Home > Economy > State capitalism as a viable alternative to liberal capitalism?

State capitalism as a viable alternative to liberal capitalism?

As it is plenty suggested in The Economist, state capitalism is gaining a big relevance and significance in nowadays Western world. Since the beginning of the economic crisis in 2008 this new manner of working with the liberal capitalism is strengthening; in the following lines, retrieved from Time Business, it is clearly displayed what is the scenario regarding a post beginning-of-the-crisis world; how the state capitalism has so much to do in the new economic juncture:

“In the wake of the 2008 financial crisis, the debate over the proper role of the state in a modern economy has been reopened. In the U.S., Tea Partiers advocate their own version of “small government” to promote economic recovery, while President Barack Obama promotes more active government policy to create jobs. Others, meanwhile, wonder if Washington needs an “industrial policy” to nurture new sectors, like green energy, to help the U.S. compete with China. In Europe, politicians are grappling with how to regain competitiveness through liberalization while still maintaining the extensive social protection of their welfare states.

In emerging markets, however, a significant state hand in economic development is far less controversial. Many of today’s up-and-coming economies either have had their state-led development period, or are still very much in the midst of that experiment – most of all, China. And it has not gone unnoticed among some analysts in the West that many of these same emerging markets have also generally maintained their growth despite the devastating global downturn. So as the market economies of the West falter, some have asked if “state capitalism,” that mix of market forces and state control, can produce better economic results than the laissez faire economic models favored in the U.S.”

What it is suggested here is exactly what has bring us to discuss. The government has more to do in the free market than what we can expect, because, being honest, nowadays there is no state that can boast of having a real and absolute free market. There is always a minimum control on the economical activities, and it has hugely increased recently. We only have to focus on the banks: the states are breaking their minds to lighten their economical debts (with “theirs” I am referring to “their banks”), asking for more and more money to be transferred from the IMF (International Monetary Fund) or the ECB (European Central Bank), so that they’ll get enough liquid money, in order to make possible the granting of credits.

The model of the so-called state capitalism is China. Retaking what Time Business says about the state capitalism-liberal capitalism debate, this is what adds relating to China:

“Yes, the economy continues to grow at a stellar pace and a big reason why is the role of the government. The country powered through the Great Recession to a great degree because of government stimulus, credit from state banks and investment by state corporations. Over the long term, the support of the state has also aided the country’s rapid advance into global manufacturing.”

Now, state capitalism might seem to be a perfect manner to control the economic crisis and to stabilize social welfare, but this is not entirely true (because, if so, we would have found the perfect new economic system). Too heavy a state hand – through, for example, bureaucratic meddling in the financial system and government control of the value of the Yuan – is creating an economy with serious distortions, including rising levels of debt, excessive investment, even more excessive external surpluses, and a potential banking crisis.[1]

Therefore, the economic crisis is not only that: it is a crisis of a corrupt and worn out system that threatens with its end. The liberal capitalism is naturally cyclic, which tends to decline between certain time periods, but what happened four years ago is a massive abuse of the system, a worldwide collapse of rusty economic gears. Whether the strong introduction of the state in the market will improve the outlook, maybe it will. What it is certain, in my opinion, that any kind of capitalism is drown, and a new and trustful system must be carried out.

References:


[1] Schuman, Michael. State capitalism vs the free market: Which performs better? September 30, 2011. Retrieved the 8 May 2012 from Time Business: http://business.time.com/2011/09/30/state-capitalism-vs-the-free-market-which-performs-better/

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