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Is State Capitalism a Good Alternative?

Russia, China and even Germany invest a lot of state money into particular companies to help them succeed. That sort of favoritism does not play well in the States, but should it?

What’s the Latest Development?

A host of economically-strong countries including Russia, Germany and China current practice a type of state capitalism, which generally means investing lots of tax dollars into certain private companies while opening them to be traded on the stock market. While we Americans might call state capitalism a way of making business ‘artificially competitive’, it is hard to argue with the system’s success. Germany controls Europe’s financial affairs while China has grown its GDP several times over in the last decade.

What’s the Big Idea?

Is state-capitalism a viable alternative to the West’s market system, particularly given our current economic crisis? A debate at The Economist summarizes two competing positions, one for and one against. Despite their disagreements, the two debaters, popular economist Ian Bremmer and Harvard Business School professor Aldo Musacchi, find a lot of common ground. They agree, for example, that state-capitalism will thrive for decades to come but doubt that it can create meaningful innovation once disparate economies have reached parity. 

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