When you write a book called The End of the Free Market, you can be pretty sure what the first question is going to be: "Do you really believe we're seeing the end of the free market? Really?"
Yes, I do. But there are two important caveats. Not everywhere and (hopefully!) not forever.
We're used to living in a world where we see corporations as the future of political and economic power. Remember the movie "Network"? Ned Beatty as Arthur Jensen standing in a darkened corporate boardroom and thundering at Peter Finch's disturbed and cowering network news anchor Howard Beale:
"There are no nations; there are no peoples. There are no Russians. There are no Arabs. There is no third world. There is no West... There is no America. There is no democracy. There is only IBM and ITT and AT&T and DuPont, Dow, Union Carbide and Exxon. Those are the nations of the world today."
How about Rollerball and Robocop, variations both on the idea that big corporations are drinking the rest of the world's milkshake--and don't mind killing people who get in their way?
Here's why you can put those fears aside and worry about something that's actually happening:
One- The free market's largest, most successful experiment in history, the single European market, has hit some serious turbulence. The kind you experience when trying to land a plane during a hurricane. I think the pilots will get that plane down in one piece--especially since they can safely ignore the screaming passengers on the other side of the cockpit door a little longer. But there's no guarantee. The latest rescue package may have cleared the plane for landing but there's plenty of wind and rain between here and the runway. Things will get bumpier before they even out. Not a good advertisement for free market capitalism.
Two- The elected leaders of nearly every free market state (with the exceptions of relatively small, well-governed commodity exporters Australia and Canada) are facing serious levels of anti-government public fury. US midterm elections look to take "throw the bums out" to a whole new level. (Bums of both parties.) Gordon Brown is already out, but the British public didn't have enough confidence in opposition conservatives to give them a majority either. French President Sarkozy has low poll numbers. German Chancellor Angela Merkel's are even lower. Japanese Prime Minister Yukio Hatoyama can't even get a dinner reservation.
At the moment, none of these leaders is any position to praise the enduring virtues of free markets.
Three- After three decades of double digit growth and a strong rebound from the global market meltdown, China is looking pretty strong these days. It's easy for Beijing to blame the West for the world's setbacks--and to propose an alternative that, on the surface, appears to promise sustainable prosperity and political stability.
China is using state-owned companies, privately owned national champions, and state-dominated investment funds to distort the performance of markets for political advantage. They're doing this inside China and throughout the developing world, where those big, bad multinational corporations find themselves competing with Chinese and other companies armed with every financial and diplomatic advantage their governments can provide.
The title of my book came from a meeting last spring with Chinese Vice Foreign Minister He Yafei. "Now that the free market has failed," he asked me, "what do you think is the proper role for the state in the economy?" (Coincidentally, He Yafei was the official President Obama found himself negotiating with when Premier Wen Jiabao decided he didn't want to make a deal on carbon emissions in Copenhagen.)
I don't agree with the premise of his question, and told him so. But I'm pretty confident that that isn't going to undermine the confidence of his bosses in China's state-driven model of capitalism.
Next week, I'll answer the question posed by the book's subtitle: "Who wins the War Between States and Corporations?"
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations? (Portfolio, 2010)
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