State Capitalism: How the Return of Statism is Transforming the World

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The end of the Cold War ushered in an age of American triumphalism best characterized by the “Washington Consensus:” the idea that free markets, democratic institutions, limitations on government involvement in the economy, and the rule of law were the foundations of prosperity and stability. The last fifteen years, starting with the Asian financial crisis, have seen the gradual erosion of that consensus. Many commentators have pointed to the emergence of a powerful new rival model: state capitalism. In state capitalist regimes, the government normally owns firms in strategic industries. Not beholden to private-sector shareholders, such firms are allowed to operate with razor-thin margins if the state deems them strategically important. China, soon to be the world’s largest economy, is the most efficient known state capitalist regime, but it is hardly the only one.

In State Capitalism, Joshua Kurlantzick ranges across the world–China, Thailand, Brazil, Russia, South Africa, Turkey, and more–and argues that the increase in state capitalism across the globe has, on balance, contributed to a decline in democracy. He isolates one of the most reasons for state capitalism’s resurgence: the truth that globalization favors economies of scale in the most critical industries, and the widespread rejection of the Washington Consensus in the face of the problems that have plagued the world economy in contemporary years. That said, quite a few democratic nations have embraced state capitalism, and in those regimes, state-backed firms like Brazil’s Embraer have enjoyed considerable success. Kurlantzick highlights the mixed record and the evolving nature of the model, yet he is more concerned about the negative effects of state capitalism. When states keep watch over firms, whether in democratic or authoritarian regimes, the government increases its advantage over the remainder of society.

The combination of new technologies, the perceived failures of liberal economics and democracy in many developing nations, the upward push of modern kinds of authoritarians, and the success of one of the most best-known state capitalists have created an era ripe for state intervention. State Capitalism offers the sharpest analysis yet of what state capitalism’s emergence means for democratic politics around the globe.

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