]

China's Foreign Aid: The Economist still doesn't get it
posted by infini at 11:00 PM on February 10 [3 favorites]

for its similarity to the Pinochet regime

wat
posted by falameufilho at 12:09 AM on February 11

This whole capitalism vs. communism dialogue is so last millennium. Kids today are making their own decisions, and they don't necessarily frame them in the old ways. I look forward to the day when automatic Chinese-to-English and English-to-Chinese translation is possible, and we hook Twitter up to Weibo and the kids everywhere tweet out the future.
posted by twoleftfeet at 3:46 AM on February 11

This whole capitalism vs. communism dialogue is so last millennium.

This has to be one of the smartest things said.

I find it interesting to note that I was born in a state with a democratically elected communist government and while the whole country has always been threatening to go the dogs, its never been said to be anything but the world's largest democracy.
posted by infini at 3:55 AM on February 11 [1 favorite]

This whole capitalism vs. communism dialogue is so last millennium.

I don't know. You ever watch Fox? (no, I don't either)

My point is that a huge part of the existing cultural narrative (in the US) is cast in this division. Clearly whatever we'll talk about this millennium has not been communicated in a way that punctures that bubble.
posted by Reasonably Everything Happens at 6:12 AM on February 11 [2 favorites]

So in the past I'd say 12-13 years that I've learned about different aspects of socialism, I never heard of one Mr. Liebknecht, and then, yesterday I start to do research for a boardgame I'm thinking of making and I swear every single page about Communism that i looked at had this guys name on it, and then we all go mentioning State Capitalism and who do I see shortly before I end up going to bed?

Wilhelm Liebknecht.

Is this just a conspiracy? Why have I never heard of him before, and suddenly he shows up on like 5 different pages in Wikipedia yesterday? What's up with that?

I remember joining the ISO for like a day before I realized it was pretty much just like a cult and I would have none of that. *shudder* All those commie groups are such a fuckin' cult.
posted by symbioid at 7:41 AM on February 11

And Reasonably Everything Happens is right, I think. My friend and I were talking about this a few years ago, during the Presidential Election w/Obama, and he said he came to the conclusion that all these old folks are living in the past, and their view of the world was tainted by 'Nam. Their views of Communism, etc... So they don't let it go, even though it seems dead to us, to them it's still a living breathing threat. They're still fighting the cold war in their reptilian brains for whatever reason. Fear, I guess. Constant state of fear and anxiety. If they actually saw the commie groups, they'd laugh their fucking head off. They're supposed to be a threat? Tell me another! Even so, people running the joint have their heads in the glorious decades of the 50s-80s...

We all know that Communism isn't a real threat anymore (and most of us know that what was called Communism was "State Capitalism" or "Degenerate Workers State" or whatever No True Communism it ended up being)... But they never got the message.
posted by symbioid at 7:46 AM on February 11

symbioid, that's known as the Baader-Meinhof Phenomenon
posted by the man of twists and turns at 12:06 PM on February 11 [1 favorite]

Or strategic seeding, who knows anymore with the editable web
posted by infini at 12:13 PM on February 11 [1 favorite]

I wouldn't say Niall Ferguson is an idiot, but, like Krugman, he has cultivated a public persona that uses simplistic (and often bombastic) arguments in order to pander to a popular audience.

Krugman is a Nobel prize winning economist who's work revolutionized the field. Niall Ferguson is a neo-con historian who idolizes the British empire.

I look forward to the day when automatic Chinese-to-English and English-to-Chinese translation is possible, and we hook Twitter up to Weibo and the kids everywhere tweet out the future.

Chinese don't use Weibo because they don't like Twitter, they use Weibo because twitter was banned. It was popular before the ban, and you can fit a lot more into 140 characters in Chinese then in English. English to Chinese translation already exists, and works well. But obviously it's going to have problems with the kind of offhand vernacular used in microblogging.

And anyway, twitter is for old people. The kids are all on tumblr, it's not just a stereotype, but I remember a couple years ago data showing that twitter was more popular with the middle aged then the young. It's funning how a bunch of middle aged people are all congratulating themselves on being the vanguard of the future, because twitter is new it must be popular with the 'young'.
posted by delmoi at 4:30 PM on February 13