120 of 127 people found the following review helpful
4.0 out of 5 stars The Menace Between Communism and Capitalism
Despite the fact that the Cold War is 20 years over, we still tend to think in an unfortunate paradigm that sees 'communism' and 'capitalism' as the two major political categories. This book is written to let us know about the existence and growing presence of a third category: state capitalism. A quote from Chinese Premier Wen Jiabao (taken from a CNN interview and used...
Published on April 24, 2010 by Kevin Currie-Knight
51 of 63 people found the following review helpful
3.0 out of 5 stars Fails to gain traction
"The End of the Free Market" by Ian Bremmer makes perhaps the best case possible for the superiority of the free market system. That the eminently reasonable arguments made by Mr. Bremmer in this accessible and well-written book ultimately fails to gain traction speaks volumes about the substantive obstacles in the way of a return to Reagan/Thatcher-style...
Published on June 7, 2010 by Malvin
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120 of 127 people found the following review helpful
4.0 out of 5 stars The Menace Between Communism and Capitalism,
This review is from: The End of the Free Market: Who Wins the War Between States and Corporations? (Hardcover)
Despite the fact that the Cold War is 20 years over, we still tend to think in an unfortunate paradigm that sees 'communism' and 'capitalism' as the two major political categories. This book is written to let us know about the existence and growing presence of a third category: state capitalism. A quote from Chinese Premier Wen Jiabao (taken from a CNN interview and used in the book) well illustrates what state capitalism is: "The complete formulation of our economic policy is to give full play to the basic role of market forces in allocating resources under the macroeconomic guidance and regulation of the government. More bluntly, state capitalism is a market that is in large degree controlled by the government. Companies exist, but often serve political ends.
The book was motivated, it seems, by the 2009-2009 economic bust and explaining why this both strengthens nations that are already practice state capitalism and encourages more folks to defend state capitalism as an alternative to the free markets that many (rightly or wrongly, as the author puts it) blame for the bust.
Make no mistake: the author of this book is not writing in support of state capitalism, but simply wants us to be more aware of what it is, what its strengths and weaknesses are, and why it affects us. The author himself, though, writes as a supporter of semi-free markets with minimal, but necessary, regulation.
The first half of "The End of Free Markets" is devoted to explaining state capitalism. It developed primarily as an outgrowth of the Cold War. China and Russia both experienced broken communist regimes and the impossibility of replacing those regimes with largely unregulated markets. As a result of these failed attempts, state capitalism became a way to harness the creative and competitive powers of the market while keeping government strong as a force. (Of course, China used market processes to escape the inflexibility of communism, while Russia brought government back INTO their markets after seeing that the transition to markets didn't work out). Today, a good many countries practice more or less restrictive versions of state capitalism: Saudi Arabia, United Arab Emirates, China, Russia, Ukraine, Algeria, India - the list goes on. State capitalism is, indeed, on the rise.
The second half of the book discusses what, from the standpoint of a market supporter, the primary difficulties are with state capitalism and why it affects market economies. The author notes that state capitalism, while it does harness some of the power of the market, the ends of state capitalism is always political: governments own or favor companies in order to bolster their own power. Thus, companies do not exist to provide goods and services so much as to strengthen the power of those in office. Instead of making decisions based on what the consumers or shareholders want, decisions are either made politically or have to be approved by those with political ends. (I am very surprised that the author doesn't also mention the fact that the same thing which brought communism down - the inability of an entire economy to be controlled centrally - will likely be the downfall of state capitlaism, which is central planning that is only a tad decentralized).
And why is this bad for those nations who operate with market principles? In an age of globalization, one downside is inevitably that other nations problems and dysfunctions become our own. Particularly with state capitalism, where decisions are always made on a political basis, any dependence we have on state capitalist countries means that we are at the mercy (to some degree) of their political forces. Should they want to, say, institute protectionistic measures (as they often do because it makes citizens more likely to support you) then we bear the consequences. Should they want to rhetorically grandstand against the US (think Venezuela's Hugo Chavez), then their companies have to follow suit. In other words, it is risky enough depending on international companies, but when those companies are owned by or in cahoots with foreign governments, there is a bleeding of economic and foreign policy that becomes...well...even more complicated.
Overall, I was surprised at how engaging and readable this book was. Yes, I like books on politics and economics, but this author's writing style was clear and very readable. He does a good job explaining the ins and outs of how state capitalism works in different nations. Also, the author is neither a gloomy pessimist or unbridled optimist (either would make me much less willing to take him seriously). He is optimistic that state capitalism has a limited shelf-life but pessimistic that the economic downturn of '08-'09 have ensured that it will be around longer than it may have been.
Overall, this is an indispensable book to read in understanding the current climate of world politics. While our own nation increases its government intervention into the economy, it is important to read about other nation's descent into such territory.
58 of 62 people found the following review helpful
5.0 out of 5 stars Compact, balanced and informative: a first-rate briefing book,
This review is from: The End of the Free Market: Who Wins the War Between States and Corporations? (Hardcover)
This is an excellent briefing book. It doesn't drive a single idea, offer a polemic position or try to be controversial. It is thus a hype-free reliable guide to a complex subject. The sequence of logic is centrist and carefully couched. It shows how state capitalism, rather than socialism, is the growing counter to liberal capitalism, in Russia, China, Saudi Arabia and many smaller economies. This is not driven by ideology and Bremmer convincingly argues against any coming Armageddon or WWF wrestling contest of King Kong Commies take on Freedom Fighting Finance Whizzes. He shows that the drivers of state capitalism are very much centered on political control of resources and power and of job creation. It adopts a very domestic focus and is as short-term in its focus as the earnings-driven Wall Street community. He points not so much to the distortions of markets and the misallocation of national resource this leads to as the absence of countervailing forces that are intrinsic to liberal democracies. He emphasizes the commonality of axiomatic belief in market forces that underlies countries like Norway, France and Germany that are too often classified as anti-markets. Under all the rhetoric is an often tense balancing of economics and business versus the intersection of politics and social priorities. Bremmer is pretty convincing in showing that state capitalism does not overall provide the better blueprint for growth but also that it will continue to grow because of its political rather than economic focus.
My test in rating the book was to consider three questions:
1. Would I recommend it to someone largely unfamiliar with the issues to get a sound grounding. A definite 'yes' here. I know the fields fairly well and I felt that the coverage was simple without being simplistic, lucid, fair in judgment and broad enough to provide a sound briefing. It's very much is the style of Atlantic magazine pieces, the Economist and Foreign Affairs journal. It's well-presented, though not exciting or jazzy. It emphasizes judgment over flashiness.
2. Would I recommend it to an expert? Here, the answer is more or a 'probably' than 'yes.' There's little that's new or striking in analysis or the sensible centrist recommendations for policy at the end of the book. The "probably" is because it brings material together in a shrewd exegesis, so that I found conformation of what I already know, and extra insights too. His analysis of the dominance of state capitalism in the oil sector was a grabber, for instance. I hadn't realized that ExxonMobil is just 15th in revenues, behind state-owned firms and that the eight top multinationals account for just 10% of global revenues and 3% of reserves. It's not overheavy on such statistics but usefully selective in the ones it does present.
3. Is it useful for a wide range of readers? The specialist economics and policy literature circles round and round all the topics Bremmer covers and provides far more depth. But World Bank type policy wonkery is for a narrow audience. I think this book is useful for business managers; it helps make sense of China and provides a sound overview of global trade. It is useful, too, for those interested in the political issues. It's distinctly centrist and won't anger or evangelize the extreme left or right. For any general reader, it sensibly counters all the guff about the death of capitalism as we know it.
All in all, this is a very professional and well-presented guidebook. Two aphorisms come to mind. One is "This leaves me none the wiser." "Yes, but infinitely better informed." The other is "You are entitled to your own opinions but not to your own facts." This book will help you be better informed and surer of your facts. What more could one ask in trying to be a little wiser?
17 of 18 people found the following review helpful
5.0 out of 5 stars The End of the Free Market as We Know It,
This review is from: The End of the Free Market: Who Wins the War Between States and Corporations? (Hardcover)
My review reprinted from Huffington Post:
Political risk guru Ian Bremmer examines the growing momentum of "state capitalism" in his new book The End of the Free Market: Who Wins the War between States and Corporations? Bremmer argues that state capitalism differs from free-market capitalism in that politics rather than profit is the main driver of decision-making. For this reason, it threatens to curtail free markets and the global economy. It is the latest chapter in the "rise of the rest," or the expansion of non-Western states in the international system.
Capitalism takes many forms but all of them can be distinguished by their "use of wealth to create more wealth, a broad enough definition to capture both free-market and state capitalism," Bremmer notes. In the free-market form of capitalism, the job of the state is to "enable" wealth generation by enforcing contracts and limiting the influence of moral bads such as greed--the latter can lead to market failures, which have occurred periodically since the Dutch tulip craze of 1637. Free-market governments attempt to ensure that the economic game is played fairly.
In contrast to free-market capitalism, the economy in state-capitalist regimes is dominated by the state agenda. "Forced to choose between the protection of the rights of the individual, economic productivity, and the principle of consumer choice, on the one hand, and the achievement of political goals, on the other, state capitalists will choose the latter every time," Bremmer explains. Continuing the sports game analogy, state capitalists control the referees as well as the main players.
Bremmer admits that state capitalism isn't new. He traces the first reference to an 1896 speech by Wilhelm Liebknecht, a founder of the Social Democratic Party of Germany. But due to recent questions regarding the merits of free markets after the 2008-2009 financial crisis, the need for job growth and economic stability in less-than-democratic regimes, and the growth of the economies and influence of state-capitalist countries, this form of capitalism is catching on worldwide.
While there is "no single model of state capitalism," its leading practitioners, China and Russia, "share a well-developed sense of risk aversion," having recently abandoned communism as their guiding philosophies. Other notable users of this model include energy-rich states, such as Angola, Iran, Kuwait, Malaysia, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela. Another cluster of countries in this group, some of which have benefited from rising commodity prices, include emerging markets that have only tentatively committed to free-market principles, such as Brazil, Egypt, India, Indonesia, Mexico, South Africa, and Turkey.
Another way to identify a state-capitalist country is by looking at the use of four specific policy tools. One policy tool favored by state capitalists is the national oil (and gas) corporation (NOC), such as Gazprom of Russia, China National Petroleum Corporation, and the National Iranian Oil Company. NOCs like these own 75 percent of the world's crude-oil reserves. A second tool is the state-owned enterprise, such as China's First Automobile Works.
A third tool is privately-owned companies--so-called national champions--that are supported by the state to develop a "commanding position" in an economy. The Brazilian mining concern Vale, according to Bremmer, is a prominent example of a company that was coerced by its government to advance the state objective of stimulating the economy.
A final tool is the sovereign wealth fund (SWF), the largest of which includes the UAE's Abu Dhabi Investment Authority valued at $300-650 billion and Saudi Arabia's Monetary Agency valued at $430-500 billion. Many types of governments have SWFs but they "tend to be as transparent--or as secretive--as their governments," Bremmer writes, noting that Norway's Government Pension Fund is exceedingly open and accountable. Norway is an example of a country that has some state-capitalist trappings but is not in the state-capitalist camp. Similarly, the U.S. bailout of financial institutions was designed to "save the free market, not bury it," Bremmer notes. "It's not the tools that count; it's how they're used. But countries that have all four of these institutions tend to be state capitalist," he writes.
How do these tools threaten the free market? While Bremmer is careful not to predict a new Cold War, he does worry about fissures in the international system and state-capitalist support for undemocratic regimes such as Guinea. As the head of Eurasia Group, a political risk company, it is Bremmer's job to ask what if. He poses at least ten hypothetical scenarios in the book, including given the mutually assured economic destruction (or interdependence) between the United States and China, what happens if China closes the door?
While the phrase "The End of the Free Market" may capture public anxiety in America today, Bremmer should have called his book "The End of State Capitalism"--he bets that free markets will win the "war" with statists. First, state capitalism just doesn't have the same appeal as an ideology that communism had, it is "more a set of governing principles than a coherent political ideology." Second, state capitalism is actually a sign of domestic political vulnerability. It is a response to the risks countries face as they open up, which Bremmer detailed in his earlier book The J Curve. Meanwhile, free markets hold several advantages over their statist cousins: Most importantly, these systems better facilitate innovation and long-term growth.
Bremmer lays out several recommendations to ensure that free markets do indeed prevail. Most of these recommendations are just good common sense for America: keep markets open, invest in hard power, pick the right fights, and welcome world-class foreign workers. Bremmer is saying subtly that for America to continue to lead it should be strong, smart, and principled. In other words, it should stay true to its values.
51 of 63 people found the following review helpful
3.0 out of 5 stars Fails to gain traction,
"The End of the Free Market" by Ian Bremmer makes perhaps the best case possible for the superiority of the free market system. That the eminently reasonable arguments made by Mr. Bremmer in this accessible and well-written book ultimately fails to gain traction speaks volumes about the substantive obstacles in the way of a return to Reagan/Thatcher-style neoliberalism.
Mr. Bremmer is no Marxist, but he does seem to advocate a regulated or mixed form of capitalism in order to referee a system that is frequently driven to excess. Mr. Bremmer recognizes that president Obama personifies a widely-held American belief in the desirability of private enterprise supported by the least government possible; in fact, the author regrets that Obama has not done more on the issue of the financial industry oversight. Nonetheless, Mr. Bremmer favorably compares and contrasts the Washington Consensus with the statist development paths chosen by emerging countries such as Brazil, Russia, India and China (BRIC) where the author contends that economic efficiencies have been sacrificed in the name of politics. But as the BRIC countries have gained power, Mr. Bremmer frets that more and more markets around the world have been closed off to the most competitive private firms, depriving people everywhere of the full benefits of globalization.
There are quite a few problems with Mr. Bremmer's work. First, Mr. Bremmer's short history of capitalism papers over how the West amassed wealth over the centuries through the imposition of protective tariffs; extreme labor exploitation including slavery; and the rapacious extraction of natural resources through colonialism. Second, BP's disaster in the Gulf of Mexico casts serious doubt on Mr. Bremmer's contention that energy multinationals are inherently superior to state-owned enterprises. Third, at a time when existential threats from environmental degradation looms large, there is but a single paragraph in the book that proposes how the market system might solve the crisis of climate change. Fourth, Mr. Bremmer devotes scant attention to the ballooning overhead costs of corporate capitalism, where government deficit spending in the U.S. is increasingly devoted to artificially propping up politically-privileged sectors such as banking, automobiles, defense and aerospace at the expense of industries that might better serve people's needs.
In contrast to Mr. Bremmer's neoliberal dream, it appears that other nations have concluded, in the words of Thomas Friedman in The Lexus and the Olive Tree, that the work of competing in a laissez-faire economy is simply "too darn hard" for the average person. In fact, many countries are choosing a more state-directed development path in order to ensure greater economic independence and stability. Who can blame them when the U.S. economy -- which has positioned itself as the exemplar of free market opportunism -- is gripped in a prolonged crisis of mortgage foreclosures, manufacturing job losses, indebtedness and environmental catastrophe?
In the end, Mr. Bremmer implores us to remain faithful to a free market system that shows little indication it can provide answers to humanity's most pressing issues. About the best Mr. Bremmer can do is advise us to not do something rash like upset the U.S.-China relationship lest we endure a kind of mutually-assured economic destruction. Consequently, while I did find this book to be interesting, its unconvincing arguments seem to provide little intellectual currency for those who might be interested in charting a course forward to a better future.
16 of 18 people found the following review helpful
5.0 out of 5 stars The coming battle between Free Markets and Capitalism v. 2.0,
The recent tumult in financial markets has politicians, business executives, economists, and scholars alike reconsidering the future of the free market system, and it's an appropriate time for a well reasoned book such as this one from political scientist Ian Bremmer. Bremmer first came to notice with his thought provoking The J Curve: A New Way to Understand Why Nations Rise and Fall (2006) and The Fat Tail: The Power of Political Knowledge in an Uncertain World (with a New Preface) (2009). As the markets have been roiled by a series of problems there have not only been calls to re-regulate them but to fundamentally rethink free market capitalism in general. The rise of so many sovereign wealth funds from wealthier oil-rich nations and autocratic state-run economies such as China has caused many to question and rethink the existing global political economic structure. In an age where the G-20 makes more sense than the old G-7 it fairly begs for a general rethink. The diffusion and dispersal of economic power is changing the global dynamic not just for political leaders but for corporations in general. Old concepts of open markets, the rule of law, an independent judiciary, fiscal transparency, and a free press are increasingly starting to look quaint in a decentralized post-American World, to borrow a phrase from Fareed Zakariah. These changes are more than a mere swing of the pendulum from de-regulated markets back to regulated markets, but a fundamental rethinking of markets entirely. The emergence of State Capitalism is creating a new friction between existing free market capitalist societies and the newer tightly regulated and controlled economic powers. In a very real sense we're seeing the old model of capitalism being passed over in favor of a Capitalism Version 2.0 if you will.
Reading "The End of the Free Market" often reminded me of Deng Xiaoping's old comment about "I don't care if a cat is black or white, so long as it catches mice." State capitalists don't care for the niceties of democracy so long as they net economic results. And in an era where the U.S. government has become the majority shareholder in a number of public corporations the question becomes whether we're far off from that same model should these companies fail to free themselves from being wards of the state. To a degree I felt echoes of "The Commanding Heights" where those counties advocating State Capitalism aren't really all removed from those states who promoted state champions, corporations essentially backed by the state to compete against foreign competition. In the end those state champions largely failed for a multitude of reasons, yet that happened in democratic societies, not the new wave of autocratic State Capitalism. And Bremmer isn't entirely certain that free market capitalism will win out over these new State Capitalist systems. These two competing systems could present a new bi-polar world just as happened with politics in the Cold War era.
As one of the foremost thinkers on global political risk Bremmer manages to write in an approachable way that is easy for the lay person to comprehend, yet which also doesn't' insult reader's intelligence. "The End of the Free Market" is certainly yet another thought provoking read from Bremmer and hopefully one that will spur new discussions about the world's global economic future.
16 of 19 people found the following review helpful
4.0 out of 5 stars Good Insights, Bad Predictions,
Ian Bremmer is a U.S. political scientist specializing in how political developments impact markets; he has a Stanford PhD in Political Science and his prior book ("The J Curve" 2006) was named a "Book of The Year" by "The Economist" magazine. In "The End of the Free Market," Bremmer sees a number of authoritarian governments being drawn to capitalism's past effectiveness, but worried about the outcome of uncontrolled free markets. Russia, China, Saudi Arabia, and others have thus invented a hybrid, state capitalism, to take its place. Leaders of free-market democracies now face the skepticism of those who see the world's 2008-09 problems as evidence that the free market has failed, that the state should instead play a leading role in economic decision-making. In Britain's case that might include the state taking renewed control of energy, power generation, transportation, and telecommunications that had been privatized under Margaret Thatcher during the 1980s. This is all quite a change from the 1991 year-end collapse of the Soviet Union that supposedly signaled the final victory of free-market capitalism.
Unfortunately, Russia's subsequent anything goes capitalism, implemented via 'shock therapy' recommended by Harvard economists, led to public demand for a 1999 return upon Yeltsin's retirement to something closer to the 'good old days' when its GDP was much higher, and crony capitalism, spiraling inflation, devaluation, and government default were unknown. Meanwhile, China's free-market agricultural reforms freed hundreds of millions from poverty and farm life. The Chinese Communist Party (CCP), continued its efforts, believing its power was doomed unless they generated prosperity for the people; Russia's experience, however, also encouraged them to go slow, and experiment - rather than risk too much change at one time, or making massive errors.
Bremmer contends that authoritarian governments also learned, per post-breakup Russia, that if they left matters entirely to market forces, they risked enabling those succeeding to use their wealth to challenge the established political powers. Thus, authoritarian state-owned companies reclaim/manage resources key to the economy, thereby creating/maintaining large numbers of jobs and avoiding the risk of creating competing oligarchy power. Saudi Arabia earlier had learned that state control of important resources could also be used to pursue foreign policy objectives - hence the 1979 Arab Oil Embargo; Russia's Gazprom followed suit by cutting off Ukraine's gas in 1996 and 1999, and China similarly banned 2010 sales into China from U.S. companies selling advanced arms to Taiwan. State-capitalist nations, however, do not direct all economic activity, instead allowing, and encouraging private companies to achieve commanding positions in other sectors.
Oil resources have been especially prone to seizure/acquisition by state capitalist nations - they control 95% of global oil and gas reserves. The largest privately-held firm is 14th in size.
In China, the leaders of both private- and public-owned firms serve at the pleasure of the CCP; similarly, their ability to obtain financing is also largely determined by the government. In at least China, these leaders are under pressure to succeed, even to meet international benchmarks once off the ground. Russian business leaders, per Bremmer, are also subject to removal for failure to meet social objectives - eg. the Kremlin may force the undoing of layoffs, or lowering prices. At the very least, these organization leaders serve as excellent public 'whipping boys' to direct public wrath onto. At the same time, authoritarian governments - especially China, are not hesitant to use their power to help their businesses obtain foreign contracts and many go where some Western nations cannot - Iran, Venezuela, Sudan; China has been especially successful in forcing external firms to give up technology and management secrets as a condition of doing business in China. This practice, as well as sending thousands abroad for advanced schooling, moving to establish 'world-class' universities within China, and buying established companies (eg. Volvo, IBM's PC-business), and encouraging outside R&D to locate in China while also building their own R&D, will make China an increasingly strong and formidable competitor in the future. (Another China strength - its large investments and loans around the world are building support within the U.N. and other bodies.)
Sovereign wealth funds (SWF- China, Russia, Saudi Arabia, Norway, Mexico, South Korea, etc.) invest extra cash from resource and merchandise sales, and are prevalent in authoritarian nations. This is done, per Bremmer, in a manner to maximize the state's power and the leadership's chances of survival. (A less self-aggrandizing and more useful approach would explain SWF decision-making in terms of ensuring long-term access to resources, preventing an economy from overheating via inflation and consumption bubbles by utilizing capital from high national savings rates and/or merchandise/resource trade surpluses, establishing a 'rainy-day' fund, creating assets to carry the economy when a nation's natural resources become depleted, funding infrastructure, and avoiding currency losses.) Globally, $2.5-4 trillion is now held in SWF - depending on market trends.
State-capitalism got its primary start in post-war Japan with the establishment of the Ministry of International Trade and Industry (MITI) in 1949. MITI organized industrial cartels in strategic industries, funded and directed R&D, mergers, and investments, and ensured the protection of new industries from foreign competition. MITI, however, did not run things with an iron hand - Sony was able to ignore MITI directions and develop transistor radios, and Honda similarly moved from motorcycles into autos. Eventually, however, MITI's power faded as Japanese firms accumulated foreign reserves of their own, and the nation ended up with a real estate/equity bubble and stagnation. Nonetheless, South Korea, and then China and others noticed Japan's initial successes, and followed this new model.
"The End of the Free Market" provides a good summary of the management and assets of a number of state capitalist nations. The most important, obviously, are Russia, Saudi Arabia and its richest neighbors, and China. India is somewhere in the middle, owning over half the nation's 40 largest companies and over 200 in total. Both it and Mexico (state-owned Cemex, Pemex), however, have strong multiparty democracies, making it rather unlikely either will proceed further with nationalization. China is credited with having laid off 50 million from state-owned enterprises in the 1990s, professionalizing management of its state-owned enterprises (including, more recently, its banks), and having a near monopoly on rare earths (essential for lasers, oil refinery catalysts, pollution-control devices, fluorescent lights, strong magnets, etc.). Bremmer also informs readers that China's largest state-owned firms derive much/most of their earnings from subsidiaries listed on equity markets.
Bremmer contends that eventually free markets will eventually win out because our world-class universities facilitate innovation, increasing global awareness brought about by foreign trade will encourage unrest in insulated nations like China, and government decision-makers make wasteful choices. Perhaps - certainly China's censorship and heavy political propaganda are not impermeable, and both Russia and China's past decision-making brought both enormous human tragedies and mismanaged economies. On the other hand, China has made major commitments, previously referenced, to improving education, and its last thirty years show dramatic improvement in economic decision-making.
Bremmer suggests the U.S. now strive to become indispensable to China and others - eg. using our military capabilities for humanitarian responses after disasters, helping train their managers, continuing and even increasing trade with them. He also suggests the U.S. not overemphasize concerns over the alleged valuation of China's currency. (Not likely to happen anyway since this would dramatically lower the value of its U.S. holdings, weaken China's case for becoming the source of the world's exchange currency, risk losing face in the international world, and impede its goal of annual 9.5% economic growth to absorb the millions still wanting better jobs.)
Bremmer then mistakenly claims that Smoot-Hawley tariffs deepened the Great Depression, in an effort to further solidify his case for increasing trade. That's impossible, because total trade was less than 1% prior to Smoot-Hawley. Bremmer also forgets that Asian nations have aggressively used tariffs, etc. when in their own interest, and China continues to do so. He also recommends we not limit immigration, and cites 2000 Census findings that immigrants made up nearly half the PhD scientists and engineers at that time, and a Harvard Business School 2008 finding of disproportionate representation of immigrants among U.S. patent applicants. Good points, but he ignores the millions of poorly educated immigrants from Mexico, Central and South America that harm Main Street while boosting Wall Street.
"Free markets have repeatedly proven that they cannot regulate themselves." Thus, it falls to the state to do so. Bremmer, however, tap dances over our failures ito do so - even after a near repeat of the Great Depression. State capitalist nations, including India, generally fared much better than Free Market economies during this period - thanks to government regulation. Bremmer also totally ignores how the U.S. and its 'Free Markets' have failed, in some instances over decades, to address other major problems such as having both the world's highest health care costs and mediocre outcomes, wasting trillions more on excess defense, K-12, and college/university education spending, becoming the world's #1 debtor nation, losing millions of jobs to offshoring and illegal immigration, failing to act on global warming, 'losing' a forty-year 'War on Drugs,' allowing our infrastructure to become inadequate and fall into disrepair, and becoming a primary terrorist target while involved in two wars. Not a record to be admired - in fact, we were recently publicly castigated by the Chinese Premier at the latest Davos economic meeting.
Bottom-Line: "The End of the Free Market" provides an excellent overview of two competing current versions of capitalism. However, author Bremmer leans too far to the right when predicting the future. Minimalism and poor U.S. government decision-making have dragged down our economy and reputation over the last two-plus decades; similarly, the IMF has incurred considerable criticism for its U.S.-like policies that worsened problems in Indonesia, Malaysia, Thailand, Argentina, and Kenya, and Russia's 1990s move towards free markets seriously backfired. During the same period, China took the opposite course and has achieved results admired around the globe. It is unlikely that Bremmer's prediction of weakening state capitalism will occur anytime soon.
7 of 8 people found the following review helpful
5.0 out of 5 stars A Refreshing Perspective on the International Political Economy,
This provocative title reiterates a statement made by China's Vice Foreign Minister, He Yafei, to a group of economists and scholars at the Chinese Consulate in New York: "Now that the free market has failed, what do you think is the proper role for the state in the economy?" Throughout the book, Bremmer explains the great divide between free market capitalism and state capitalism, providing a unique perspective in our understanding of our international political economy.
Prime examples of state capitalism are China, Russia, and Saudi Arabia. These states have a strong hold over the economy, allowing them to almost control growth. However, growth and prosperity is not an objective of these states, says Bremmer, but a means for regime preservation. The leadership's security comes before the economic sense and the people's wellbeing. Leadership can take steps such as keeping obsolete industries alive just to maintain jobs (Russia), forgiving debt on the eve of elections (India), and driving Google out over censorship (China, of course).
What does the gap between the two systems, or approaches, mean for the international environment? For one, it is harder to reach an agreement on key issues, such as climate change, financial regulation, relations with Iran, and the dollar's role as an international reserve currency, says Bremmer. The leading global decision-making group is G20, that now includes the powerful state capitalists, which simply speak in different terms than the "traditional" free market capitalists of the good old G7. The new conflict of ideologies may not be a new Cold War, but it presents what Bremmer terms "mutually assured economic destruction." That is, China and the U.S. are bound by very strong ties - the U.S. needs China to finance its debt, and China needs American consumers to continue buying Chinese exports.
Finally, what is it that lies at the base of the Chinese Vice Foreign Minister's argument? Free markets are more prone to produce bubbles, compared to strictly controlled economies. Furthermore, when those bubbles bust, free market capitalists tend to take more control over the market, providing bail outs such as the TARP. But these are temporary measures. Eventually these governments prefer to surrender control to promote more growth and, well, freedom.
17 of 22 people found the following review helpful
2.0 out of 5 stars Free markets deserve a more cogently argued and better researched defense,
Free markets deserve better than is offered up in this book, which reads at times like a pseudo-intellectual paean to free markets, underlined with often slipshod, inaccurate research, marked by authoritative assertions. The middle portions of the book feel like filler - perfunctory notes on companies and economies, which while useful at times, do not seem to cohere well into the narrative the author seems to be building - while the beginning only flatters to deceive. This would have been a middling though intriguing article; it has been extended into a mediocre book and can be skipped in its entirety.
The beginning of the book grabs your attention. A question posed by China's Vice Foreign Minister, He Yafei:
..... "Now that the free market has failed," he asked, "what do you think is the proper role for the state in the economy?" [page 1]
demands your attention. This question is provocative, demands serious thought, a reasoned defense, and a balanced set of arguments. Unlike a few years ago, when this question could be dismissed as the usual propagandist bombast of a communist regime, the global financial meltdown of the past few years has meant that a more vigorous, a more reasoned, and a well-thought-out response is required. This book, sadly, fails to do that.
A fundamental underlying premise of the book is the attempt to delineate the form and role of state capitalism versus free-market enterprise. This is probably a crucial distinction that needed to be clarified to the general public. The book however ties itself in all sorts of knots of logic in trying to make that distinction. The only argument that the author keeps making in the book is that a system of enterprise when followed in communist and socialist regimes is state capitalism, and when followed elsewhere is free-market enterprise. It's the end - political in communist and socialist regimes - that separates the two.
Let's look at one example of hastily (poorly maybe?) conducted research.
..... "National champions are companies that remain in private hands (though governments sometimes hold a large minority stake) but rely on aggressive material support from the state to develop a commanding position in a domestic economy and its export markets." [page 67]
A fairly sweeping definition is penned here. The author seems to realize that the same definition could be applied to some private corporations in the US and in Western Europe. So a hasty distinction is attempted thus:
..... "There are plenty of large U.S.- and Europe-based companies that become global players at least in part with support from their governments. ... But state capitalists create these national champions to build a reliable competitive advantage both at home and abroad, primarily for political reasons." [page 67]
Hmm... pretty tenuous. Almost every country has examples of what the author would define as "national champions". Boeing is one prime example - a company that has aggressive material support from the US government (in the form of domestic military contracts and aggressive diplomatic lobbying by US government for overseas contracts for instance). The Airbus consortium is the parallel example in Europe. No one would deny that each company benefits from political largesse precisely for the reasons that the author articulates in the paragraph above.
..... "Some emerging market-based national champions have expanded their international clout by buying up companies based in developed countries. ... India's Tata Group has become the country's largest corporation, partly through acquisition of iconic Western brands like Britain's Tetely Tea, Jaguar, Land Rover, and Corus (formerly British Steel). Tata now operates across multiple industrial sectors in more than eighty countries." [page 69]
Ok - so this is, just, complete rubbish.
Why? Let's get the obvious error out of the way. The Tata Group is not a corporation - it is at best a holding company for several individual corporations. Tata Motors, Tata Steel, Tata Consultancy Services, Titan, etc... are all Tata Group companies. None is India's largest corporation. That distinction goes to Reliance Industries, per a Fortune Global 1000 ranking.
Secondly, for several decades, the Tata group was seen as deprived of political patronage. Patronage that people accused the Birla Group for much of the post-Independence decades, and later the Reliance group in the 1980s of profiting from. The Tatas on the other hand were seen as languishing as an honest but only mildly successful conglomerate because they insisted on doing things the honest way - often finding themselves at the receiving end of the infamous "license raj".
Thirdly, for anyone who claims to be writing with any kind of objectivity to claim, directly or through convoluted insinuations like Bremmer, that the Tata group has served to further Indian politicians' agendas is culpable of abject ignorance at best. It has been ranked as one of the most respected companies in the world by a Financial Times / PriceWaterhouseCoopers study in 2004 ("Financial Times / PricewaterhouseCoopers World's Most Respected Companies Survey 2004"). The Tata group likely does its share of political lobbying, but other conglomerates are seen as more aggressive and often more successful.
Plucking names - popular and widely known names at that - out of thin air and besmirching them with innuendo is not going to build credibility.
One other issue with the book is how it labels free speech in communist and socialist countries as propaganda, while the same when practiced elsewhere, in free-market economies, is termed free-speech. A definition based on convenience.
The book talks about "conflicts of interest" being more obvious in places like Russia.
..... In Russia, conflicts of interest are more obvious. That Viktor Zubkov moved from prime minister to chairman of Gazprom, Russia's gas monopoly, when Dmitry Medvedev left Grazprom to become Russia's president reveals all we need to know about government control of an internationally powerful state-owned company. [page 154]
Very true. Insidious links between the government and companies are all too well-known in communist regimes like Russia and elsewhere. But then, couldn't the same argument be applied to the US, where Robert Rubin spent 26 years at Goldman Sachs, went on to serve as the US Treasury Secretary, and then served as Chairman of Citigroup. Or Dick Cheney, ex Vice-President of the US, who served as Chairman and CEO of Halliburton, "a Fortune 500 company and market leader in the energy sector." Or Henry Paulson, who was Chairman of Goldman Sachs, then went on to become the 74th Treasury Secretary of the United States, and in 2008 oversaw the biggest bailout ever of the same industry that he worked in for more than thirty years?
The author skips explaining the distinction between these parallels. What should be obvious to all is that there has always been what many would call an unholy alliance between politics and business.
Ultimately, while the book is useful in bits and pieces, it falls far short of what a good defense of free markets should and could be. In these uncertain times when the infallibility of free markets is in doubt, it is important to come up with a balanced and reasoned treatise. This is not it. This book reads like a pseudo-intellectual attempt at economic gravitas. It falls short, it falls flat.
Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity is a highly recommended book.
3 of 3 people found the following review helpful
4.0 out of 5 stars quick read, nuanced and interesting,
Other reviewers have gone into great detail on the structure of this book, so I won't rehash anything. I've not read Ian Bremmer's early works despite my interest, though his name is what drew me to this one. I wasn't let down. This is a fine book, a very quick but enlightening read that made me feel more knowledgeable after every session.
I believe that Bremmer succintly and ably captures the dynamic of "state capitalism" as he describes emerging powers on the world stage, and what it means going forward. This is what the book sets out to due and it does it well. My only problem would be that Bremmer's model of the US as a bastion of pure-ish free market orthodoxy seems a bit outdated. Of course the US would never embrace state capitalism the way China has, but Bush's presidency brought with it a fondness for corporatism and a desire to parcel out taxpayer money to private contractors, especially in the military - and this money was undoubtedly used to further political goals. A more nuanced view of America's current economic thinking would have been welcome.
The mainstream media in the USA has been fixated on this politically driven "free market" or "socialist" divide since 2008. Of course the world does not work like that, no economy works like that, and anyone listening can not and would not get even an incomplete grasp of the topics at hand. It's completely worthless. Books like Bremmer's, even with their faults, are useful in understanding that. If you want to have a good grasp on the economic factors that will shape the coming decade, you could do a lot worse than this book.
3 of 3 people found the following review helpful
5.0 out of 5 stars The "end of history" is called off, the "flat world" wrinkles,
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A book like this is eye-opening because it brings into sharp focus many different and apparently unconnected events into a larger framework: Google's shutdown of its servers based in mainland China after disputes over censorship and sabotage with the government; the interruption of Blackberry services by Persian Gulf nations; the arrest of a Rio Tinto executive in China over allegations of industrial espionage; the difficulties that Western oil companies have in boosting reserves because of resource nationalism... As you read "The End of the Free Market", your mind goes click-click-click. All of these appear on the surface to be temporary hiccups in the process of ongoing globalization. But Bremmer's book challenges this complacency by arguing forcefully that this sort of conflict will actually become more frequent as the "rise of the rest" brings forth not a global free market but a much more complex landscape in which Western companies have to compete with "national champions" with partially protected local markets, multinationals struggle to penetrate smaller emerging markets whose resource nationalism can be subsidized by larger patrons such as Russia, China and even Brazil, and undemocratic governments successfully balance pressure from democratic countries and multilaterals by playing them off against more accommodating clients in the East or South.
Anyone who remembers the fall of the Berlin Wall probably nurtures the deep-lying conviction that capitalism has carried the day and that, despite catastrophes like the 2008 crisis, it will continue to do so for many decades to come, progressively breaking down barriers to trade and individual freedom. The daily drumbeat of news about China's ascendancy can reinforce the lazy notion that, despite problems such as an inflated property market or labor troubles, the process of economic liberalization will continue until eventually political liberalization is forced upon the Communist Party somewhere down the line. Bremmer replaces this vision with a more subtle scenario in which "state capitalism" freezes (or at least delays) the march toward worldwide liberal democracy while simultaneously reaping the benefits of local entrepreneurship.
In many ways, "The End of the Free Market" is a sober counterpoint to Fukuyama's epiphany, The End of History and the Last Man, of two decades ago. Crucially, Bremmer's thesis is not an exercise in futurology: he claims that "state capitalism" is already upon us, as many governments across the world combine different degrees of authoritarianism and free markets to strengthen their grip on power. And the cases of Google, Research in Motion and Rio Tinto (which he does not discuss since they postdate the writing of the book) do indeed seem to bear it out. However, the book is a not a pessimistic dystopia, simply an invitation to correct the evangelical notion that adoption of free market capitalism will lead automatically to free trade and liberal democracy. This is a good antidote to simplistic visions of the post-Cold War World.
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The End of the Free Market: Who Wins the War Between States and Corporations? by Ian Bremmer (Paperback - September 27, 2011)
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