2/14/12

State Capitalism - Really ?

I was reading a complete file in the Economist last month that talks about 'State Capitalism'; and discusses in detail the advantages and flaws of the model; of course considering China / Russia / Brazil (in that order) as heroes of the model.

Of course China is engaged in State Capitalism; and many of its leading firms are owned by the state and that is clear in their ownership.. Similar for other countries in this 'axis of state-capitalism' .... Now the really interesting question - if we ponder the claims a bit - is: is liberal capitalism really liberal capitalism. Let's look at some of the evidence:
 - South Korea: the country's leading non-state firms (Samsung, LG, Hyundai, etc....) receive unlimited support from the state financially (even direct contribution to marketing spending) as well as in positioning in key negotiations with other countries... No one can argue that without the state's role in selecting and promoting these firms they would have survived and grown to their current size.
 - The United States: The large defense budgets, the support to Boeing, the contracts that get awarded hazily, as well as many many deals between firms and other countries that are brokered by the state
 - Why does the french president british/ turkish prime minister for example travel with an army of business men and heads of economic sectors and 'close deals' as they are on diplomatic trips ..
 - What about the huge amounts of money that can (and have been) be thrown at companies considered 'too big to fail' .... Isn't the state already effectively a stakeholder here? 

In the end ... the state in most/all these 'liberal-capitalism' countries is the first supporter of its business elite, and this begins to clarify things: The State is the support for the country's business elite and key companies in all cases of US / UK / France / China / Russia / etc ... ( granted with varying degrees) .. The only difference between them, is that - Ironically - in the Chinese case, it is more transparent as we know who the owner is of these companies (the state) and we know that he is acting in his own self interest ... with the other countries, everything becomes under the table !

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