Monday, February 27, 2012

Niall Ferguson on State Captialism

Niall Ferguson sometimes gets it wrong in his commentary on current affairs, but I think that his wide-angle historical lens provides some very good insight into this issue of political economy. A lot of folks have suggested that China's current brand of "state capitalism" is ascendent and superior to the market capitalism championed by the U.S. and which served as the basis for the "Washington consensus". Ferguson provides a useful "hold on a minute perspective" on the contention that this "state capitalism" now holds the key to the future.

Ferguson notes the contention of Ian Bremmer that China is the premier example of state capitalism that could fundamentally change the way the world economy works. But as Ferguson notes, China's brand of capitalism is a varied amalgam of government intervention and very free markets. (Neither does he mention the role of corruption, but I understand from 1HP that this factor looms too big to ignore, especially in a system in which the state looms so large.) Ferguson, citing the likes of Adam Smith and Peter Thiel, acknowledges the importance of government institutions in any capitalist system. Issues of the environment in which the economic system operates are crucial. Ferguson argues that the key lies on how and in what ways the state deals with the economy, a point well-taken. In conclusion, he writes:

The real contest of our time is not between a state-capitalist China and a market-capitalist America, with Europe somewhere in the middle. It is a contest that goes on within all three regions as we all struggle to strike the right balance between the economic institutions that generate wealth and the political institutions that regulate and redistribute it.

The character of this century -- whether it is "post-American," Chinese, or something none of us yet expects -- will be determined by which political system gets that balance right.

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