State Capitalism

Articles mainly talk about rise of state capitalism, its growth and actions of the government, the variations of state capitalism, benefits and flaws and its future. Rise of state capitalism In the recent years, following the biggest financial/economic crisis in 2007-2008 that destroyed Lehman Brothers, state capitalism grew to be more popular. State capitalism is basically profit making and seeking, with the government trying to match the powers of the state with the powers of capitalism.

They use capitalist tools like listing the State-owned enterprises on stock market and also embracing globalization. They attempt to control the economy using the business in this way. Some examples are China, Russia and Brazil, where the political system is still very much communist even though the economy is opening up and being more capitalistic. Another example will be Singapore, though not communist, but have successfully attempted to attract world’s most powerful companies, MNCs, to invest in the economy, at the same time, controlling the country’s economic growth in a way.

Actions of Govt Government uses State-owned entreprises and National champions (privately owned companies which receive huge support from government. Eg. China’s Geely cars, Singapore’s Singtel) to achieve their control. 1. exercise their control using ownership of shares and productive use of assets in these companies 2. form alliances with MNCs and international companies and model after them (capitalist) 3. invest and provide support to the national champions Variations of state capitalism 1. State controls economy at the back, using SOEs and National champions (as mentioned above) . eg China 2.

Create “vertical business groups” – business in the same industry coming together like an oligopoly, and control that through shares 3. Acquire shares in many companies but retain minority ownership, rather than majority. Give private shareholders more power, but still earning money In a way, the politicians still retain their power by using capitalism. Benefits 1. Obvious in infrastructure, and 2nd generation infrastructure like network and environmental issues, especially in emerging worlds and countries 2. produce national champions that can compete globally.

3. prospered and grown business in specific industries. In a way more focused 4. helped emerging countries learn to be more independent and grow more Flaws 1. critics question about the system’s ability to sustain and innovate itself compared to capitalism 2. SOEs also less productive and efficient 3. Unable to provide fair trading system bcos economy is being controlled. If controlled, how to grow in a way that they want to? 4. Affect the real benefits of globalization like integration of markets, increase in trade, capital flows, etc.

5. Cronyism and corruption Future 1.more popular due to its effect on emerging worlds, growing stronger and richer as compared to countries like USA 2. believe that they will learn from past lessons and avoid mistakes like the financial crisis 3. need to practice better governance to tackle issue of corruption and cronyism 4. needs to balance interests of stakeholders more instead of only focusing on profit making 5. needs a dimension of liberty in order to sustain – have more free will and take more responsibility for their actions. In order not to be confused and corrupted further from the good that they wish to bring.