State Capitalism’s Uncertain Future PDF
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State Capitalism’s Uncertain Future State Capitalism’s Uncertain Future Scott B. MacDonald and Jonathan Lemco Copyright © 2015 by ABC-CLIO, LLC All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher. Library of Congress Cataloging-in-Publication Data MacDonald, Scott B., author. State capitalism’s uncertain future / Scott B. MacDonald and Jonathan Lemco. pages cm Includes bibliographical references and index. ISBN 978-1-4408-3107-2 (print : alk. paper) — ISBN 978-1-4408-3108-9 (e-book) 1. Capitalism—Government policy. 2. Globalization—Economic aspects. 3. Economic policy—History—21st century. I. Lemco, Jonathan, author. II. Title. HB501.M21875 2015 330.12'2—dc23 2015007507 ISBN: 978-1-4408-3107-2 EISBN: 978-1-4408-3108-9 19 18 17 16 15 1 2 3 4 5 This book is also available on the World Wide Web as an eBook. Visit www.abc-clio.com for details. Praeger An Imprint of ABC-CLIO, LLC ABC-CLIO, LLC 130 Cremona Drive, P.O. Box 1911 Santa Barbara, California 93116-1911 This book is printed on acid-free paper Manufactured in the United States of America Contents Preface vii ONE: Introduction 1 TWO: A Short History of State Capitalism 17 THREE: Market Leninism at Work in China 43 FOUR: In the New Tsar’s Court 71 FIVE: State Capitalism, Power, and Identity in the Middle East 101 SIX: State Capitalism in Latin America 131 SEVEN: The Limits of State Capitalism 155 EIGHT: Conclusion: An Uncertain Future 177 Selected Bibliography 191 Index 199 Preface Since the end of the Cold War the global political economy has been in a state of disequilibrium. That state of affairs is related to the redefini- tion of relationships between countries, peoples, and markets. The era has witnessed the rise of China as a global power, the relative decline of the United States as the dominant power, Europe’s slippage into a crisis of identity, a critical reassessment of their roles in the world by Japan and Russia, and the emergence of a number of other countries into the upper rungs of global power. Among the latter group are Brazil, India, Indonesia, Saudi Arabia, Turkey, and Mexico. While one interpretation of this is that the global South, the swath of countries that constitute the southern hemi- sphere, is finally on the rise and reaching a convergence with the more industrialized and developed West, another view is that the end of the Cold War released more traditional forces. Globalization created a “new world order” based on a community of countries that had a stake in the system, but also left them reaching for the commanding heights of the new and poorly defined world community. The question raised in the following pages points to the issue of what has emerged from the end of the Cold War and the extended period of globalization that commenced in the 1980s. Along these lines, the global community is one that is less held together by the benefits of globaliza- tion, in which shareholding has a little less meaning and nationalism has returned as a force. Indeed, as reflected by the 2014 Scottish independence referendum and the movement for Catalonia’s independence in Spain, proto-nationalism is alive and well. The issue of nationalism also points viii Preface back to what kind of political economy is the best. In advanced economies, the dominant model is democratic capitalism—a capitalist economic sys- tem, led by the private sector. Although there are variations between the Anglo-American economies and continental Europe and Japan, the key tenets are electoral politics, rule of law, respect for contracts, and a well- defined and extensive space for the private sector. The competing model is autocratic capitalism. The political system is authoritarian, and the economy is capitalist, but large state-owned compa- nies play a major role in the creation of national wealth. In such a system, the government may be willing to hold elections, occasionally allowing an opposition, and promotes a private sector—but the core group of political and economic actors are drawn from the ranks of the ruling party or the ruling elite. Decisions are usually made promptly, talent is appreciated, and state companies are often competitive with their foreign private sector counterparts. This system has brought considerable advances to China, Russia, and Singapore (by far the most successful), but also carries with it a hardnosed approach to opposing ideas. Moreover, there is a downside to autocratic capitalism if it slips beyond professionalism and pragmatism into crony capitalism. The catalyst for this book came from the events of 2008’s global finan- cial panic and Great Recession, which shook the foundations of the demo- cratic capitalist system in the West and Japan. The excessive dependence on financial capitalism in the United States, the United Kingdom, and Ireland eroded claims of the superiority of those economic models and, with the upsurge in the economic clout of China and the other BRICS (Brazil, Russia, India, and South Africa), lent credence to the idea that state capitalism might be the future. This claim was reinforced by China’s willingness to implement a massive stimulus program in 2008–2009 that did much to prevent the world from slipping into a new Great Depression similar to the 1930s. Most significantly, the rise of China advanced the argument that state capitalism, especially with an autocratic bent, was set to knock private sector companies out of business and threaten the world with a new brand of authoritarian government. Indeed, state capitalism appeared to be the core of a “new normal” of geo-economics that was like a juggernaut on the world stage. Our view is that although state capitalism’s surge in the aftermath of the 2008 financial panic and Great Recession was impressive, this is not the threat to the world community purported by some. Instead state capitalism has an uncertain future, considering the massive economic, demographic, and political challenges confronting governments in China, Preface ix Russia, and Saudi Arabia. This creates a landscape in which volatility and risk are magnified. Many state capitalist systems are going to be severely challenged by the temptations of cronyism, reflected in the cozy relations between many of China’s economic elites and its state-owned companies, or the same matrix in Russia. This problem is evident even in democracies such as Brazil, which became painfully obvious in the Petrobras scandal of 2015. Democratic capitalism, faults and all, is hardly finished. This is important to recognize as younger generations of students, businesspeople, and policymakers are going to be forced to deal with the challenges repre- sented by autocratic state capitalism. The authors wish to thank their families for their patience with the fin- ishing of the book. Special appreciation is extended to M.-M. Kateri Scott- MacDonald for her reading and editing each chapter. Vitmar Harizaj’s help in editing is also appreciated. We have also appreciated the patience of Hilary Claggett, our editor. Her faith in us to finish the book has been vin- dicated. All responsibility for this book is ours and ours alone. We should also add that the views expressed in the following pages do not necessarily represent those of MC Asset Management Holdings LLC or Vanguard.
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