The End of the Free Market | Ian Bremmer

Summary of: The End of the Free Market: Who Wins the War Between States and Corporations?
By: Ian Bremmer

Introduction

In ‘The End of the Free Market’, Ian Bremmer delves into the resurgence of public ownership in private enterprises during the 21st century. He examines the shift from free-market capitalism to state-controlled economies, analyzing the impact of the 2008 financial crisis on western capitalism and nations’ reactions. State capitalism has become prominent in countries such as Mexico, Brazil, Russia, and China. This introduction provides an overview of the book’s exploration of state capitalism, its tools, and its implications, as well as the vital themes and overarching message.

Resurgence of Public Ownership

The 2008 financial crisis led to the revival of government intervention and financing in banking and industrial sectors, despite the belief that state-controlled economies were on the decline. The G7 bloc has also expanded to include free-market skeptics like Russia, China, and India. The massive nationalization of businesses during the crisis gave an opening for skeptics to challenge the viability of Western capitalism. However, globalization and capitalism cannot be reversed by decree as they are powered by individual impulses of billions of people. Other nations see the US as the origin of the crisis and blame free markets for the crash and the inability of the West to right its economies and prevent panic.

State Capitalism’s Rise

State capitalism is characterized as a variant of commercial enterprise that maintains political control over some or all parts of the economy. In countries like Russia, China, Mexico, and Brazil, state-owned or aligned companies are on the rise, and they tend to prioritize the interests of the government ruling elites over those of individual citizens. These nations view government economic involvement as a strategic long-term policy choice. However, this intervention creates inefficiencies and distortions that result in a disadvantage for the rest of the world. Despite the fall of communism, no country practices unfettered capitalism. Even the US, as a bastion of free markets, has “mixed” capitalist economies. Developed nations recognize that private interests alone cannot provide for all of society’s needs and take an active, albeit usually temporary, economic role in the aftermaths of wars and financial crises. Still, their default position is that open markets are the best way to generate long-term prosperity, and state intervention in economic operations should remain minimal.

State Capitalism: The Four Tools

State capitalism is a system in which the government uses various tools to manage its economy and maintain political power. The four significant tools of state capitalism are National Oil Corporations (NOCs), State-Owned Enterprises (SOEs), Privately Owned National Champions, and Sovereign Wealth Funds (SWFs). NOCs are among the world’s biggest energy firms and, along with other state-owned entities, account for 75% of the Earth’s oil. They enjoy government support and have competitive advantages over private companies. SOEs manage non-petroleum resources or provide essential products and services and include the US Postal Service, China’s State Grid Corporation, and Angola’s Endiama. Privately Owned National Champions are spun off from state-owned enterprises and enjoy government support. SWFs invest in strategically pivotal assets and answer only to their state handlers. The use of oil, gas, and other commodities as political tools and strategic assets is resource nationalism, which is an essential part of state capitalism.

The Four Waves of State Capitalism

State capitalism has experienced four waves of resurgence throughout history. The first began in 1960 with the creation of OPEC, while the second came with the rise of emerging markets in the 1980s and early 1990s. The third wave saw economic liberalization and rising commodity prices, which benefited state capitalists. The fourth wave emerged after the 2008 financial meltdown, which pummeled free markets but relatively insulated state capitalists. Saudi Arabia, Russia, and China’s state economies pose a fundamental challenge to the future of free markets.

The Saudi Monarchy’s Strategic Spending

The Saudi monarchy uses its oil wealth to fund civic projects, ensuring political continuity and deterring threats. Its efforts to open national companies to global competition have failed due to little motivation for citizens to forgo state support. Despite some market exchange outside of direct government involvement, Saudi rulers tightly hold their oil industries, including the world’s largest oil company and the petrochemical industry. The Saudi Arabian Monetary Agency serves both as the central bank and SWF. The nation’s national champions include privately held family-run businesses like the Bin Laden Group.

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