Learning to Love State Capitalism

Yves here. It’s revealing to see how much effort the press and pundits spend in demonizing state capitalism, when the US version of capitalism arguably combines the worst of that system and laissez faire capitalism, by having many key industries so dependent on state support (banking, the military-surveillance complex) that they cannot properly be considered private, and others getting so many subsidies (real estate, higher education, Big Pharma) that they should at least be very strictly regulated.

By Ilias Alami, a political economist based at Maastricht University who recently authored the book Money Power and Financial Capital in Emerging Markets and Adam Dixon, Associate Professor of Globalization and Development at Maastricht University and principal investigator of the European Research Council-funded SWFsEUROPE project. Originally published at openDemocracy, based upon a research article recently published in Political Geography, available here

State capitalism is back. At least that is what we are told. An avalanche of books and articles have recently argued that the more visible role of the state across the world capitalist economy signals the resurgence of state capitalism. Consider the mass bailouts following the 2008 financial crisis and the Covid-2019 pandemic, the expansion of state-owned enterprises, sovereign wealth funds, national and regional development banks, the renewal of industrial policy and various forms of economic nationalism in the advanced capitalist economies, and the consolidation of state-led development in China and elsewhere. For many commentators and policymakers, these developments suggest that state capitalism is once again taking center stage in the global political economy.

These narratives of resurgent state capitalism are far from innocent. Consider the front cover of a 2012 special report of The Economist, figuring a picture of Lenin smoking a cigar. In another issue, published two years earlier and dedicated to state-backed Chinese takeovers, the front cover featured a picture of Mao handing over a wad of banknotes (see Fig. 1).

Figure 1: Two front-covers of The Economist (January 21, 2012 and November 11, 2010)

These imaginaries and representations comprise a myriad of value-laden symbols, which mobilize familiar histories and narratives. For instance, the red background color as well as the pictures of the two charismatic leaders elicit the histories of ‘really existing socialism’ in the ex-Soviet Union, China and elsewhere, but also that of the Cold War. Those representations link the contemporary ‘return’ of the state to the past by reactivating vivid memories of the Cold War and communism, while depicting imaginaries that echo with suspicion and duplicity. The covers suggest that in state capitalism, what lies behind the veil of capitalist money and markets – symbolized by the US dollar, both on Lenin’s cigar and Mao’s banknotes – is the concentration of economic power in the hands of strong, illiberal states. There is something inauspicious, if not threatening, about the fact that money is not allocated by the invisible hand of the market, but by the very visible hand of Mao.

Those imaginaries are not confined to the business press. In one of the most cited articles on the topic, then turned into a best-selling book, political pundit and president of Eurasia Group Ian Bremmer argues that the rise of state capitalism in the developing world is antithetical to Western liberal capitalism and seriously risks impairing the functioning of the free market. In another influential book, Council on Foreign Relations fellow Joshua Kurlantzick argues that the return of state capitalism ‘presents a real potential alternative to the free-market model, and as an alternative it presents serious threats to political and economic stability around the world’. For Harvard economist and Cato Institute research fellow Jeffrey Miron, ‘[China] has state capitalism, not true capitalism’.

We see the recent resurgence of these narratives and discourses as not coincidental. For us, it must be considered against the backdrop of a series of interrelated geopolitical and geo-economic transformations, including a shift in the center of gravity of the global economy from the North Atlantic to the Pacific rim, power dispersal in the global economy away from the traditional Western centers of power, and the multiplication of forms of reassertion of state authority in the economy and society.

Partly as result of these transformations, some of the older signifiers used to make sense of world politics, such as the geopolitical division of the world into ‘Third’, ‘Second’, and ‘First’, or between global North and global South, but also some of the post-Cold War narratives framed in the context of ‘globalization’ and the ‘end of history’, have lost traction and credibility. This is compounded by the highly inefficient responses to the Covid-19 crisis by a number of advanced capitalist states.

We submit that the re-emergence and redefinition of discourses of state capitalism participates in the search for new discursive frames and geopolitical lines of reasoning by strategic analysts, political leaders, foreign policy professionals, corporate pundits and academics, in order to render intelligible these messy epochal transformations. Put differently, state capitalism is rapidly emerging as ‘a new global drama’, that is, a simple and straightforward grand geopolitical narrative which acts as a frame of reference for political discourse and practice. Let us take a closer look at how it operates.

First, imaginaries of state capitalism reduce the complexity and diversity of the current political-economic transformations previously mentioned to a clear-cut binary opposition between free-market capitalism vs. state capitalism. The state capitalism narrative is a familiar story of heroes and villains which, through discourses of competition, hostility, and expanding influence, constructs a sense of ‘ideological directness’. The two main protagonists are easily identifiable, two radically different and incompatible models of capitalism.

Second, the geo-category establishes this sense of simplicity, directness, and familiarity by reactivating older grand geopolitical narratives, such as the ones that were central to the repertoire of Cold War geopolitics (cf. the covers above), but also the racialized rhetoric of empire. Indeed, these imaginaries suggest that state capitalism is located in spaces outside of the Western core of the world economy, and simultaneously construct the abnormality and alterity of state capitalism in reference to a presumed universal template of capitalist political organization which dominates in the West. This is evident in Bremmer’s account, which explicitly pits state capitalism against (Western-dominated) democratic liberal free-market capitalism, and in Miron’s characterization of Chinese state capitalism as some kind of impure form of capitalism.

Constructing the non-West as characterized by impurity and deviance (clientelism, corruption, dysfunctional political interference) is typical of racialized imperial discourses, and allows denying that those attributes are potential facets of Western capitalism too, which is simultaneously represented as a fundamentally democratic, rational, efficient, pure version of capitalism. Hence, this Western capitalism is constituted not only as morally superior, but also as the ideal norm.

Now, scrutinizing these narratives, the values that underpin them, and the context of their production is no mere intellectual exercise. They have real, material effects, and are implicated in the ‘ongoing social reproduction of power and political economy’. Imaginaries of state capitalism participate in the discursive construction of a threatened identity (Western state and business actors) and of a threatening object (Chinese state capitalism) that must be controlled. For instance, as the category state capitalism is rapidly entering the main political lexicon, highly complex political matters are refocused as an oversimplified question of competition with a rogue and expansionist state capitalism, which requires an appropriate policy response. The image of the nefarious state capitalist competitor is used to give meaning, political justification, and rally support for increasingly protectionist policies in trade, technology, and investment regulation in the United States and other advanced capitalist economies.

Consider for instance the US 2018 National Defense Strategy and the 2017 National Security Strategy. The portrayal of China as a state capitalist power with global ambitions in the context of a new Cold War, allows providing justification for the current toughening in US diplomacy and foreign policy. As such, hardline policy readjustments are presented as a well-intended and rational reaction to a global ideological threat, and not as an attempt from a declining hegemon to contain the rise of an increasingly capable competitor.

Another telling example is that of Germany’s new National Industrial Strategy 2030, as well as its recently announced economic plan for a post-coronavirus world. These plans feature unprecedented calls for state subsidies, direct state participation in companies, and a reform of EU competition policy, all justified by concerns that distressed firms and under-valued strategic assets in Germany and Europe may be targeted by ‘predatory’ state capitalist investors from beyond Europe.

The irony of these narratives won’t escape the reader: the imagined threat of ‘state capitalism’ in the East begets state capitalism in the West. Casting doubt on the legitimacy of state capitalist competitors, namely China, justifies state intervention and protectionism at home. As we have suggested elsewhere, we may very well all be state capitalists now.

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44 comments

  1. PlutoniumKun

    A huge issue of course is defining where the State ends and Capitalism begins. There are a myriad of different types of companies that can be defined to one extent or other as ‘State Capitalism’. Off the top of my head:

    1. Private companies so large and influential they can essentially suck the State into being its supporter and ally (Boeing, any number of Wall Street finanical institutions).

    2. Companies formed by the State but which have become hybrids of private capitalism with State support, depending on when suits the company (Airbus, any number of ‘national’ airlines).

    3. Private companies that were always intended as an expression of national development objectives – many major South Korean and Japanese manufacturing conglomerates.

    4. Various forms of the military industrial complex (which of course exists in many forms outside the US as well), or in some countries there is a distinct government/construction industry complex.

    5. Private companies that have been essentially ‘captured’ by the State, normally for security ends – Alibaba and Huawai for example.

    6. What are described in Ireland as ‘semi-States’ – Fully public owned companies formed by the State (or often municipalities) to fill in the gaps left by the private sector or to exploit resources (Statoil in Norway).

    If there are any clear rules for which ones are good and which are bad, it seems that the less clarity there is in the relationship between the private company (or senior management) and the government, the more insidious and dangerous the relationship can be. But where there are clear objectives, and a clear power relationship, State capital hybrids can be highly successful.

    Reply
    1. ShamanicFallout

      Yes. And then there are things like government or public university research (funded and or actually done) like pharmaceuticals, technologies, etc. that make may make little sense from an investment/ profit perspective for a corporation to undertake, but who can then swoop in after the fact and reap the rewards as it were.

      Reply
  2. Joe

    Good points here. This is one of the problems I have with Milanovic’s typology of national political economies in Capitalism Alone. Are we seriously supposed to believe that the U.S. doesn’t have “political capitalism”? To be fair, Milanovic is too sophisticated to claim that the Anglosphere political economies are “liberal” in anything but a relative sense. But he never really grapples with the nature of the U.S. state (tellingly, he only uses “oligarchs” to refer to Russians). Contra Milanovic, it seems to me that we just have different varieties of state capitalism around the world.

    Reply
    1. Susan the other

      I thought that was a sophisticated redefinition of alternative – not a noun but a sort-of adjective. Alterity of some concept. The evolution of conceptualization.

      Reply
      1. Anarcissie

        Otherness, if you prefer Germanic roots? But since ‘alterity’ is weird, it sort of illustrates itself.

        Reply
  3. The Rev Kev

    It is weird reading this article. One of the main criticism that Washington has of China is that corporations there are backed by the government. But I guess that China was copying what worked for Japan all those years of their economic success when the Japanese government picked and backed particular industries. South Korea too for that matter. But I suppose that the truth is that in any industrialized country that it is the government that picks the winners and the losers and will act accordingly. if a government is not overrun with corruption, it will back industries that will be good for the country. If too corrupt, it will choose industries that only benefit a particular group or class.

    Reply
    1. eg

      I believe that this is the basic message of Ha-Joon Chang’s “Bad Samaritans” — that the established industrial powers preach to developing nations arrangements that are the OPPOSITE of how they built their own economies; which is to say, they are hypocrites pulling up the ladder they themselves scaled in order to perpetuate unequal relations that work in their own favour.

      Reply
      1. Off The Street

        Add in some debt-peonage and you have the makings of generations of grift for the well-positioned NGO, first adopter foreign corporation and a few fellow-travelers.

        Reply
  4. Watt4Bob

    When the pot calls the kettle black, is it dishonesty, lack of self-awareness, or strategic disinformation aimed at its constituents?

    IOW, is the financial press in the west just a bunch of reflexively lying scoundrels, clueless misanthropes, or a bunch of too-clever tacticians using misdirection in an attempt to cover their continued looting of their respective ‘subjects’?

    IMO, all of the above, and add to that, the elites/crooks are totally aware that their ‘window of opportunity’ is fast closing, or the clock is about to run out, the ref is looking the other way, and elbows always get sharper in the paint.

    We the people aren’t even in the arena, we’re unable to afford tickets, and so are listening to the play-by-play on radio sponsored by Las Vegas bookies.

    Reply
    1. philnc

      +1 for Watt4Bob. Question is, what are We The People going to do about it? Can’t be that there’s nothing to be done: if that were the case why would so much effort be put into gaslighting us?

      Reply
      1. Watt4Bob

        if that were the case why would so much effort be put into gaslighting us?

        Force of habit?

        Because it’s fun and profitable?

        Because we haven’t used our ‘safe word’ yet?

        If I had to guess, I’d say the folks in charge of gaslighting us have life-long tenure.

        It’s clear we don’t get to do much this election cycle: getting rid of Mitch might be the most we can can hope for this go round, and they’ve got back-up.

        I keep telling myself that despair is a sin, and hoping for the best.

        But there’s some sort of deflation going on, the best keeps getting worse as time goes by.

        Reply
        1. Amfortas the hippie

          “Because it’s fun and profitable?”
          i think we tend to forget the professional sports aspects of our politics. It’s a bidness.
          last presidential election had, what? several billion dollars churning around?
          that’s a better return than golfTV.

          Reply
          1. Watt4Bob

            Hillary and the DNC supposedly paid a $Billion to just 5 consultants?

            And lost!

            So I’d like to know what sort of margin those guys work on?

            If they were each got paid $200 million, does the guy who walked with a profit of $175 million feel like a fool when he learns one of his buddies made $195 million?

            Reply
    2. Generalfeldmarschall von Hindenburg

      Thanks Watt4Bob. I was jut banging out a comment about pots and kettles when I decided to hit refresh and saw you beat me to it.

      I can only add (and maybe someone else ‘noticed’ this already; The right in the US likes to underline the ‘socialism’ in NatSoc, when really all the classic 30s/40s fascist countries were state-capitalist systems. The Japanese Zaibatsu, the German cartels and the big Italian enterprises were all ‘national champions’.

      Reply
      1. Watt4Bob

        Yeah, they’ve done a great job of selling socialism=fascism.

        I expect by next year antifa will made to wear red swastikas, and BLM to wear brown shirts.

        Reply
    3. workingclasshero

      Only neo liberal “washington consensus” ran by so called finsncial markets are acceptable to the anglo phile msm.this is like old school thomas freidman.of course most of the mainstream liberals will fall for this.

      Reply
  5. hemeantwell

    It might have helped the article if the authors reached back to consider the framework in which this question was debated back in the early 20th c, i.e. that it was a central issue in determining the oppositional tenor of socialist strategy. For various writers — e.g. Hilferding, Lenin, Luxemburg, and particularly Bukharin — the question was central to the question, raised within the German SPD, of whether a revolutionary strategy was necessary and/or possible under the state-organized capitalism that was emerging. To boil it down, as I think it tended to get boiled down to in the heat of debate, if you held, like Bukharin did at times, that the state could manage capitalism’s contradictions, then you could think of socialism as an evolutionary enterprise in which socialists would get voted into office and then “take over the keys” from capitalists. Or, you could take the view that socialism is a hopeless project because the bumps in capitalism’s road have gotten smoothed over. Bukharin, who was quite willing and able to think outside convention, got into hot water for at least entertaining the state capitalism hypothesis and it was later part of the indictment justifying his murder.

    Reply
  6. Frank Little

    I’ve been reading Andrew Feinstein’s book The Shadow World about the arms industry and in that context I don’t know if you can draw such a distinct line between the state, private weapons manufacturers, and the many intermediaries who work to get weapons from A-B, many of whom have ties to transnational criminal networks and/or intelligence agencies.

    The networks described in his book seem to be something distinct from either a state or a private entity. While support from the state in terms of money and political cover is essential for these kinds of deals to go through, the privacy afforded private companies is also essential for keeping the unseemly details out of the public eye (at least that’s the goal).

    In many cases too there is more than one government involved, further diluting any sense of accountability that is at least nominally associated with state actors in western liberal democracies in the western press. Then you have the people who work to get those weapons from where they were nominally sent to to where their paymasters in intelligence services really want them to end up.

    Take any component of these networks and moving these weapons becomes a lot more difficult. What do we call such an entity? In whose service is it really operating?

    The “military industrial complex” is a tired cliche and does not, in my opinion, adequately capture the clandestine financial and geopolitical goals that are at play in these arrangements. In theory citizens in a western liberal democracy should have some input on this kind of policy but if that was ever possible it certainly seems impossible now.

    Reply
    1. Amfortas the hippie

      supranational elite, operating above the westphalian fences.
      more akin to the Knights Hospitalier or Templars than to outdated modes like State or Nation. Those are kept around to fence the workers/managers and provide a field for intramural sporting wars to keep the serfs entertained, by turns frightened and exuberant.
      the Mob is like Exxon is like the CIA is like the Sinaloa Cartel is like Goldman.
      “it’s a big club”, and all.

      Reply
  7. Bruno

    As I see it, state capitalism developed its two main forms in the 1930’s: Stalinist monopoly state capitalism in the Russian Empire and Rooseveltian state monopoly capitalism in the American Empire. Those are the systems administered today by the Chinese Stalinists and the American Liberals. The main difference between the two great systems of capitalist exploitation is that the Stalinists are a bit embarrassed by the word “capitalism” and the Liberals by the word “state,” while neither is bothered in the least by the reality of “monopoly.” Both, however, gladly exemplify the truth spoken by Marx and Lenin: the government is the executive committee of the ruling class and the state is a body of armed men devoted to repression of the people in the interest of the ruling class while carrying out the instructions of its executive committee.

    Reply
  8. JWP

    “These plans feature unprecedented calls for state subsidies, direct state participation in companies, and a reform of EU competition policy, all justified by concerns that distressed firms and under-valued strategic assets in Germany and Europe may be targeted by ‘predatory’ state capitalist investors from beyond Europe.”

    Seems like they’ve morphed capitalism into pure socialism. It amazing how far leaders of gov and corps will go to make state capitalism seem closer to capitalism than its more true form of socialism for companies. As NC and WolfStreet have been pointing to for a while now, markets cease to function properly when propped up and we end up with an everything bubble. I’m dumbfounded and enraged that state capitalism has become the new norm, where trillions are dedicated to subsidies and the people are left to fend for themselves. A recipe for collapse.

    Most industries we rely on the private sector for (oil, healthcare, cars, tech) are so heavily subsidized they would instantly fail without them. What kind of model is that when the demand drops out as it is now?

    Reply
  9. Susan the other

    Nancy Pelosi just said something that made me want to kiss her on the forehead. She said that Trump is like a man who won’t ask for directions. She hit the bullseye. And it also pertains to this little essay on capitalism. In my mind capitalism never had a focus in the first place… but it will after civilization gets this sorted out. It’s like capitalism won’t ask for directions either. Oh man, I know that guy. Stream of heat-delirium consciousness here: Theme: Capitalists are idealists too, and easily manipulated. Possible algorithm: State capitalism could be boiled down to one rule (there’s nothing left to exploit), and a few particulars: 1. everything I need to know I learned in Kindergarten, 2. Do unto others, 3. But don’t do the bad things, 4. Money is a social invention, and alas, 5. Profit is now relative – it was inevitable really, and lastly 6. If you can’t have the neighbor you love, love the one you have. I’m sure everyone can add their own to their list.
    \
    To my thinking “pure capitalism” is sort of equivalent to being a virgin. Yuck. Or if you can’t be a virgin at least maintain the pretense of virginity. Even yuckier. Let’s just get over it. I don’t care if we even tear down Lady Liberty too while we’re on our rampage. She’s been gang-raped a million times anyway. At least that twit Bolsonaro doesn’t have to worry about the great Redeemer – he’s always been too ugly to rape. Can’t we just all agree to change? Sorry, it’s the wine and the heat, really. Signing off ;-)

    Reply
  10. flora

    an aside, per Yves:

    US version of capitalism arguably combines the worst of that [state capitalism] system and laissez faire capitalism, by having many key industries so dependent on state support (banking, the military-surveillance complex) that they cannot properly be considered private,…

    When was the last time we had real price discovery in the US stock market?

    Reply
    1. John Wright

      I suspect there will be apparent price discovery in the future.

      A flat, government supported stock price level does not allow a profitable buy-low, sell high tactic for “investors” as the stagnant prices will not have exploitable deltas.

      Perhaps we will see the politically important players go to cash at a high level to public investors (ETF’s, pension funds, individual investors) and then push for “no government stock support” to get prices down to start a new inning in the game.

      Not true price discovery, but may appear as such.

      Reply
  11. Daniel Raphael

    Neither the state nor capitalism deserve our love; where there is the state, there is capital. As Marx pointed out, capital is nothing other than “alienated labor,” which is a somewhat fancy way of saying labour that’s been stolen from the laborer. The state exists apart and distinct from working people, which is how/why we can speak of and identify it as such; it is the crystallization, repository, and beneficiary of alienated labor. That there is an old, ongoing argument among fans of capital about “state capitalism” vs varieties of more-or-less laissez faire exploitation, is hardly news. The news of our time is not the (re?)emergence of the state, but its increasingly firm integration with industry and military. There’s a name for that, and it isn’t capitalism–nor is it socialism.

    Reply
  12. flora

    The current US pols, mostly neoliberal, doth protest too much. I got a chuckle out of reading their deep concern about state capitalism.

    Neolibs are assumed to be deeply opposed to state intervention in ‘the market’, (genuflects). But, they actually want a strong state that they have politically captured and ideologically control so as to impose the dominance of their market ideology and business interests on the country.

    from the article:
    an Bremmer argues that the rise of state capitalism in the developing world is antithetical to Western liberal capitalism and seriously risks impairing the functioning of the free market.

    “Free market”: that’s the tell. It is another term the neoliberals use to mean “free unregulated markets” (unless the regulation is in the market’s interest) and disempowered citizens (to change anything that would “harm” the market). Basically, New Deal capitalism is as anathema to them as is the dreaded ‘state capitalism’.
    Much shorter, the neolibs believe in ‘state’ capitalism as long as they control the state’s rule making bodies. It might well be called Western illiberal capitalism.

    So my take away is that the neolibal economic groups are probably worried about a rise in competition they can’t buy off: foreign state capitalism. They may also be worried about losing their grip on the minds of voters and politicians in the West. Their philosophy might be looking a little shabby around the edges. So, they present themselves as defenders of freedom.* ‘Our version of state capitalism is better than their version of state capitalism.’ ha. My 2 cents.

    *In neoliberal thought, freedom and ‘the market’ are the same thing. We will all be more free, according to then, in proportion that all areas of life are made more market-like.

    Reply
  13. Chauncey Gardiner

    Given the level of monetary, legislative, regulatory, federal agency, geopolitical, media and financial markets support provided to large corporations and Wall Street by the USG and the dominant factions of the two legacy political parties, this supposed contrast is largely spin in my view. Economically, I feel this stage of capitalism is a distinction without a meaningful difference other than the comparatively low level of state ownership in the US attendant to a continuing “Privatize the gains, socialize the losses!” philosophy that has so benefited a relative few with a tremendous concentration of the nation’s wealth in their hands. It is what can be done socially and politically to exit this Kondratieff winter without more war and social and environmental damage where my interest lies.

    Reply
  14. RBHoughton

    Its like playing football with a referee. He may not see all the fouls but he keeps cheats on their toes and punished those he catches. That’s what state capitalism is to me.

    Having a referee ensures that teams, their managers and owners are deterred from bribery – we see its effects by observation and protest publicly and vociferously when it occurs.

    Reply
  15. Ian Ollmann

    The threat to democracy is not state capitalism, but rather the more general aggregation of wealth and power in the hands of a few. Whether these are western billionaires or the Chinese communist party leadership matters little. Democracy is rule by the people, not the plutocrats. We won’t have stability until someone cares about the welfare of the common man.

    Reply
    1. Synoia

      Ah all animals are equal response.
      How is that to be managed?

      The UK did it once, with death duties (estate taxes), which broke up the large estates. That might be a path.

      The practice of hiding inter-generational money in trusts is a part of large estate preservation in the US.

      Reply
  16. eg

    There is no capitalism without the state. Hence all capitalism is “state capitalism.”

    The rest is sophistry and hypocrisy to varying degrees.

    Reply
  17. laodan

    This article is about narrative; it is not about the concept of capitalism per se. A narrative about a concept is what is called ideology.

    Capitalism starts in Early-Modernity with “commercial capitalism” which lasted between 500 and 750 years before industrialization started in Britain and Walloonia. The length of this first phase of capitalism depends on how you define “long distance trade”. Initially European long distance merchants had to carry gold all the way to the Middle-East to pay the merchants from who they bought luxuries. Yes commercial capitalism was about buying and selling luxuries, at the attention of the aristocracy, which rapidly transformed in the production of luxuries indicated by the displacements of the European economic center of gravity from the Italian city-states to Flanders (Bruges then Antwerp) to Holland (Amsterdam) to London….

    At the time the roads were insecure and a caravan of donkeys carrying gold on the “Via Francigena” was a highly risky business indeed. The concept of capitalism originated in that particular context of risk. For these long distance “Franc merchants” (French before the kingdom of France) protecting their Gold was of “capital importance”. A merchant obtained his gold, through installments made by members of the aristocracy, to finance a commercial venture. If the merchant was robbed or lost the gold on the road he would never get a second chance to collect new installments… thus the “capital importance” of that gold.

    In old 12th century French the word capital originating from the Latin capitalis meant “of the head” hence “capital, chief, first” [from caput (genitive capitis) “head”]. The word only appeared, in English, by the early 15c.

    The notion of the “capital importance” of gold then incentivized bankers in the Italian City-States and the Champagne fairs to find a solution to eliminate the risk… and some economic historians suggest that the origin of the letter of credit comes from Marco Polo who upon his return from the court of Kublai Khan in Beijing reported that the use of currency and other negotiable documents in China was one of the reasons the Khan had more treasures than all the other kings in the world …

    The notion of “capital importance” was then further associated with “money that has been invested” which over the passing centuries was then remembered as : capital = invested money.

    The dominant propaganda narrative today originates with “Western big capital holders” who feel that the control of the economy-world is passing from their private hands into the hands of the Chinese state. It is a power game that is being narrated by the servants of big capital holders to keep Western citizens from being attracted by the newly forming Beijing model of governance …

    Reply
  18. Sound of the Suburbs

    What is capitalism?

    Making money doing nothing.
    What are the options?
    Well, there are quite a few options available; we’ve got rent, dividends and interest and there is the globalisation favourite, capital gains on property.

    With a BTL portfolio, I can get the capital gains on a number of properties and extract the hard earned income of generation rent at the same time.
    That sounds good.
    What is there not to like?

    This is the best thing about capitalism.
    You can make money without doing any work.

    I hate work, I love capitalism.
    It’s great, isn’t it?

    Actually, capitalism shouldn’t be like this.
    The Classical Economists spotted the problem immediately.

    The Classical Economists had a quick look around and noticed the aristocracy were maintained in luxury and leisure by the hard work of everyone else.
    They haven’t done anything economically productive for centuries, they couldn’t miss it.
    The Classical economist, Adam Smith:
    “The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money.”
    There was no benefits system in those days, and if those at the bottom didn’t work they died. They had to earn money to live.

    Ricardo was an expert on the small state, unregulated capitalism he observed in the world around him. He was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
    “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist.
    They soon identified the constructive “earned” income and the parasitic “unearned” income.
    This disappeared in neoclassical economics, which is why it’s such a big problem today.

    Today’s experts are just re-discovering the wheel.
    “Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Angus Deaton, Nobel prize winner.

    William White (BIS, OECD) talks about how economics really changed over one hundred years ago as classical economics was replaced by neoclassical economics.
    https://www.youtube.com/watch?v=g6iXBQ33pBo&t=2485s
    He thinks we have been on the wrong path for one hundred years.
    Small state, unregulated capitalism was where it all started and it’s rather different to today’s expectations.
    We don’t know what capitalism actually is, we would need to go back one hundred years to find out.

    Reply
    1. Sound of the Suburbs

      Is that why the hammer and sickle used to be the symbol of communism?
      Probably, this symbolised hard work.
      It signified an opposing system to capitalism.

      The traditional symbol of capitalism was the fat banker, smoking a cigar.
      This was the symbol of capitalism.

      Reply
      1. Ludus57

        You are close to the mark.
        The hammer and sickle symbolised the unity of the workers – the hammer – and the peasants – the sickle.

        Reply
    2. Sound of the Suburbs

      They had a program on UK TV where they traced the family history of various celebrities.
      They all seemed to have connections to important and influential people of the past.

      My Mum did her family history, which seemed like a tour round the poor houses of London.
      This did seem rather strange, as I am sure her family must have had some success in the past, if not as much as the celebrities on that TV program.
      I think I may have the answer.
      “There was no benefits system in those days and if those at the bottom didn’t work, they died. They had to earn money to live.”
      As people got older, they couldn’t work.
      If they didn’t work, they couldn’t pay the rent, and ended up in the poor house, where they died pretty quickly.
      The poor houses were the care homes of the past, and this is where most people died.
      Tracing a family history mainly comes from birth and death certificates, and they nearly all died in the poorhouse.

      Reply
  19. Peter, the Digital Disruption

    Yves, thanks for publishing this!
    Let’s get to roots here; Capitalism is, and always has been founded on production and exchange of privately-owned commodities, for profit, in a marketplace. The primary commodity defining exchange of all others was, and still is human labor. Ignore the “Marginal Utility” nonsense, it’s junk pushed by corporate shills who are terrified by the implications of the labor theory of value first articulated by Ben Franklin, Adam Smith and probably others before them.

    If we miss the essential, that with the digital/AI revolution in technology, human labor is being de-valued day by day as a commodity, then we can’t understand why investment has shifted massively to speculation (3 investment groups now own controlling stock of 90% of S&P 500 companies) which has no allegiance to anything but its algorithms, and market volatility (murderous PG&E-caused fires throughout California mean market volatility!! Yaaay!! Chaos throughout Africa, mid-East and Asia means volatility!! Yaaay!!).

    Productive investment no longer yields sufficient profits (check out the Deloitte Shift Index – ROI dropped 70% since 1965), so corporations are overtaken by private equity firms, the private sector invades the public sector seeking taxpayer-funded profits, and here we are.

    What is being called State Capitalism is more like the classical definition of Fascism – not just a nasty ideology, but the merger of corporations and the government/state, privatization of everything, and finally the shift from a “democratic” form of government (bribery and corruption backed up by force and terror) to a corporate dictatorship (open force and terror, backed up by bribery and corruption).

    Only a movement to make all resources and social processes public property can oppose fascism, and it’s struggling to form itself now. Its most out-front voices are already beginning to consider the necessity of challenging Capital for state power to carry out an agenda of fulfilling human needs and survival of our species on the planet. Check out https://lrna-usa.com/

    Reply
  20. Anarcissie

    As I understand Lenin’s idea of ‘state capitalism’, he was using the term state as a synonym for the government; thus, by ‘state capitalism’ he intended a situation in which the government replaced the private capitalist, but otherwise worked in pretty much the same way. In fact, one could even keep the old private capitalists around as consultants. However, this construal of state, in my opinion, leaves out the huge apparatus of social structure created, maintained, and regulated by the government but not nominally within the literal, official government. This structure is what I would call the state. In that case, normal corporations and other bourgeois institutions, while not literally part of the government, are certainly part of the state and ultimately under the control (actual or potential) of the government. If so, all capitalism is state capitalism; capitalism is a condition of the state. In support of this view, I note that there are very few instances of capitalism existing for long (or extending very far) without government support and protection. Talk of ‘free trade’ and ‘free markets’ and ‘free enterprise’ are hokum (unless we’re dealing with communes in the woods or flea markets in church parking lots). It’s not a case of the pot calling the kettle black; it’s a case of the pot being a kettle, and vice versa. In some countries the government leans more heavily on its periphery, in other less, but they have the same overall form, in the West as in the East.

    Reply
  21. VietnamVet

    It is interesting that the rise of multinational corporations and trading institutions superseding nations are ignored. Boeing is a prime example. There is no competition. In monopolies and duopolies, all that matters are management bonuses and shareholder value. The revolving door perpetuates the corruption. The Boeing B-52 still flies combat missions almost 70 years since its first flight. By dismantling government and its protection against death from the four horseman, the wealthy got richer but they are about to see their wealth crumble into rubble. How can Boeing survive without international travel to and from the USA and with social distancing in passenger airplanes within America? It cannot.

    Reply

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