INT 200: Global Capitalism and its Discontents

State Capitalism

State Capitalism• The state / government engages in profit seeking economic

activity with the management of the productive forces in a capitalist manner – Or, an environment wherein the capitalist enterprise is a component

part of the state bureaucracy and the receivers of capitalist surplus value are state appointed bureaucrats

– even government agencies that are organized like corporations and use business management practices

• Rising powers often use the state to kick-start growth– USA, Japan, Korea

State Capitalism• Centrally Planned Economies

– state effectively controls both production and allocation of resources • Social Liberalism

– role of the government includes addressing economic and social issues such as poverty, health care and education

• Ordoliberalism– variant of social liberalism; need for the state to ensure that the free

market produces results close to its theoretical potential• the state must create a proper legal environment for the economy and maintain a

healthy level of competition• state must have a strict monetary policy in order to create monetary stability and low

inflation• Haftung: responsibility

• Dirigisme– an economy in which the government

exerts strong direct influence – “Indicative planning

State Capitalism• State Own Enterprises (SOEs)

– hybrid corporations, backed by the state but behaving like a private-sector multinational and embracing globalization

– corporations in which the state owns controlling shares of publicly-listed corporations, effectively acting as a large capitalist shareholder

– Initially, SOEs were little more than government departments in emerging markets, with no independence

– Now, they operate by recognizable capitalist management principles– Now, powerful

• Significant advance on Predecessors – Wider scale, faster, & more sophisticated– Seen as a sustainable model

Þ state capitalism is the most formidable foe that liberal capitalism has faced so far

State Capitalism

• Various Models– Chinese, Russian, Petrostates, and Brazil

• Best of both worlds?– Pros

• Stability as well as growth• Clout that private-sector companies would take years to build• Success

– Cons• Favoring one group of companies / industries means others suffer• Good at copying, not as good at innovation• Does not guarantee stability: concentrates power and corrupts it • State-capitalist governments can be capricious • Unfair trading