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The rise of state capitalism

February 1st, 2012 · 4 Comments


The spread of a new sort of business in the emerging world
will cause increasing problems

Jan 21st 2012 | from the print edition

OVER the past 15 years striking corporate headquarters
have transformed the great cities of the emerging world. China Central
Television’s building resembles a giant alien marching across Beijing’s
skyline; the 88-storey Petronas Towers, home to Malaysia’s oil company, soar
above Kuala Lumpur; the gleaming office of VTB, a banking powerhouse, sits
at the heart of Moscow’s new financial district. These are all monuments to
the rise of a new kind of hybrid corporation, backed by the state but
behaving like a private-sector multinational.

State-directed capitalism is not
a new idea: witness the East India Company. But as our
special
report
this week points out, it has undergone a dramatic revival. In the
1990s most state-owned companies were little more than government
departments in emerging markets; the assumption was that, as the economy
matured, the government would close or privatise them. Yet they show no
signs of relinquishing the commanding heights, whether in major industries
(the world’s ten biggest oil-and-gas firms, measured by reserves, are all
state-owned) or major markets (state-backed companies account for 80% of the
value of China’s stockmarket and 62% of Russia’s). And they are on the
offensive. Look at almost any new industry and a giant is emerging: China
Mobile, for example, has 600m customers. State-backed firms accounted for a
third of the emerging world’s foreign direct investment in 2003-10.

Tags: General

4 responses so far ↓

  • 1 LZ // Feb 1, 2012 at 2:53 pm

    State capitalism is a phantom: look at the Chinese system as it is. To prefer a system that can’t even take step one on smog is to be a victim of propaganda, from Singapore no doubt. Singapore is a tiny Manhattan in the middle of nothing, and its example is not illuminating.

  • 2 SLR // Feb 3, 2012 at 12:23 pm

    The model for East Asian isn’t Singapore, but Japan. It has been a stunning success to say the least (don’t buy the “Lost Decade” myth/bullsh*t).

  • 3 nemo // Feb 3, 2012 at 12:27 pm

    It has been that way all along, but noone can really imitate that.

  • 4 SLR // Feb 5, 2012 at 1:17 pm

    Actually, they can and are imitating that. The Japanese used “hard” authoritarian rule to build themselves up from the Meiji Restoration up to WWII. They only shifted to “soft” authoritarian rule after WWII. A host of East Asian countries have built themselves up rapidly using the same model (the high average IQ of the East Asian population probably play a major role too). China looks like its well on its way to proving the efficacy of the model.

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