“The End of the Free Market” written by Ian Bremmer, is the 2nd book I have purchased via the iTunes Store on my iPad. It is the second book which I have finished after my first e-book “Game Change” by J. Heilemann & M. Halperin. Bremmer’s book take a hard look at the free market and properly set the stage for state capitalism for the 21st century, with clear examples from China, Russia, Saudi Arabia and southeast Asia moving across the book. It ended with some scenarios to how state capitalism will evolve in the next 50 years.
In some sense, the book kicked off with an anecdote from the author in his meeting with China’s Vice Foreign Minister, He Yafei. The Chinese minister kicked off with a rhetorical question that have taken into the context of the recent global financial crisis triggered by the filing of Chapter 11 bankruptcy protection of Lehman Brothers on Sep 15 2008. In his words, “Now that the free market has failed … what do you think is the proper role for the state in the economy?” Through six long chapters, Bremmer described the emergence of the new strand of state capitalism which authoritarian governments have learned to compete internationally by embracing market driven capitalism. In some sense, these governments has managed to utilize wealth creation to show their legitimacy of their rule in the country. China and Russia have successfully incorporated state capitalism after the end of Cold War.
While the author weaved the story with a brief history of capitalism and how the markets have failed through the madness of crowds and herd behavior following bubbles that drove economies near the brink of collapse, for example, the Wall Street Crash in 1929 that led to the Great Depression. With each crisis, the state introduced regulation into the system. It also attempted to debunk the myth that democracies and free markets are interwined and how state capitalism can still provide a semi-free market to function within a government tightly controlled environment.
By clearly demonstrating the fundamental differences between free-market & state capitalism, the author showed that the latter is not an ideology bur rather a tool for retaining political control. Policy makers do not embrace state capitalism as a knee-jerk reactions to rebuild or jump-start a new economy out of recession but rather a long term policy choice. Second, the state capitalists view markets as a tool that serves the national interests of the ruling elites rather than an engine of opportunity for the individual that is “led by an invisible hand to promote an end which was no part of his intention” (Adam Smith, Wealth of Nations 1776).
In the final part of the book, the author warns that the free market is likely to meet its end, when countries with such economies start closing door on trade, investment and immigrants. He also pointed that the dynamics between US and China has to be balanced without compromising their values for example in the protection of intellectual property rights and currency issues. He also made it clearly that if corporations (such as Google) has to taken on state capitalists, it is likely that Google will lose as compared in the past where the British East India Company has managed to secure control of India in the 18th century. However it does not clear up the issue on whether corporations have the propensity to be a state of its own. It’s a book that is highly recommended for policy makers and economists to get a clearer look on how economies are run in this century and where it is all heading on an macro-economic scale.
You can watch the video of Ian Bremmer giving a talk about his book here: