State Capitalism

State Capitalism

The very word 'state capitalism,' may appear like an oxymoron. As President Ronald Reagan once said: "The business of government is to stay out of business." State capitalism, therefore, invites scorns and rebuke from the conservatives. But state capitalism suggests collusion too; between the government and its crony capitalists. What Joshua Kurlantzick meant by the 'return of statism,' in more ways than one, is a vindication of the term's second meaning, that the state and the crony capitalists that work hand-in-glove (with the authorities) have returned with a vengeance. Invariably, the Washington Consensus, that once privileged the importance of the market institution; a functional electoral democracy and a free press, has been made defunct.

This is a phenomenon that is not merely happening on a grand scale in Asia, but also many different parts of the world, including Brazil and Turkey. More often than not, the state is involved in order to enjoy the economy of scale that can be extracted from the whole process of globalization.

What no one knows is whether the state's extensive involvement in the national, regional and global economy will necessarily produce a trickle-down effect. In other while the rich does get richer, can the rising tide raise the welfare of the poor too in terms of new jobs created ?  Simple and empirical evidence adduced by the likes of Jagdish Bhagwati and Steve Radelet do show a general increase in absolute gains.

But there are also other economists, most notably, Joseph Stiglitz and Dani Rodrik, who are not entirely persuaded as yet. Be that as it may, "State Capitalism," is an excellent account of how the state has made its return felt, with or without the intervening variable of the 2008 global financial crisis.