: End of the free market, the: who wins the war between states and corporations? (9781591843016) : Ian Bremmer : Books
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End Of The Free Market, The: Who Wins The War Between States And Corporations?

by Ian Bremmer
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Product Details

  • Publisher: Portfolio Hardcover
  • Publishing date: 13/05/2010
  • Language: English
  • ISBN-13: 9781591843016
  • ISBN: 1591843014


Nouriel Roubini and Ian Bremmer: Author One-to-One
In this Amazon exclusive, we brought together authors Nouriel Roubini and Ian Bremmer and asked them to interview each other.

Nouriel Roubini is a professor of economics at New York University's Stern School of Business. He has extensive senior policy experience in the federal government, having served from 1998 to 2000 in the White House and the U.S. Treasury. He is the founder and chairman of RGE Monitor (, an economic and financial consulting firm, regularly attends and presents his views at the World Economic Forum at Davos and other international forums, and is an adviser to cental bankers around the world. He is the author of Crisis Economics and Bailouts or Bail-Ins. Read on to see Nouriel Roubini's questions for Ian Bremmer, or turn the tables to see what Bremmer asked Roubini.

Nouriel Roubini Roubini: Your book [The End of the Free Market: Who Wins the War Between States and Corporations?] suggests that an old trend, what you call state capitalism, has become much more important. What happened to change things?

Bremmer: Over the past 18 months, the Western financial crisis and the global recession have accelerated the inevitable transition from a G7 to a G20 world. That’s not just a matter of more states at the bargaining table. It’s not just about having to herd more cats to get things done on the international stage. It’s about herding cats together with other animals that don’t really like cats. And that’s not really herding.

The G7 world was one where everyone that mattered for growth in the global economy accepted the assumption that prosperity depended on rule of law, independent courts, transparency and a free media—and in the value of free market capitalism. In that world, multinational corporations are the principle economic heavyweights. This consensus has provided the engine driving globalization for the past 40 years.

The sun has set on that world. The country that has emerged strongest and fastest from the global slowdown is one that does not accept the idea that a regulated free market economy is crucial for sustainable economic growth. China’s success has persuaded authoritarians around the world that they really can have explosive growth without undermining their monopoly hold on domestic political power. China has enjoyed double-digit growth for thirty years without freedom of speech, without well-established economic rules of the road, without judges that can ignore political pressure, without credible property rights—without democracy. And the events of the past 18 months have made China more important that ever for the future of global economic growth. This is a big change with enormous implications that we had better start thinking through.

Roubini: The term state capitalism means different things to different people. How do you explain it today?

Bremmer: I’m writing about a system in which the state uses the power of markets primarily for political gain. A country’s political leaders know that command economies will eventually fail, but they’re afraid that if they allow space for markets that are truly free, they’ll lose control of how wealth is generated. They could end up empowering others who will use markets to generate revenue that can then be used to challenge the government’s authority to dominate the country’s political life. So they use national oil companies, other state-owned enterprises, privately owned but politically loyal national champion companies, and sovereign wealth funds to exercise as much control as possible over the creation of wealth within the country’s borders. And they send these companies and investment fund abroad to secure deals that increase the state’s political and geopolitical leverage in a variety of ways.

This system is fundamentally incompatible with a free market system.

Roubini: Creating friction between the state capitalists and other governments. To say nothing of privately owned companies.

Bremmer: Exactly, yes. In a free market system, multinational corporations are looking to maximize profits. In markets that are not intelligently regulated, and we’ve seen this in the United States, they're looking to maximize short-term gains at the expense of sustainable, long-term growth for their shareholders or for their own compensation. The past two years have reminded us of the sometime excesses of free market capitalism.

In a state capitalist system-- the principle economic actors are looking first to achieve political goals. Profits are subordinate to that goal. In other words, if profits serve the state’s interests, they’ll pursue profits. But if the state needs a state-owned oil company to pay through the nose to lock up long-term supplies to the oil, gas, metals and minerals needed to secure the long-term growth that keeps workers in their jobs, off the streets, and the political leaders in power, profits and efficiency can become political liabilities and these companies will pay whatever it takes to get what their political patrons want.

But the state-owned companies are competing with multinationals that won’t overpay, that can’t overpay. Here, the injection of politics into market activity distorts the outcome—in this case by raising the price that we all pay for energy and other commodities.

Roubini: When you mention the state capitalist countries, which ones do you specifically have in mind?

Ian Bremmer Bremmer: We find state capitalist powers among the Arab monarchies of the Persian Gulf-- Saudi Arabia and the United Arab Emirates are the most important. You see this trend, of course, in Putin’s Russia. There are other examples of countries that mix free market with state capitalist policies. But we wouldn’t be talking about state capitalism as game-changer for international politics and the global economy if it weren’t for China, now the world’s second largest economy and its fastest growing major marketplace.

Roubini: The End of the Free Market is a provocative title. Are you trying to out-Doom me?

Bremmer: You know I wouldn’t do that. But you have to admit, it’s not an exaggeration. It’s not that I think the United States is going to throw away its free market principles. It's not about President Obama being some kind of socialist. Washington will tighten the regulation of financial markets in coming months, and some people won’t like that. Americans will not lose their faith in the power of free market capitalism to generate prosperity. But that can’t be said for the rest of the world.

The global economic system is no longer driven by consensus around these values. There are now competing forms of capitalism. You used the word friction. That’s exactly the right word. Friction, competition, even conflict. There will be winners and losers, and the world’s political and business leaders better begin to try to sort out who those winners and losers will be.

Roubini: Do you mean that state capitalists will be winners and those who bank on free markets will lose?

Bremmer: Not necessarily. We’re going to see governments around the world that no longer feel bound to follow the Western rulebook of decades past. We’ll see multinational corporations struggling to adapt, because foreign investment will become much less predictable and much more complicated. And the backing they get from their home governments won’t carry as much weight.

Yet, some of them will be more successful than others at learning to compete on a playing field that isn’t level. There are very good reasons to doubt that the state capitalists will have staying power. But for now, they have lots of new clout and plenty of advantages. Over the next five, ten, twenty years, state capitalist governments and the companies and institutions they empower will be a serious—and global--force to be reckoned with.

The threat for Americans is that all this is happening at a moment when people are struggling, and their elected leaders have every incentive to respond to that fear and anger with promises to throw up walls meant to protect them from all these changes. Americans have always prided themselves on tearing down walls, not building them. State capitalism and American populism will put that faith to the test.

Roubini: Were you tempted to call your book The End of Globalization?

Bremmer: No, this isn’t the end of globalization. It is the end of globalization’s singular, overriding power to shape our lives and the future of the global economy. Globalization depends on access to global consumer markets, capital markets, and labor markets. State capitalism compromises all three. Globalization still matters, and it will continue to matter for the foreseeable future. But it is no longer the fundamental driver of growth in a global economy that looks increasingly toward China for the next expansion.

(Photo of Nouriel Roubini © RGE Monitor)

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  • Kindle Price Higher Than Book Price
    From Amazon

    Despite the publishing industry's best efforts at explaining book costs, it defies logic that the Kindle price of this book is higher than the hardback copy. Stick to $9.99 for new books and as Steve Jobs advises, go for volume.

  • Fails to gain traction
    From Amazon

    "The End of the Free Market" by Ian Bremmer makes perhaps the best case possible for the superiority of the free market system. That the eminently reasonable arguments made by Mr. Bremmer in this accessible and well-written book ultimately fails to gain traction speaks volumes about the substantive obstacles in the way of a return to Reagan/Thatcher-style neoliberalism. Mr. Bremmer is no Marxist, but he does seem to advocate a regulated or mixed form of capitalism in order to referee a system that is frequently driven to excess. Mr. Bremmer recognizes that president Obama personifies a widely-held American belief in the desirability of private enterprise supported by the least government possible. In fact, the author believes Obama's somewhat detached position is somewhat regrettable given that the financial industry could presently use a good dose of regulatory oversight. Nonetheless, Mr. Bremmer favorably compares and contrasts the Washington Consensus approach with the statist development path chosen by emerging countries such as Brazil, Russia, India and China (BRIC) where Mr. Bremmer contends that economic policies are formulated by party bureaucrats with the primary intent to further gain political advantage. In these states, Mr. Bremmer believes that economic efficiencies are sacrificed in the name of politics. As the BRIC countries have gained power, the author frets that more and more markets around the world are being closed off to the most competitive private firms, depriving people everywhere of the full benefits of globalization. There are quite a few problems with Mr. Bremmer's work; I will cite only a few. First, Mr. Bremmer's short history of capitalism papers over how the West amassed its power and wealth through high tariffs; extreme labor exploitation including slavery; and the rapacious extraction of natural resources through colonialism. Second, BP's disaster in the Gulf of Mexico casts serious doubt on his contention that energy multinationals are inherently superior to state-owned enterprises. Third, at a time when existential threats from environmental degradation looms large, there is but a single paragraph that proposes how the market system might provide the best platform to solve the global warming crisis. Fourth, there is scant attention devoted to the ballooning overhead costs of capitalism, where government deficit spending in the U.S. is increasingly devoted to artificially propping up politically-privileged sectors such as automobiles, defense and aerospace at the expense of industries that might better serve people's needs, such as nutritious foods, a clean environment and affordable health care for all. Therefore, it seems to me that the core problem facing Mr. Bremmer is the lack of a vision that might inspire others to keep the neoliberal dream alive. Unfortunately for Mr. Bremmer, with the benefit of hindsight it seems that other nations have concluded, in the words of Thomas Friedman in The Lexus and the Olive Tree, that the work of competing in a laissez-faire economy is simply "too darn hard" for the average person. In fact, many countries are choosing a path that ensures greater economic independence and stability for their people. Who can blame them when the U.S. - the purported best example of free market opportunism -- is gripped in a prolonged crisis of mortgage foreclosures, manufacturing job losses and environmental catastrophe? In the end, Mr. Bremmer implores us to keep the faith in a free market system that shows little indication that it can provide answers to humanity's most pressing issues. About the best Mr. Bremmer can do is advise us to not do something rash like upset the U.S.-China relationship lest we endure a kind of mutually-assured economic destruction. How inspiring! Consequently, while I did find this book to be interesting, it seems to provide little intellectual currency for those who might be interested in charting a course forward to a better future.

  • For Kindle Users
    From Amazon

    For those who lamented that there was no Kindle version of this book, there now is; but at a price slightly higher (at the time of this review) than for the hard cover copy. So did they gave it to you or put it to you? And to Amazon? You decide.

  • pure fluff
    From Amazon

    Look, everybody knows that the important part of this book is about China. Despite being so long, only 20 or so pages actually talk about China. This book is mostly fluff.

  • State Capitalism - Economics as Politics
    From Amazon

    When the Soviet Union collapsed, it seemed the end of command economies, and the inevitable dawning of free markets around the world. Perhaps so eventually, but meanwhile it turns out those weren't the only options. Countries with multi-century traditions of authoritarian government turned out to be deft enough to open up their economies sufficiently to survive, while still retaining essential political control. This book explains the new state capitalism of such countries as China, Russia, and Saudi Arabia, and how it differs from both command economies and our previous notions of free economies. The key differentiating feature of state capitalism is that crucial decisions are made primarily for political rather than economic impact. Although such decisions are perhaps inefficient in economic terms, for a resource-rich country like Russia or Saudi Arabia, any economic inefficiency is considered far more tolerable than political instability. It was also helpful to see how this concept carries over to the new concept of Sovereign Wealth Funds, again differing from other investments in that they are primarily invested for political rather than economic reasons. The recommendations at the end were very welcome, and helpful, despite seeming a bit optimistic. Although free economies may indeed prevail eventually, there are also those here who would be happy to make our country another bastion of state capitalism, as a way of safeguarding political power. Fortunately, recognizing such a risk aids in defense against it.

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