Academic journal article Asia - Pacific Issues

How Emerging Forms of Capitalism Are Changing the Global Economic Order

Academic journal article Asia - Pacific Issues

How Emerging Forms of Capitalism Are Changing the Global Economic Order

Article excerpt

In the aftermath of the global financial crisis of 2008, the future of the world economic order does not seem as clear as it once did. The Cold War was in essence a competition between capitalism and communism. The defeat of communism seemingly established the supremacy of free-market capitalism. Today, however, a new dynamic is playing out-this time between different models of capitalism.

Up until fairly recently, free-market capitalism remained dominant in setting the agenda for global economic governance and development. This model holds that markets should be responsible for the allocation of all goods, services, labor, and finance, with the state taking a highly limited role in economic governance. Although also based on a market system, the models of capitalism prevalent in continental Northern Europe and Japan have been seen as traditionally distinct from the neoliberal model. They are based on governing labor and capital markets not only by market-based means, but also with the aid of central coordination among the interests of capital, the state, and, in Europe, labor.

More recently, a third model of capitalism has come to the fore. Espousing a more state-centric form of development in emerging market economies, especially the economies of Brazil, Russia, India, China, and South Africa (together known as BRICS), the state here takes an activist role in managing economic development, including the employment of industrial policy, financial and regulatory tools to foster industrial catch-up, and technological upgrading. These models are referred to as new forms of state capitalism or refurbished state capitalisms.

Over the past thirty years, free-market capitalism or the neoliberal model of capitalism profoundly influenced the agenda for governance and reforms in developing countries. Known in the international arena as the Washington Consensus, due to its embrace by the World Bank, International Monetary Fund, and other institutions promoting economic reforms, many claimed that this model would be triumphant in bringing development and prosperity to all.1 Confidence in this consensus was badly shaken, if not shattered, by the financial collapse of 2008. Today, the future of the world economic order seems more uncertain than at any time since the 1980s. Already some argue that the Washington Consensus is rapidly fading. For example, the Nobel Laureate in economics, Joseph Stiglitz, contends that the Washington Consensus and its underlying ideology of market fundamentalism are "dead."2 Others, though, are less convinced.

The political economist Colin Crouch insinuates that declaring the death of neoliberalism is premature, since the neoliberal order relies on the power and persistence of large multinational corporations domiciled in advanced economies. Even in the aftermath of the global financial crisis of 2008, these corporations have sustained their deep influence over governments and the global political economic order.3

In answering the question of whether the neoliberal global economic order is actually in decline or not, three distinct questions must be analyzed: First, is there a politico-economic system that actually challenges the neoliberal model at present? Second, if so, what is this system? And, finally, what is the exact nature and logic of how this rival system is challenging the neoliberal global economic order?

The analysis concludes that, yes, there are at present rival politico-economic systems. Moreover, refurbished forms of state capitalism are, indeed, the most likely challengers to the Washington Consensus. However, refurbished state capitalisms differ from earlier forms of state capitalism in that they have adapted many aspects of the neoliberal model and deeply integrated with the global economic system. China's example is used to illustrate how such new forms of state capitalism are pragmatic in nature. The emergence of refurbished state capitalisms is therefore producing a dynamic mix of mutual dependence and competition with the still dominant neoliberal model of capitalism. …

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