What is the Future of State Capitalism?

Raising capital today means that private equity companies are bumping into state owned funds, particularly when seeking capital for larger deals. If a fund manager tells a client their capital will come from a state owned fund, often the client’s first question is how ethical is that fund? How did they make that money? Who benefits from the incoming revenues from these investments?
The concern arises as there is the perception that some States do not channel money to their own people’s social welfare.
This is State Capitalism at its worst.

If the answers to customer concerns can be given easily, then that capital will be willingly accepted. The West is able to think beyond xenophobic attitudes that if money is not money made here, we don’t want it. Remember the Nineties when Japan bought up property?

We do need to look at why so many citizens of some countries with these huge funds are choosing to vote with their feet and leave their home land for the West? This has been developing for decades. Why did these people travel far to North America, Europe and Australia? Being an immigrant myself, I have put this question to other immigrants many times over the years. The answer is the same – my government has leaders enriching themselves rather than taking up the role to help everyone in the nation.

Otherwise, I see business leaders – my clients – embracing seeing other nations rising up, experiencing their own industrial revolutions and going global. "There may not be global rules for State Capitalism yet," adds John Loewen, "but these will come because the customers are asking the questions more and more. The market-human beings- is demanding transparency and states need to show where they spend their money and who benefits from it."

No, it’s not perfect in any country so let’s not be grand standing and silly about who is pure and who is not. The point is we have now arrived at a point in history where every human being on this planet now understands that their State is obliged to look after their people first, before enriching themselves and indulging in their vanity projects. Otherwise, the steady outflow of their best and brightest will continue.


Anonymous said...

Capitalism will flourish and counterbalance the resurgence of the state run enterprises when while looking for the maximization of shareholders equity, it also looks for the welfare of the people, at least for the ones where it operates, not only for humane reasons but the sake of the creation of a larger market instead. With the so called concept of a "good corporate citizenship" which is mostly a sort of charity and window dressing, it will keep lagging as compared to the left wing movements of many countries, including the US.

Ludwig Toledo

Anonymous said...

Let's get one point out in the open - the fuss is not about the potential ills of capitalism on steroids. It is not about the emergence and potential hegemonic status of the super heavy weight class 'our' capital markets. No, nor is it about state owned enterprise - which, as in the case of PertoChina, can grow bigger than many surrounding states combined.

The fuss is that these super heavy weight contenders are no longer American - that these are no longer somehow legitimate and that they represent something that free markets should shun.

There has been no fundamental change - the pooling and deployment of ever larger amounts of capital in capitalism is a cause for celebration - even if those pools do not coalesce in our back yard.

The alarm bell here does not demand nor does it warrant a new set of rules per economic policy - if so, the lightening movement of hedge fund capital, the vast pools of influence exerted by the biggest banks and corps such as Mobil and GM should have been stimuli enough to to warrrant such regulatory changes long before the emergence of the super heavy weights class.

What this suggests is nothing more than the emergence of changing political tides. Spheres of influence that are have been part of life, governed at large, by the helping invisible hand, are now coming back to shake that very hand and at the same time call into question the legitimacy of influence.

Omer E