Angela Merkel warned against growing government intervention in international trade: “If we are of the opinion that things are simply not fair, then we have to seek multilateral answers and not pursue a unilateral protectionist course where we isolate ourselves.” She was largely defending the Washington Consensus , a catchall term that suggests politics and economics ought to inhabit separate spheres. This is the orthodoxy upon which the current international order is based.
But that consensus is coming apart because, more than ever, state-led capitalism works — and it is here to stay. China’s consolidation of its state-owned enterprises (SOEs), Russia’s oligarch-led economy, the proliferation of sovereign wealth funds (SWFs) and growing government intervention in the West are clear indicators of state-led capitalism’s success.
.. Moscow is able to use these corporations for political ends: threatening gas supplies to keep European governments compliant, for instance, or directing energy revenue to finance military development.
.. The Sovereign Wealth Fund Institute reports that there are dozens of SWFs, including 24 created in the past decade, which collectively control more than $7 trillion in assets.
.. SWFs are an important feature of today’s global economic landscape; governments also use them as agents of statecraft. SWFs in the Persian Gulf region, for instance, are investing in Russia because of concerns about America’s regional staying power, and they are deepening ties with Muslim countries in Southeast Asia to ensure export markets and potentially to facilitate counter-radicalization initiatives.
.. And in the United States, President Trump has bragged that he personally influences firms’ decisions about where to place their factories... This is a dramatic reversal of the trend from two decades ago... But a number of factors led to skepticism about free markets. One was the underwhelming developmental effect of SAPs and liberalization.
A further blow to the neoliberal model was a series of financial disasters caused by unrestricted flows of capital, notably the 1997 Asian financial crisis and the 2008 global financial crisis.Perhaps the factor that has most undermined neoliberalism’s attractiveness, though, is the persistent power of countries with state-led economies, such as China and Russia... We are not seeing a “universalization of Western liberal democracy” and free-market capitalism, as Francis Fukuyama predicted