Focus: Tomorrow’s Flashpoints
Karl Marx dreamed of a world where the state had become irrelevant, and so withered away. Many rich guys have had the same dream and, unlike Marx, they put their money where their mouths were, in the form of campaign contributions to make it all come true. But it’s beginning to look as if that dream has run into an unpleasant new reality.
For a generation, the world was divided into two heavily armed camps: Free Market Capitalist Democracies (FMCDs we’ll call them) versus Authoritarian Bureaucratic Socialist States (ABSSs). Yes, there was the occasional embarrassing thugocracy in the West’s camp … well, not all that occasional, come to think of it, but you get the idea.
Then The Wall came down, the Soviet Union de-unioned, and all of a sudden there was only one superpower – us, the U.S. The Bipolar World was history. The struggle between FMCDs and ABSSs had been decided and we won, hands down. Hooray!
Except you’ve probably noticed that it hasn’t quite worked out the way we imagined. For a few years there democracy – real democracy – was advancing globally, but for the moment that advance has paused. Much more importantly, a new system has emerged to challenge FMCD: Authoritarian State Capitalism (ASC).
ASC was always there, but we didn’t notice it because no great powers practiced it. Most Mideastern countries are ASCs, have been for decades, and Singapore was famously so. But now there are some bigger players – Russia and China, for starters. India is a bit of a fence-straddler on this one: definitely state capitalist, but arguably democratic. But India is struggling with (and losing to) rampant corruption, and rampant corruption is poisonous to democracy. Unless things turn around in New Delhi, look for them to join the unambiguous ranks of ASCs.
One advantage State Capitalist systems have over us Free Market guys is that they can ignore the market when the market is screwing them. Case in point: petroleum. When demand goes up in a free market, price goes up, which in turn produces more supply, which then reduces the price back to a new point of equilibrium.
There are times, of course, when it is far better for the supplier to restrict the supply and keep the price high – particularly if the supply is finite, which is the case with petroleum. Why would anyone who has a finite supply of petroleum want to pump it out of the ground faster just so they could sell their finite supply at a lower price?
In a free market system, the requirement to generate quarterly profits drives companies to do just this. But when the state controls supply and production, the state can take a longer view. One clear trend of the last decade has been increasing control of petroleum reserves in the hands of state-owned and managed companies. Welcome to ASC-land.
And the one clear geo-political trend today is a steady flow of wealth and power from FMCD-land to ASC-land.
We are going to have to learn a whole different vocabulary for dealing with this brave new world. Free markets are only going to be as free as the 500-pound gorillas let them be. Free trade isn’t going to mean what we thought it meant. Really. And you rich guys who thought government had just about outlived its usefulness are going to have to put off your victory celebration for a while.
What this all means in terms of new alliances, new rivalries, and new potential global flashpoints, is big, big stuff. More on that in the coming weeks.
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