Great article in the WSJ. Worth reading in full.
The U.S. Marches Toward State Capitalism With American Characteristics
President Trump is imitating Chinese Communist Party by extending political control ever deeper into economy
A generation ago conventional wisdom held that as China liberalized, its economy would come to resemble America’s. Instead, capitalism in America is starting to look like China.
Recent examples include President Trump’s
demand that Intel’s chief executive resign; the
15% of certain chip sales to China that
Nvidia and
Advanced Micro Devices will share with Washington; the “golden share” Washington will get in U.S. Steel as a
condition of Nippon Steel’s takeover; and the $1.5 trillion of promised investment from trading partners Trump plans to personally direct.
This isn’t socialism, in which the state owns the means of production. It is more like state capitalism, a hybrid between socialism and capitalism in which the state guides the decisions of nominally private enterprises.
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Trouble with state capitalism
There are reasons state capitalism never caught on before. The state can’t allocate capital more efficiently than private markets. Distortions, waste and cronyism typically follow. Russia, Brazil and France have grown much more slowly than the U.S.
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Means of control
State capitalism is a means of political, not just economic, control. Xi ruthlessly deploys economic levers to crush any challenge to party primacy. In 2020,
Alibaba co-founder Jack Ma, arguably the country’s most famous business leader, criticized Chinese regulators for stifling financial innovation. Retaliation was swift. Regulators
canceled the initial public offering of Ma’s financial company, Ant Group, and eventually
fined it $2.8 billion for anticompetitive behavior. Ma briefly disappeared from public view.