Jake Street .com


  State Capitalism

                                    (This was an original column back in 1996 - updated December, 2009.)

China is the model of state capitalism.

A successful Chinese endeavor, whether it’s manufacturing computers or building high-rise office or apartment buildings, is in partnership with the government. It is a blend of private enterprise and socialism (where the state either owns or controls everything).

State capitalism is where private and public endeavors are blended together in partnerships. It may also be described, by those unwilling to face reality, as a system where the state is intervening in the market to protect and advance the interest of Big Business.

It is in sharp contrast with the ideals of both free market and laissez-faire private enterprise system.

And it is never benevolent. By its very nature, it depends upon Karl Marx’s adage, “The greater good. . .” And it survives by an economic policy of “Might makes right.”

State capitalism rose in Japan, following the war. Japanese government and Japanese banks staked out areas of mutual concern and developed mutual policies to assure success in those areas of interest. In turn, government and banking officials played heavy roles serving on the Boards or in corporate decision-making positions in these Japanese business endeavors.

Beginning in the decade of the 60's, with a booming world economy, this early model of aggressive state capitalism grew Japan into the world’s foremost economic competitor.

Seeing Japan’s success, business and industry leaders screamed to political capitals about what they saw as “unfair” competitive practices. Politicians, eager for power or money, created some favored status for select economic segments. Many countries, already leaning to socialism, created governmental partnership with supposedly private firms to push for economic gains.

The Japanese policies of putting all economic eggs in a basket of government partnerships ignored the internal economy. This created a weakness, and the Japanese economic bubble burst in the late 80s. The yen lost it power, and the Japanese market lost most of its gains. Today, Japan still has not recovered from it's failed experiment.

Ignoring the Japanese experience, other countries continued to set policies for expanding state capitalism.

China’s entry into world markets coincided with a remarkable growth of policies in world capitals creating governmental partnerships with receptive sectors in private endeavors.

Urged on by such “humanitarian” countries as the United States, China blended their form of communism into economic partnerships that could compete in world markets. Today, there is not a single Chinese industry competing internationally that is not in partnership with the Chinese government. But China is not alone.

America is right there with China.

There is not a major American bank that is not in some form of partnership with government (loans and deposits are guaranteed by government and the right to a profit guaranteed by the Federal Reserve Bank). In 2009, our financial institutions were nationalized as a result of those banking partnerships.

There is not a major U.S. industry that does business in a foreign nation without some form of guarantee by the American government. 

There is not a major oil company that is not in partnership with some government in the world today.

There is not a major U.S. endeavor doing business here at home without some special privilege or advantage granted by the government. For instance, taxpayers are funding research and development programs for the big oil and big drug companies.

These are supposedly private sector enterprises in partnership with government. We call it “Capitalism” — leaving out the silent word, “State”, but there is not a spit's worth of difference between what we're doing and the policies of China' government.

American enterprise was to be private.

For years, the American economic system was a “Free Enterprise” system. Then, after government had dropped so many special advantages on some and restrictions on others it became a “Private Enterprise” system.

It wasn’t free to do business anymore.

The basic excuse for governmental intervention in the free enterprise system was the argument that "in the real world property rights and contracts, which are the basic requirements of a functioning free market system, require coercion or physical force in order to be upheld, a true free market by this definition is impossible." The weak-minded failed to recognize the falseness within the statement, which fails to acknowledge the rule of law in a free society (and assumes or substitutes the law of man).

Under private enterprise, law, not government, still set the rules within the system. But special interests, insiders, the power-hungry, and the plunders, corrupted the law, perverted it, giving the power to coerce and use physical force (police action) to the government. With its nose in the door, soon all of the government-ass was in the room.

Like the Chinese, Americans are now living in a system of State Capitalism.

We, America, got here because we didn’t pay attention to the business of politicians.

Too many of us believe the business of politicians is the creating and passing of laws for the common good. This is not so. The business of politicians is getting money or power --- or power and money. And it’s the same in Austin, Tallahassee, Sacramento, Albany, Pierre, Little Rock, or the capital in your home state. And in Washington, D.C. Or in Japan, Russia or England. Or in some remote village in Hijackastan.

Where ever you find a seat of government, you'll find the bozos cluttering up and covering up and creating special privileges for someone.

In politics, black and white are always in shades of grey: There is no good or evil. Just degrees of right or wrong. In both parties. And in both parties, the party is the most important thing. . .

Why should we expect more? The goal of each party is to put a “spin” on truth; on facts. The only objective is to make the respective party look good.

It is a political party’s promise of things it cannot deliver that encourages socialism.

Society, unfortunately, is a concept generated by cultural, social, economic and ethnic groups.

The welfare of the people, especially the welfare of the poor, the old, the disadvantaged and the minorities, used to be the primary concern of the socialist. They ignore the individual need for the acquisition of property and a “pursuit of happiness.”

The conservative wants government to do things their way, based on some perceived Biblical instruction, whether its abortion or liquor by the drink: Forgetting that if government has the right to tell you what you cannot do it also has the right to tell you what you must do!

The libertarian trades away individual rights for the unrestricted rights of monopolies and conglomerates, which care nothing for the rights of individuals.

Worst of all, are the promoters of “ethnicity” — History and a little common sense show that ethnicity offers no cultural benefits or advantages, except for those promoting their own personal brand of ethnicity as a way to make money or gain power.

Sooner or later, State Capitalism will fail.  For over two decades, we have warned of the dangers of State Capitalism. We warned that it carries within it the seeds of its own destruction.

Today, we see the results of State Capitalism: We are a nation under siege. Banks, Financial firms, car manufacturers, and business endeavors of all kinds are coming under the control of some faceless government bureaucrat or power-brokering Czar. There can be no pride in knowing we were right, however, when America's future is a nation of economic slaves and social servants to our own government.

Bureaucratic imperatives are to escape responsibility, dodge problems and gather power to themselves...the reasons why everything run by government is blotched or messed up. It doesn’t matter whether its Katrina or Homeland Security or Healthcare or the Education Department. Whatever government gets involved in, it eventually takes over and fouls up. So, all you Exxon-Mobil and Walmart types...beware!

What the socialist, the conservative, the libertarian, the ethnic leader, all of us, forget is that no coffee tastes as good as it smells.

All newly-weds learn that there is a difference between anticipation and realization. Only voters forget.    

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