The Economist on state capitalism

Since 2008, I’ve been repeatedly amused by the contrast between coverage in the Economist and the Financial Times, compared to the mainstream centre-left. The bastions of liberalism see capitalism under threat; the

The social democrats rarely even mention capitalism by name, let alone predict its alteration or demise. They’re too cowed, too nervous — and, I suspect, too insecure in their understanding of economics and finance.

This week Lenin is on the cover of Economist, introducing a feature on state capitalism. By this they mean the rise of state-run companies, including from the developing world, as the new behemoths of the economy. They’re not ashamed to put it into historical terms:

The era of free-market triumphalism has come to a juddering halt, and the crisis that destroyed Lehman Brothers in 2008 is now engulfing much of the rich world. The weakest countries, such as Greece, have already been plunged into chaos….

The crisis of liberal capitalism has been rendered more serious by the rise of a potent alternative: state capitalism, which tries to meld the powers of the state with the powers of capitalism. It depends on government to pick winners and promote economic growth. But it also uses capitalist tools such as listing state-owned companies on the stockmarket and embracing globalisation.

The party line is what you’d expect. To the Economist state-run companies are better than pure socialism, but far inferior to private corporations.

I also can’t help noticing how many of their criticisms of state-run companies could equally apply to Britain’s PFIs:

Studies show that state companies use capital less efficiently than private ones, and grow more slowly. In many countries the coddled state giants are pouring money into fancy towers at a time when entrepreneurs are struggling to raise capital….everywhere state capitalism favours well-connected insiders over innovative outsiders

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