Sunday, 11 July 2010

The West should fear the growth of state capitalism - Ian Bremmer - Telegraph

The Trotskyists will be happy. Concern about state capitalism is making a comeback.
This time it is an avowed free market man at the forefront of the new concern - Ian Bremmer, the author of The West should fear the growth of state capitalismis president of Eurasia Group, an independent political science research and analysis body with more than 300 clients ranging from multi-nationals to hedge funds. He is not advocating a move towards worker led industry but fearful of "a set of governing principles" used by governments around the world to manage the performance of markets and companies for long-term political survival.
A little sample from an interview published in London's Sunday Telegraph that is of special relevance to Australia now that China has become our major trading partner:
Those who fear that China is going to be the global economic super-power bar none can also find solace in his prediction that China is "the biggest bubble we've ever seen". "The fact that I am very bullish on China for the next three to five years does not mean it's not a bubble," he adds.
The bubble, he argues, is in part caused by the unsustainability of China's productivity and worker model – and there has been much reporting recently on worker unrest in China's massive factories – by its growing environmental problems, and the fact that companies – such as Google and General Electric – are becoming increasingly aggravated at the way China does business.
"You add all of that stuff up and you project 30 years from now, and you say this system will explode," Bremmer said.
Once that happens – and Bremmer argues this is the same for all state capitalist countries – there is a choice to be made: a country either looks inwardly and opts for a "virulently nationalist" route, or it chooses to embrace the free market, and integrate with the rest of the world.
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