State-run economies increasingly adore the free market

This past week at the World Economic Forum in Davos, Switzerland, German Chancellor Angela Merkel warned against growing government intervention in international trade: “If we are of the opinion that things are simply not fair, then we have to seek multilateral answers and not pursue a unilateral protectionist course where we isolate ourselves.” She was largely defending the Washington Consensus , a catchall term that suggests politics and economics ought to inhabit separate spheres. This is the orthodoxy upon which the current international order is based.

But that consensus is coming apart because, more than ever, state-led capitalism works — and it is here to stay. China’s consolidation of its state-owned enterprises (SOEs), Russia’s oligarch-led economy, the proliferation of sovereign wealth funds (SWFs) and growing government intervention in the West are clear indicators of state-led capitalism’s success. Controlling market activity gives governments obvious advantages when it comes to advancing political agendas at home and foreign policy abroad.

China has nearly halved the number of its state-owned enterprises — firms such as China Guodian Corporation, a major power generator, and Shenhua Group, a coal producer — in the past 15 years. But this does not mean its SOEs are becoming smaller. Instead, these merged corporate behemoths will soon start taking larger stakes in China’s leading private companies, thereby increasing their centrality to the nation’s economy. Beijing is using these titanic companies to develop a global network of infrastructure projects, such as China Harbour Engineering’s Port City project in Colombo, Sri Lanka, that will increase its influence in dozens of countries. At the same time, its economy continues to grow, and its soft power — the spread of its culture, films and TV shows — is reaching new peaks.

 

– Washington Post

Read the full article here.