Preaching to the choir

Le mieux est l’ennemi du bien. –Voltaire, “La Bégueule” (1772).

In The End of the Free Market: Who Wins the War Between States and Corporations? (Portfolio, 2010), Ian Bremmer does not in fact predict the end of the free market system; instead, he outlines the challenge posed to today’s international economic order by what he sees as a new, virulent form of economic organization that illiberal governments across the world have adopted since the end of the Cold War.

Bremmer first describes the mechanics of this form of organization, which he terms “state capitalism,” linking its fundamental objectives to those of mercantilism. Essentially, he defines state capitalism as a system in which governments view markets primarily as a strategic device used for political gain. He paints NOCs, SOEs, private “national champions,” and SWFs as the tools of state capitalism, but is careful to point out that their presence does not a state capitalist economy make. He then goes into a lengthy description of the wide spectrum of state capitalism worldwide. Walking a thin line between Economist article and corporate political risk country report, Bremmer points out the various ways that state capitalist practices have hurt MNC interests in a variety of developing countries, paying special attention to those that he calls the most egregious and influential state capitalists, Saudi Arabia, Russia, and, of course, the Peoples Republic of China. However, Bremmer’s vested corporate interests undermine the utility of this section. These are not the objective analyses of a neutral observer, but the exposition of a president of a political risk consultancy whose fundamental interests – and the fundamental interests of whose multinational clients – run counter to those of state capitalist countries worldwide.

He then details the threats that state capitalism poses to the liberal, free market democracies of North America, Western Europe, and the Pacific Rim. Underlying this section is an assumption of the intrinsic superiority of free markets – yes, an assumption, for Bremmer does not provide any insight into exactly why free markets work when they work but fail when they fail, except to blame failure on “government regulation,” an inexcusable oversimplification. He gives cursory treatment to the financial crisis, concluding that free markets are not to blame, but poor government regulation is, failing to consider the extent to which regulatory failure of is in fact a result of private sector agency – in other words, he vastly underestimates or even ignores the influence that the private sector has on politics in liberal free market countries. Finally, he reaches the conclusion that free market capitalism will eventually win out over state capitalism due to the latter’s unsustainable structural issues, and presents some modest, establishmentarian proposals on how to deal with state capitalism in the short and medium term, urging liberal industrialized countries to refrain from beggar-thy-neighbor policies.

Overall, despite its dubious grounding in market fundamentalism and the resulting murky analysis and logical fallacies that often made for a frustrating read, Bremmer’s book succeeds in the sense that it provides a good case as to why state capitalism threatens the interests of multinational corporations and developed, liberal free market economies. However, the book ultimately fails in because its analysis of state capitalism from the practitioner’s perspective is marked by the Nirvana fallacy, with Bremmer seemingly believing that liberal free market capitalism is a viable, immediate alternative to state capitalism in the countries in which the latter is practiced today.

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