Book Review – The End of the Free Market by Ian Bremmer, Portfolio, 230 pp
The global financial crisis has not only been a source of misery to millions around the world, but has also created a crisis of capitalism, where even its champions are questioning its future. For example, the Financial Times ran a series of articles under the heading “Capitalism in Crisis,” while the Wall Street Journal asked whether it was time to rethink capitalism.
What does the public think about the future of free enterprise? A worldwide survey released by Global-Scan in April 2011 came up with some surprising results. It found that in the US support for capitalism had decreased from 80% in 2002 to 59% in 2007. Ironically, support for capitalism in China is at 67%.
The variety of capitalism practised in Western countries, like the US and Europe, is, however, quite different from what the Chinese understand by capitalism, which usually involves state-run businesses operating in the international marketplace. The growth of “state capitalism” is the theme of Ian Bremmer’s latest book The End of the Free Market. Bremmer’s main preoccupation is the growth of state capitalism around the world, led by China, followed by India, Brazil, Russia, Saudi Arabia and many other countries. Bremmer goes on to argue that state capitalism threatens the free-market, although at odds with the title of his book, he does not believe that it will necessarily overrun the free-market.
Nevertheless, the threat is real. Taking just one statistic provided by Bremmer, 75% of the world’s crude oil reserves are owned by state-run companies, and the fourteen largest state-run companies control twenty times more oil and gas than the eight largest multinational companies. State capitalism is not confined to the oil business, and according to Bremmer in 2008, 117 state-owned public companies from Brazil, Russia, India and China appear for the first time on the Forbes Global 2000 list of the world’s largest companies.
The main reason for the increased popularity of state-owned businesses is that it allows the ruling political party to control these corporations, with corrupt funds being channelled back to the political and military elites. Certainly in China, Communist Party bosses have become very rich off the proceeds of state corporations. Perhaps more disturbing, in Zimbabwe, thugs in the Mugabe government have taken over major industries such as diamond mining, enriching themselves and using funds to prop up Mugabe’s dysfunctional government. The situation is not much better in Venezuela. Pakistan and a host of other corrupt regimes use their dominance over the economic sector to keep themselves in power.
While Bremmer certainly points this out, and in some detail, such outrages are not his main concern. Rather, he is more worried that state capitalism will undermine the free-market system, choke off economic growth, and introduce inefficiencies into the market system. I would suggest that while this is important, the contribution of state capitalism to helping keep dictators in power is a much better argument against this perversion of capitalism.
In the last part of the book, Bremmer looks to how the spread of state capitalism might be stopped. “Market advocates,” Bremmer writes, “will now have to work that much harder to persuade sceptics that the world is richer states remain committed to free-market capitalism.” He concludes that the free market will “win” the war for countries supporting state capitalism, although his reasons for this prognosis are not particularly convincing.
While Bremmer’s book is a full-blooded attack on state capitalism, in which the government owns or controls corporations, he fails to show the same critical facilities at developments in market economies, where millions of dollars spent on lobbying has created a situation in which corporations own or control governments. This is no less dangerous to the free-market system.