One thing history has consistently taught us is that paradigms shift and new eras are born in a repeating cycle that’s as old as hills. One thing history has also taught us is that some shifts are far more epochal than others; some have the capacity to distort the pathway of history and others not. Since the crisis, many have questioned the status quo: the Arab Spring brought phenomenal change in the developing world and there are Occupy movements in over 200 cities worldwide.
However, one such change poses a profound challenge to one of the key pillars of U.S. unipolarity: the re-emergence of state capitalism. While the architects of the Washington Consensus had already begun writing the obituary of state capitalism, it has returned reinvigorated, rejuvenated and streamlined, ready to boost itself towards primacy. Indeed, at this year’s World Economic Forum in the Swiss ski resort of Davos, delegates raised concerns over the capacity of contemporary laissez-faire capitalism to meet the challenges posed by the current climate, with WEF founder Klaus Schwab warning that, “Capitalism in its current form no longer fits the world around us.” For many, state capitalism 2.0 may be the answer. Gone are the days of lethargic government bureaucracies and the pumping of public capital into fundamentally inefficient industries. Now, state capitalism 2.0 is underpinned by the utilization of the free-market by state-owned enterprises to galvanize state investment, ensuring efficiency and shaking off innovative malaise. Fundamentally, state capitalism 2.0 operates under a market-based ethos to strengthen national champions instead of protecting them against exogenous competition.
Some have reported that the rise of Russian, Brazilian and particularly Chinese state-titans represents a veritable sea change in terms of the state’s role in economic activity. This is challenging the hegemony of America’s free-market model as nationalized champions climb the global market league tables. Currently, 4 of the 10 largest global companies by revenue are state-owned. Most notably, out of the 10 largest energy giants by oil and gas reserves, all of them are state owned and essentially control more than three-quarters of the world’s oil supplies. Moreover, these state titans are no longer satisfied with simply pumping oil and gas, they are increasingly venturing outside of their country’s borders to lock in deals for future energy supplies or seeking new business opportunities abroad.
In what some have touted the era of change, people worldwide have re-evaluated the foundations upon which political and economic modernity is built. Will this, in conjuncture with the rearing of state capitalism’s once ugly head, provide a new template for economic orthodoxy? Or are the contours of neoliberal free-market capitalism such that its embeddedness in geoeconomic structures is simply too strong to overcome? Overall though, to suggest that the auspicious new model of state capitalism portends the free-market’s twilight hours is at best premature and at worst naïve.
However, one thing remains true: while Western economies stagnate in the economic doldrums of the current crisis, the economies of the emerging world are taking full advantage, appropriating not only a larger share of international markets, but significant ideational purchases in setting the contours of global economic orthodoxy. It is beyond doubt that the global financial crisis has been seen by many as a bona fide crisis of U.S.-style capitalism. Others see the rise of state capitalism as heralding the eventual deposition of Washington from its position as the international community’s primary rule-setter. Nascent multilateralism in South America and East Asia are a testament to this, as they chart alternative paths to the ‘American Way’ that are explicitly engineered to exclude Washington and its modus operandi, both economically and politically.
As Ian Bremmer recently said, “security is no longer the primary driver of geopolitical developments; economics is.” The battlefield of economic orthodoxy is thus one that has the capacity to be the primary driver of geopolitical developments in the years to come. State capitalism has already played its first hand. Watch this space.
