An Analysis of State-owned Enterprises and State Capitalism in China
State Capitalism - WordPress.com · 2/7/2019 · The Problem with State Capitalism •“One...
Transcript of State Capitalism - WordPress.com · 2/7/2019 · The Problem with State Capitalism •“One...
StateCapitalismMarket-MaximizingGovernmentInterventionism
Today’sDiscussion•Housekeeping•BriefReview•StateCapitalism•Corporatism•EastAsianNICs•BRICEconomies•TheFutureofChina
HOUSEKEEPING
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Lady’sChoice?
BRIEFREVIEW
OurStorySoFar…
Smith Ricardo
CLASSICALLIBERALISM
List
MERCANTILISM
Marx
MARXISM
Engels
MODERNIZATIONTHEORIES
Weber Rustow
ANTI-COLONIALISM&DEPENDENCYTHEORY
Lenin GunderFrank
KEYNESIANISM
Keynes
NEOLIBERALISM
Hayek Friedman
STATECAPITALISM
Bremmer O’Neill
4-7
TypesofEconomicSystems
TypesofEconomicSystems
Government owns most or allresources.
Command Mixed Market
Government and privateownership of economic
resources mixed in varyingproportion.
Mostly private (individualor business) ownership of
resources.
Bias towardentrepreneurial innovation.
Applies the invisible hand,laissez-faire, property rights,
and individualism.
Philosophical Anchor:Capitalism
Goal of balancing economicefficiency but protecting againstthe excesses of greed and self-
interest.
Philosophical Anchor:Socialism
Bias toward large-scale, capital-intensive
production.
Applies the visible hand ofthe state, central
planning, and collectivism.
Philosophical Anchor:Communism
Types of Economic Systems
TheRoadtoSerfdom (1944)• Advocatedlibertyandpurefreemarketcapitalismbecauseofthehazardsofexcessivegovernmentcontrol:
FriedrichAugustVonHayekwasafollowerofLudwigVonMises,andthefatherofmoderneconomicliberalism.
• Stifling of market incentives
• Excessive central control
• Loss of political freedoms
ChicagoSchoolofEconomics
•PublicSectorAusterity• EconomicLiberalization• IndustrialRestructuring
ChicagoBoy:MiltonFriedman
TheDownsideofReaganomics
•Riseinunemploymentinearly1980s
•Massivefiscaldeficits• StrongerdollarandmoreconsumptionleadstoexplosionofU.S.foreigndebt
•Developingworldexperienceddebtcrisis
Reagan
• RonaldReaganandMargaretThatcher
•1981U.S.legalizesinternationalbanking
•1984¥/$agreementliberalizesJapaneseinvestment
•1986LondonStockExchangeacceptsforeignsecuritiesdeals
UnleashingInternationalCapital
STATECAPITALISM
WhoisIanBremmer?•PoliticalscientistwhofoundedtheEurasiaGroup,aninternationalconsultancy
•Authorof“StateCapitalismComesofAge,”inForeignAffairs (May/June2009)
IanBremmer
Whatis“StateCapitalism”?AccordingtoBremmer,statecapitalismis“asysteminwhichthestatefunctionsastheleadingeconomicactorandusesmarketsprimarilyforpoliticalgain.”
Whatis“StateCapitalism”?“Statecapitalismhasfourprimaryactors:nationaloilcorporations,state-ownedenterprises,privatelyownednationalchampions,andsovereignwealthfunds(SWFs).”
FormsofStateCapitalism• Inanefforttomanageeconomicgrowth,manygovernmentsattemptto:•promotecertainindustriestoencourageeconomicdevelopment
•developcertainnationalcompaniesintogloballeaders•Restrictcompetitionfromforeigncompaniesinstrategicindustries
•Create“sovereignwealthfunds”(SWFs)tomanagecapitalaccumulationinkeyindustries
WhereIsStateCapitalismHappening?•Bremmer worriesthatrelianceonstatecapitalismisincreasing:
• Developingeconomiesaroundtheworldhaveincreasinglyreliedonstateinterventioninthemarket.
• Intheaftermathofthe2008-09financialcrisis,Westerngovernments,includingtheUnitedStates,reliedheavilyonstateinterventioninthemarket.
GlobalDistributionofEconomicFreedom
4-18
TheProblemwithStateCapitalismAccordingtoBremmer,theproblemwithstatecapitalismisthat:
• Thegovernmentexplicitlymanipulatesmarketoutcomesforpoliticalpurposes
• Governmentinterventionexposesprivatecompaniestounfaircompetitionandhighercosts
• Consumersfacehigherpricesandmarketinnovationsuffers
• Cronyismleadstocorruptionandeconomicinefficiencies.
TheProblemwithStateCapitalismAccordingtoBremmer,theproblemwithstatecapitalismisthat:
• Thegovernmentexplicitlymanipulatesmarketoutcomesforpoliticalpurposes
• Governmentinterventionexposesprivatecompaniestounfaircompetitionandhighercosts
• Consumersfacehigherpricesandmarketinnovationsuffers
• Cronyismleadstocorruptionandeconomicinefficiencies.
TheProblemwithStateCapitalismAccordingtoBremmer,theproblemwithstatecapitalismisthat:
• Thegovernmentexplicitlymanipulatesmarketoutcomesforpoliticalpurposes
• Governmentinterventionexposesprivatecompaniestounfaircompetitionandhighercosts
• Consumersfacehigherpricesandmarketinnovationsuffers
• Cronyismleadstocorruptionandeconomicinefficiencies.
TheProblemwithStateCapitalismAccordingtoBremmer,theproblemwithstatecapitalismisthat:
• Thegovernmentexplicitlymanipulatesmarketoutcomesforpoliticalpurposes
• Governmentinterventionexposesprivatecompaniestounfaircompetitionandhighercosts
• Consumersfacehigherpricesandmarketinnovationsuffers
• Cronyismleadstocorruptionandeconomicinefficiencies.
TheProblemwithStateCapitalism• “Oneessentialfeatureofstatecapitalismistheexistenceofclosetiesbindingtogetherthosewhogovernacountryandthosewhorunitsenterprises.”
VladimirPutinandRussianoligarchOlegDeripaska.In January2019,theTrumpadministrationofficiallyliftedsanctionsonDeripaska’sbusinesses(EN+GroupPlcandEuroSibEnergo JSC) (GettyImages).
GettoKnowtheRussianOligarchsOlegVladimirovichDeripaska isthefounderofBasicElement,oneofRussia'slargestindustrialgroups,andhasclosetiestoPutin.
Emin Araz oghlu Agalarov,isanAzerbaijani-RussiansingerandheirofAmas Agalarov,a
Russianbusinessman.
YevgenyViktorovich Prigozhin isaRussianbusinessman whohasnumerousrestaurantsand
cateringbusinessesthathavehosteddinnerswhichVladimirPutinattendedwithforeigndignitaries.
http://time.com/5401645/putins-oligarchs/
Amas Agalarov
Viktor Felixovich Vekselberg is a Ukrainian-born Russian businessman, and the owner and president of RenovaGroup, a Russian conglomerate. His fortune is estimated at $13.6 billion.
GettoKnowtheRussianOligarchs
http://time.com/5401645/putins-oligarchs/
ISSTATECAPITALISMREALLYATHING?
CritiquingtheIdeaofStateCapitalism“itisanunhelpfuloversimplificationtodividetheworldinto‘marketcapitalist’and‘statecapitalist’camps.Therealityisthatmostcountriesarearrangedalongaspectrumwhereboththeintentandtheextentofstateinterventionintheeconomyvary.”
ProfessorNiallFergusonProfessorofHistoryatHarvard/Seniorresearchfellow,JesusCollege,Oxford/Seniorfellow,HooverInstitution,StanfordUniversity
TheScandinavianModelIn1938,Sweden’sgovernment,employerassociation,andtradeunionsnegotiatedtheSaltsjobadenAgreement,whichledtocentralizedcollectivebargainingatthenationallevel.
Grand Hotel Saltsjöbaden in Saltsjöbaden, where the treaty was signed.
Norway’sSovereignWealthFundNorway’s$1TrillionGovernmentPensionFund,alsoknownastheNorwegianOilFund,wasestablishedin1990toinvestthesurplusrevenuesoftheNorwegianpetroleumsector.
IftheNorweguan fundhadbeenacountry,itwouldranksomewhereaheadofMexicoandbehindIndonesiaintermsofgrossdomesticproduct.InSeptember2017itwasworth$192,307perNorwegiancitizen.
Asia’sPolitical&BusinessMonopolies•PoliticalMonopolies:Developmentof�irontriangles�:electedofficials,bureaucrats,andindustry
•BusinessMonopolies:JapaneseandKoreanindustrialgroups(zaibatsu,chaebols)
Political scientist Chalmers Johnson described how MITI (Ministry of International Trade and Industry, MITI) told companies what to make; subsidized loans, promoted worker training; encouraged corporate mergers and bankruptcy, and restricted imports (protecting domestic market) through informal means. Political corruption led to major bank failures and loss of investment capital that contributed to a prolonged financial crisis in the 1990s.
SouthKorea,HongKong,Singapore,andTaiwanbecameknownasthefour“AsianTigers"
EastAsianNewlyIndustrializedCountries(NICs)
AfterWWII,newlyindustrializedcountries(NICs)inEastAsiadevelopedrapidlythroughastrategyofexport-led
industrialization.Severalconditionsprovedhelpful:
• Growinginternationaleconomy• StrongdollarandclosetiestotheUnitedStates• Strongautonomousstatesandbureaucraticagencies
• Closegovernment-businesscoordination• Nounionsorlandedelite
ResultsofExportOrientedGrowth•6-8%GDPgrowthrates• Shifttomanufacturing,• Lowunemployment• Lowinflation•Highrateofurbanization
• Strongpovertyreduction
O’NEILL’sBRICs
StateDrivenDevelopmentAnumberofcontemporaryexamples—notablyBrazil,Russia,India,andChina—illustratethepowerfulrolethatstatescanplayinpromotingdevelopment.
TheBRICSIdeaGoldmanSachschiefeconomistJimO’Neillwroteapaperin2001arguingthatBrazil,Russia,India,andChinaweretheemergingsuperstarsmostlikelytodominatethe21stcenturyeconomy.SouthAfricawasaddedin2010.
Inhisessay“BuildingbetterglobaleconomicBRICs.,”O’NeillpredictedbigdevelopmentsforthefourBRICcountries.
TheBRICS
Takentogether, thesefivecountries cover40percentoftheworld’spopulationandmorethan25percentoftheworld’sland,andacombinedGDPof$16trillionin2015.
Between1990to2014,thesecountrieswentfromaccountingfor11%oftheworld’sGDPtoalmost20%.
http://time.com/4923837/brics-summit-xiamen-mixed-fortunes/
In2014,thecombinedcurrencyreservesof
thegroupingstoodatabout$4trillion,75percentofworld’scurrencyreserves.
TheBRICScountriesfeaturealargelystate-drivendevelopmentmodel,withanemphasisoneitherextractiveenterprisesorexport-orientedgrowth.
TheBRICS
THEROLEOFBRICSINTHEDEVELOPINGWORLD(2012)
BRICSForeignDirectInvestmentFlows
THEROLEOFBRICSINTHEDEVELOPINGWORLD(2012)
Thefivenations,withajointestimatedGDPof$16tn,setuptheirowndevelopmentbankinparalleltotheUS-dominatedIMFandWorldBankandholdsummitsrivallingtheG7forum.
WaningEnthusiasmforBRICSGlobalenthusiasmovertheBRICShasdiminishedinrecentyears,partlyduetohardlinepoliticaltendenciesandeconomicheadwindsfallingglobaldemandandloweroilandcommodityprices GoldmanSachsshutdownitsBRICinvestmentfundinlate2015
afteritsassetsplungedinvalueby88%fromtheir2010highpoint.
CracksintheBRICS
TheBRICSLackSynergy• BRICSareverydifferentincultureandideology
• BRICSlacksharedeconomicinterestsandobjectives
• BRICScompeteinseveralmarkets(e.g.,clothing,aircraft,militaryequipment)
• BRISgenerallydon’tcomparetoChina’sroleinglobaltrade
BRICSLosingSteam?• WhileChinaandIndiacontinuetothrive,Brazil,Russia,
andSouthAfricahavenot.
THECHINAMODEL
Mao’sChina• OnOctober1,1949,MaoZedongfoundedthePeople'sRepublicofChina(P.R.C.).
• In1953-58,Maoistgovernmentinitiateda5-yearplansfocusedonindustrialexpansion(agriculturelanguished).
• In1958-62,the“GreatLeapForward”focusedoncreatingagriculturalcommunes.
Mao’sChina• Discreditedbyeconomicfailures,Maowasbrieflysucceededaspresident byLiuShaoqi from1959-68.
• Maograduallyreassertedpowerandfrom1966-76,the”CulturalRevolution”soughttopurgebothtraditionalandcapitalistelementstore-establishMaoismasthedominantideologyofChina.
AfterMao• Afterhisdeathin1976,agroupofreformerswithintheCommunistPartyledbyDengXiaopinggraduallyendedandcondemnedtheCulturalRevolution
• Neweconomicreformsintroducedin1978advocatedanewmodelofsocialism“withChinesecharacteristics”
DengXiaopingwithCarterin1979
ChinaToday• From1990-2015,China’sshareofglobalmanufacturingoutputincreasedfrom>3%toabout25%.
• Inrecentyears,Chinahasbecometheworld’s2ndlargesteconomybyGDPandispoisedtosurpasstheUnitedStatesinthenextdecade.
WorldEconomiesbyGDP
WorldEconomiesbyGDP
TheRoleofPopulation
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ConcludingThoughts•OfficeHours•Powerpoints•ConcludingQuote:�Thebiggertheworldeconomy,themoreimportantitssmallestplayers.�
• JohnNaisbittGlobalParadox