Zero Sum Game

Review Economics

The End of the Free Market: Who Wins the war Between States and Corporations?

by Ian Bremmer

Portfolio, 2010, 240 pp.

Politics and the economy: two subjects that always seem to be tied together, whether people like it or not. Given the recent financial crises on Wall Street and their international impacts, more people have begun wondering who the major players in the global economy are, how countries manage their economies, and how the economies of those countries are affected by politics.

Enter Ian Bremmer’s The End of the Free Market, an excellent guide for people who may not be entirely familiar with terms like laissez-faire or “state capitalism,” but who want to know more about such concepts. Written as a response to a question put to him by the Finance Minster of China (Is this the end of the free market?), the book is aimed at those who intuitively understand that there is a difference between the style of capitalism practiced in Norway from the kind exercised in Saudi Arabia or China, but could not elucidate those differences.

As the president of the political risk analysis and consulting firm, the Eurasia Group, and author of two popular books on economics, The J Curve (Simon & Schuster, 2006)and The Fat Tail (Oxford, 2009), Bremmer is on familiar grounds.  

The beginning of The End of the Free Market serves as aprimer on economic styles and as an overview of how and, to an extent, why certain governments choose the economic management styles that they do. Bremmer opens by defining a series of economic terms and providing an explanation of how he intends them to be used, with the caveat that he is simplifying concepts to illustrate the broader ideas of command (state-run) versus free market (market-driven) economies. Bremmer then provides a brief but illuminating history of economic systems, with a focus on state-run economies, starting from the early 20th century; that is, about the time when governments began taking active roles in monitoring their economies. Again, he simplifies the material, but this technique is useful for illustrating the broad historical trajectories of many state capitalist countries. Finally, there is a brief overview of the economic tools used by all countries, regardless of their political orientation, employed frequently in the name of state security to protect certain industries, such as oil or food production.

The middle of the book examines current, successful state capitalist countries. As one might expect, given their recent, dramatic economic rise, Bremmer devotes a great deal of time to China, the United Arab Emirates, Saudi Arabia, and Russia. Unfortunately, some countries are shorted and grouped together, most notably those from Latin America and Southeast Asia. Given the breadth of the global economic system, however, such omissions may be unavoidable in a book aimed at a general public. Still, the transitions are not smooth. It is jarring, for example, when after specifically discussing countries like Russia or Saudi Arabia, Bremmer sweeps Central America into a group, giving them a much briefer analysis and less detail. As to why Bremmer chose this approach, whether for brevity’s sake or for some other reason, remains unexplained.

Because Bremmer is a free market advocate, he frequently draws attention to the fact that countries like Saudi Arabia or China take measures to protect economies that are specifically designed to keep their central governments in power or to maintain a stable social environment. Bremmer is careful not to offer an outright condemnation of these systems, however. There is a genuine attempt to merely describe the various economic situations around the globe and offer his views for how they came about without passing judgment on the rightness of their politics. With state capitalism practitioners like China becoming more powerful, being aware of their strengths and the motivations behind the political decisions is important when trying to assess conditions across the globe.

 

Bremmer is aware that because of the ongoing, worldwide fiscal crisis, free market capitalism as practiced in much of Europe and the United States is under attack. He closes The End of the Free Market by recognizing that countries like Brazil or Argentina, previously onboard with the free market concept, are questioning the system. Bremmer first identifies the inherent weaknesses of state capitalism, specifically the need of governments practicing it to keep people employed—regardless of the health of the economy—in order to cement political power and social stability. He then recommends ways in which the West can meet the challenge of state capitalism and demonstrate the superiority of the free market. This moment, however, is where the book falters in a big way: Bremmer’s recommendations toward salvaging the free market economic system involve two major pieces of advice to Europe and the United States: first, do not shy away from the free market because of the current fiscal crisis; instead keep practicing the values of regulation, but not involvement, in the market. Second: to engage in an effective public relations campaign for the free market, touting its strengths.

But these recommendations beg an important question: if free market capitalism as practiced in the U.S. and Western Europe truly is the best economic system, why would it need a PR campaign to promote its validity? Given the current economic crisis, such superiority is understandably called into question, which provides a perfect opportunity for Bremmer to address the structural problems inherent in free market capitalism uncovered by the financial crisis. It follows that true structural fixes should be proffered, rather than the “stick-to-it-ness” and public relations campaign Bremmer weakly espouses. Granted, the possible solutions might constitute another book unto itself, but Bremmer fails to even provide the reader with a casual look at the problems of and solutions for the free market and its woes. By settling for being a primer on the competing economic visions of the world instead of boldly recommending the changes needed to ensure the superiority of the system he champions, The End of the Free Market comes up short.

October 21, 2010

frontispiece and illustration from Worldmapper.org