Friday, February 24, 2012

State Capitalism vs. Decentralization

The January 21st issue of The Economist has a fascinating supplement on State Capitalism: everything you need to know but didn’t know it. The daily news needs to be reframed in this context.

As rebellion ramps up across the world, for the same reasons as always - the trampling of the many by the few - leaders and pundits still think in terms of the old paradigms: capitalism vs socialism.  But there’s a new system taking shape which is no better than the old one and could be worse in terms of saving the planet.

Any system that relies on continued growth contributes to the end of the planet as a human habitat. Capitalism, socialism and state capitalism all belong in that category.

According to The Economist , under state capitalism, the state holds a significant share in major economic institutions and industries, enabling it to  regulate and encourage activities it deems in the national interest.  It is being practiced in China, Russia, Brazil, India, and through sovereign funds in Qatar, Abu Dhabi and Saudi Arabia, among others. Interestingly, the British conservative journal admits that ‘the long era of state activism has left a surprisingly powerful legacy’, mentioning that France’s electric company is 85% state-owned, Japan’s tobacco company is 50% owned by the government, and Germany’s Deutsche Telekom is 32% state-owned.  What it does not mention is that this situation evolved as part of Europe’s hundred plus year old history, of ‘enlightened’ state control over valuable resources and services.

As America’s railroads were being built by private money, Europe’s were built by nations.  Nineteenth century German Chancellor Bismarck invented the welfare state, and if Russia and China are today the foremost state capitalist systems, that is not unrelated to their communist past.

Humans will eventually breed themselves out of existence, thanks to ‘growth’, ‘progress’, and modern medicine (birth control having come too late), unless the pollution considered necessary to their survival is stopped. We have a choice between seeing 10 billion inhabitants living at an early  agricultural level by mid-century, or making drastic changes to our lifestyle now. (I beg science buffs not to dispute this deliberately grand generalization. Pay attention, instead, to the gist.)

The gist is that the choice is no longer between capitalism and socialism, but between state capitalism and decentralization. Between worldwide military/industrial/fascist power that is blinded by hubris, and small, participatory communities. Increasingly, some will try to overthrow the most powerful machine man has created, and others will build new ways of relating to one another, as they wait out the machine’s inevitable demise through war and depletion of the resources which enable it.

While the U.S. and Europe worry about the fate of their market economies, with Greece, the cradle of democracy, speeding to default, the new economic giants are inventing new ways to run their economies. The question is whether state capitalism will eventually contribute to saving the planet or not. And whether worldwide protesters and Occupiers will succeed in creating a different kind of society if they do not.

Today the Indian government proposed setting up a multilateral bank exclusively funded by developing nations to finance their projects. The proposal has been circulated to the BRIC group: Brazil, Russia, India and China - as well as to South Africa, and will be discussed alongside the meeting of Group of 20 finance ministers in Mexico City this weekend.

The World marches on without the Greatest Empire ever known.


  1. Nice enlightening article, but I didn't understand about the Greatest Empire.

  2. Thanks for your comment. The United States is the most powerful empire the world has ever known. Do you understand now?