To illustrate the differences between a Soviet-style command economy and these various forms of capitalism, imagine a football game or soccer match. Command economics is a game in which the state tries to predetermine the final score by ensuring that all players, referees, and spectators faithfully perform their pre-assigned roles. It’s more a pageant than a sport. Post–Soviet Russian–style laissez-faire capitalism is a blood sport with few rules and referees who represent the competing interests of the spectators who wagered most on the outcome. The strongest dominate, and everyone else loses. Free-market capitalism is a game with referees who exist only to ensure proper enforcement of recognized rules and with players involved in genuine competition. Government’s only role is to ensure that the rules are written effectively and fairly. It’s an ideal, one to which most U.S. and European policy makers aspire. State capitalism is a match in which government controls most of the referees and enough of the players to improve its chances of determining the game’s outcome. Spectators profit from some limited level of genuine competition, but the state rigs the game to ensure that favored players have what they need to score the vast majority of points on its behalf.

This book is about the emergence of this new strand of capitalism and how it threatens free markets and the future of the global economy. The main characters are the men who rule China, Russia, and the Arab monarchies of the Persian Gulf. But as we’ll see in some detail, the apparent success of this new model has attracted imitators throughout much of the developing world. It’s the story of how, in the first decade of this new century, public wealth, public investment, and public ownership have made a stunning comeback. Governments dominate key domestic economic sectors. The oil companies they own now control three quarters of the world’s crude-oil reserves. They use state-owned and favored privately owned companies to intervene in global markets for aviation, shipping, power generation, arms production, telecommunications, metals, minerals, petrochemicals, and other industries. They own enormous investment funds that have quickly become vitally important sources of capital.

Chapter one tells the story of how all this happened. Chapter two offers a brief history of capitalism to uncover the roots of the current emerging conflict. Chapter three illustrates how state capitalism works. Chapter four reveals how and why governments in a dozen different countries use it, with special attention on China, Russia, Saudi Arabia, and the United Arab Emirates. Chapter five outlines why state capitalism threatens free markets and the future of the global economy. Chapter six details what those who believe in free-market capitalism can do about it.


    You’ve written that free markets must now compete with the rise of something called “state capitalism.” What is that?

    State capitalism is a system in which the state acts as the dominant economic player and uses markets to advance political goals. It’s a trend we see primarily in China, Russia, and the Arab monarchies of the Persian Gulf, but individual elements of it exist in democracies like Brazil and India. In this system, governments use national oil companies and other state-owned enterprises to create and maintain large numbers of jobs. They use select privately owned companies to dominate certain economic sectors. They use so-called sovereign wealth funds to invest their extra cash in ways that maximize the state’s profits. In all three cases, the state is using markets to create wealth that can be directed as political officials see fit. And in all three cases, the ultimate motive is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).

    National oil companies and even sovereign wealth funds have been around for many years, haven’t they? How and why have they become a threat to free-market capitalism?

    Yes, some of these tools have been… Keep Reading