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Entries in state capitalism (9)


You there! Innovate!  Now!


Moscow Times op-ed by a biz strategist consultant (via WPR's Media Roundup).

Great rundown here that encapsulates a lot of Russian history:

Eminent Western speakers put forward seemingly logical ideas on modernization and what Russia needs to do to modernize at the Global Policy Forum, which was held in Yaroslavl on Thursday and Friday. But most of them were not Russia experts as such and were thus naively overoptimistic on the country’s willingness and ability to implement change.

Applying Western logic to Russia is a risky business since things here are often the opposite of how things happen in the West. Will this modernization effort be any different from numerous others in Russia’s history?

The problem has always been implementation. Russia has been modernizing on and off since Peter the Great founded St. Petersburg in 1703. Periodically aware of the huge developmental gap with the West, it has never caught up.

As Russian history has shown, Western-style reforms invariably get blown off course by exogenous or endogenous shocks that necessitate short-term crisis management. After that, a conservative reaction sets in because of the fear of losing power after reform attempts fail and are discredited by the people.

Most Russian reform efforts are reactive and short-term, rather than proactive and structural. The result is a country that for centuries has been scraping along the bottom and failing to fulfill its colossal potential.

The government’s strong modernization campaign is concentrating on high technology, and yet it has not even plucked the low-

hanging fruit that would do so much to improve the country’s low productivity, such as radically cutting the number of bureaucrats and amount of red tape.

The Kremlin also has a poor understanding of science, technology and innovation, hence its piecemeal policies on modernization. “Innovation by decree” is one of the least effective models for modernization.

Now try remembering that when it comes to China's much vaunted state capitalism.  The author ends the piece by noting that China's authoritarianism is much more flexible, but the point remains the same: you cannot innovate by decree and if you let real innovation happen, you cannot control it by decree either--and still reap its economic rewards.


Castro: I was misquoted, and, oh yeah, you're all fired

Naturally, Castro now says The Atlantic misquoted his alleged admittance that Cuba socialism was a failure, but actions speak louder than words.

This WSJ front-pager declares "Cuba unveils huge layoffs in tilt toward free market."  How that gets spun as a non-admission of model failure is beyond me, but Fidel is a master liar.

Castro can declare America bankrupt, but we did it the natural way.  His version was just a willful pursuit of a known bad and corrupt strategy.

We've long known that little bro Raul wanted to start down this path years ago.  Now, Castro gets to watch the dismantling of his system while still breathing air, because job creation in Cuba's tiny private sector simply won't match the need unless the system is radically redrawn.

Not everybody gets to watch their funeral, but Fidel will.  No wonder he's suddenly so philosophical.


Since when did government picking winners ever work?

Economist editorial and briefing.

The pertinent reminder of this foolishness:

In the 1980s, the last time industrial policy was in fashion, the West was in awe of Japan and its inexorable rise; now it is in awe of China and its state capitalism.

Deja voodoo

Yet the overwhelming reason for China's miracle is that the state released its stifling grip and opened the country to private enterprise and to the world . . . Part-privatization and competition created in a short time what decades of industrial policy had failed to do.

In the rich world, meanwhile, the record shows, again and again, that industrial policy doesn't work . . . However, many new justifications are invented for the government to pick winners, and coddle losers, it will remain a bad old idea. 

And the kicker:

Thanks to globalization and the rise of the information economy, new ideas move to market faster than ever before.  No bureaucrat could have predicted the success of Nestle's Nespresso coffee-capsule system--just as none foresaw that utility vehicles, vacuum cleaners and tufted carpets . . . would have been some of America's fastest-growing industries in the 1970s. 

And the original sin?

Officials ignore the potential for innovation in consumer products or services and get seduced by the hype of voguish high-tech sectors.

Much the story of our venture-capitalist-in-chief, Obama, and green technologies.  Now we race China to see who can sink more public money on that one, because government investments are the BEST WAY TO GO!

And please, do not cite DARPA's internet as the great counter. Unless you think only the government could come up with that, or that Al Gore invented it, or that it took off primarily because it was kept in government hands instead of turned loose to the public.

In the briefing, four reasons are cited for the current vogue:

  1. The weakness of the world economy (in the West, that is)
  2. The desire of Old Core economies to rebalance from too many imports
  3. Emergency use of industrial policy in response to the crisis has whetted the public's appetite for more, and 
  4. The West is mindlessly aping the Chinese, whose "genius" consists of extensive growth and nothing more.

What a world!


Ah, the "genius" that is state capitalism!

Graphic here

Couple of FT stories.

First one details how the Chinese government has decided to consolidate the steel industry "in a renewed campaign to save energy and reduce pollution."  Beijing wants 10 mills to control 60% of production.  Some industry analysts doubt the goals will be achieved.

My point: interesting how we assume that government bureaucrats in Beijing can figure this all out on their own, mandating the most efficient change.  History says a bunch of guys sitting around the table aren't all that smart at directing entire industries.

But, of course, the Chinese are so different from past attempts at this, because  . . . you know, they're Chinese!  All inscrutable and such.

But it's weird how, when booms come, like the one detailed in the second story on housing, the Chinese are given to same grubby corruption that afflicts every other industry when government tries to do too much.

Meanwhile, the shortage of cheap housing is one of the reasons firing up workers at factories, leading to labor unrest.

But, of course, the Chinese bureaucrats are so amazingly clever in their all-knowiing mastery over the economy, it's like they've reinvented the whole universe (I'm told this often by all sorts of knowing and famous sorts in the US, so it must be true), so I'm certain they'll figure all that out in such a way as to propel the Chinese economy to the leading position in the world!  Because, again, if a bunch of guys sitting around a table in Beijing want that, then surely it can be done.

Maybe if we just lured some of their geniuses over to our side, we could set up a table in DC and then vault past the Chinese--just like that!

It's really all so simple, when you think of it.  Get a table, some Chinese guys, and then rule the world.  It's just so stupid that nobody thought of this before now.


China: looking to take next step toward global brands

Usual excellent stuff from WAPO's John Pomfret.

The lead:

Quick: Think of a Chinese brand name.

Japan has Sony. Mexico has Corona. Germany has BMW. South Korea? Samsung.

And China has . . . ?

If you're stumped, you're not alone. And for China, that is an enormous problem.

Last year, China overtook Germany to become the world's largest exporter, and this year it could surpass Japan as the world's No. 2 economy. But as China gains international heft, its lack of global brands threatens its dream of becoming a superpower.

No big marquee brands means China is stuck doing the global grunt work in factory cities while designers and engineers overseas reap the profits. Much of Apple's iPhone, for example, is made in China. But if a high-end version costs $750, China is lucky to hold on to $25. For a pair of Nikes, it's four pennies on the dollar.

"We've lost a bucketload of money to foreigners because they have brands and we don't," complained Fan Chunyong, the secretary general of the China Industrial Overseas Development and Planning Association. "Our clothes are Italian, French, German, so the profits are all leaving China. . . . We need to create brands, and fast."

The problem is exacerbated by China's lack of successful innovation and its reliance on stitching and welding together products that are imagined, invented and designed by others. A failure to innovate means China is trapped paying enormous amounts in patent royalties and licensing fees to foreigners who are.

China's government has responded in typically lavish fashion, launching a multibillion-dollar effort to create brands, encourage innovation and protect its market from foreign domination.

Through tax breaks and subsidies, China has embraced what it calls "a going-out strategy," backing firms seeking to buy foreign businesses, snap up natural resources or expand their footprint overseas.

Domestically, it has launched the "indigenous innovation" program to encourage its companies to manufacture high-tech goods by forcing foreign firms to hand over their trade secrets and patents if they want to sell their products there.

Since 2007, thousands of Chinese businessmen have attended government-sponsored seminars on "going out," learning everything from how to do battle with domineering Americans and Britons during conference calls to why a Chinese boss should think twice about publicly humiliating his wayward foreign workers -- as he'd do to his staff at home.

China has also moved to re-brand China itself. Late last year, when memories of China's poisoned pet food and deadly milk were still fresh, the Ministry of Commerce contracted with the global advertising giant DDB for a $300,000 ad showing a series of high-tech products, from top-of-the-line running shoes to an iPod.

As a guitar wails, a voice intones: "When it says 'Made in China,' what it really means is made in China, made with the world."

This is always the tough stretch that I think about when people start predicting China's inevitable domination of the global economy.  Brands a lot more complex that most prognosticators imagine.  I mean, just look at BP all of a sudden--from "beyond petroleum" to beyond pathetic.  You can hire ad agencies to hawk your stuff, but that's just surface sheen.  The real brand loyalty comes in the ability to offer compelling innovation, excellent services, and the like.  That sort of capacity can't be ordered from above; it has to be nurtured from below.  A bunch of guys sitting around a table in Beijing won't be able to pick winners consistently, and in their failures, legitimacy will be lost, grumbling will ensue, and that much more resources will be wasted on policing people and their dangerous thoughts instead of winning hearts and minds and brand loyalists through modeled behavior.  Single-party states simply aren't cool, and they will never will be.

More excellent analysis:

In recent months, the Western media have hyperventilated with stories about China's going-out strategy and about Chinese firms buying up the globe -- Oil! Gas! Cars! -- and even investing in the United States. In 2000, China had $28 billion in overseas investments; this year, it could break $200 billion.

But a little perspective: Even if China's total foreign direct investment hits $200 billion, it still pales in comparison to smaller economies, such as Singapore's, Russia's and Brazil's. And China has plunked down only about $17 billion in rich countries, equivalent to the overseas assets of a single medium-ranked Fortune 500 company.

The 34 Chinese companies on the Fortune 500 list basically operate in China only. The world's three biggest banks are Chinese, but none is among the world's top 50, ranked by the extent of their geographical spread.

"Moving forward another 10 years," said Kenneth J. DeWoskin, chairman of Deloitte's China Research and Insight Center, "it's hard to see how viable Chinese companies will be if they just stay in China."

China's attempts to fight what it sees as the stranglehold of foreign patents and intellectual property rights have also had hiccups.

China is estimated to have paid foreign firms more than $100 billion in royalties to use mobile telephone technology developed in the West, according to executives of Western communications companies.

So in the late 1990s, it decided to develop its own. But after more than $30 billion in development costs, its unique technology still has fewer than 20 million users in a market of more than 500 million.

Handset makers have told China's government that they won't produce phones equipped with the new technology unless they are given subsidies. And China has resorted to giving away the technology to Romania and South Korea to encourage broader use.

"China is still stuck," said Joerg Wuttke, former president of the European Union Chamber of Commerce in China and a 25-year veteran of doing business in China. "There is a huge disconnect between the money spent in universities and the lack of products."

China also faces enormous challenges to creating globalized firms. Studies of Chinese executives show that they spend far more time with government officials -- who in China are the key to their profits -- than with customers, who are the key to international success.

"Chinese executives like me need to spend a generation outside China to learn how business is done around the world," said Hua Dongyi, who chairs a massive Chinese mining company in Australia but has also built roads in Algeria and infrastructure in Sudan.

Remember that line:  Chinese execs spend far more time with their party bosses than focusing on customers.

In a nutshell, there's the Achilles heel of state capitalism.

And that's not a problem you can fix by throwing more $$$ at it.

Rest of the story is about how Lenovo's purchase of IBM computer production was a rare success.

As always, Pomfret captures reality in China--absent hype--better than anybody else.


Mining OPEC for Africa?

Inevitable development and proper channeling of what will be substantial blowback inside Africa (maybe not on top but definitely from below) regarding Asia's (and particularly China's) ramping up of demand for the continent's mineral resources.  

It's misleading and premature to cast China's "penetration" as a colonial-style grab for power.  What is happening is the development of a huge co-dependency relationship that lack counterparty capacity (it takes two to tango fairly on any deal) on the part of African nations.  In short, China's got its state capitalism shtick in line but African nations lack a cohesive counter, creating uneven transactions (i.e., Africa can always do better) that so far generate a lot of investment and activity and jobs (all great); it's just not clear how evenly that new wealth is being distributed locally in a sustainable fashion.

Gist of piece:  time to call the companies' bluff about being able to go elsewhere if they're not treated right by the Africans.  With China's heavy entry, that bluff starts looking a lot weaker because finding such volume elsewhere is a whole lot less feasible with each passing year of "sticky" investment.


One more go-around with Bremmer on "The End of the Free Market"

Ian comes back (on "The Call") with one more go in the conversation:

Today, a few final words from me on Tom Barnett’s thoughtful response to my book. Tom has argued that the state capitalist phenomenon is not as “unprecedented” as I think it is. He notes that “It’s not like OPEC’s national oil companies or China’s state-owned/-dominated enterprises came out of nowhere—they’ve been there all along.” He’s right about that, of course. OPEC was generating international headlines in the early 1970s. Sovereign wealth funds began appearing in the 1950s. China has had state-owned companies for decades.

In my opinion, the difference is not in the institutions but in their importance for international politics and the global economy. Until the end of the Cold War two decades ago, the isolation of the communist world imposed sharp limits on the global economy’s production capacity, but economic trends within it had little negative impact west of the iron curtain. Today, we’re wired together as never before.

The global economy will depend heavily on China for future growth for years to come. China’s growth has been dependent on exports to its largest trading partners: the European Union, the United States, and Japan. Though China has rebounded strongly from the global slowdown, thanks mainly to a massive state-directed spending spree, the Western financial crisis threw millions of Chinese out of work for some time. Greece’s vulnerability has threatened the cohesion of the entire eurozone.

And we now live in a world in which state-owned companies (which answer to political officials rather than shareholders) own more than three-quarters of the world’s crude oil reserves. With strong economic growth among emerging markets, global demand for oil is on a sharp upward trajectory. That means that state capitalist oil and gas exporters have much more direct impact on our standards of living than at any time in the past. And multinational companies are competing with Chinese state-owned giants armed with political and material support from Beijing in parts of the world where Chinese companies have only recently begun to compete.

State capitalism isn’t new, but it has never been so directly important for how the rest of us live. Throw in historic levels of market turbulence and long-term debt issues in America, Europe and Japan, and I think that we now find ourselves in an extraordinary transitional moment in the history of the global economy.

Reply:  Here's where Ian's argument serves its most useful purpose.  The real threat from state capitalism isthat political self-preservation stands in the way of the technological and market innovation required to meet the resource requirements of this emerging global middle class.  A Chinese economy that underperforms in its shift from extensive to intensive growth is bad news for everybody on the planet, but especially for the average Chinese.  In the end, that's what'll drive the political system to open up:  the fear of underperformance.  So, in the end, it's not about the perceived "superiority" of state capitalism, which neither Ian nor I believe in (or peddle).  Rather, it's about how long the Chinese "Communist" Party can maintain the illusion that the best route forward for the society is an economy that can be more pervasively commanded by the government (prioritizing stability) versus one that's truly liberated and fueled by the innovation of the Chinese people (prioritizing higher growth but accepting more churn).  For now, the balance sits on the side of stability, given all the change churning its way through China right now.  That won't end soon--but soon enough (e.g., the 6th generation of leadership that comes online in 2022 is the one to watch).

I'm betting the greed of the Chinese people for a better life and more wealth will overwhelm the greed of the CCP to maintain a single-party state.  So no idealism on my part:  I simply like the numbers.

Again, Ian's book, on sale today, is called "The End of Free Markets."


Another shining example of the threat of state capitalism--to its subjects

A WAPO story noting the extent of hard times that Chavezism has brought to Venezuela:

Every day for the past three months, government-programmed blackouts have meant the lights flicker and go dark in a city that once bustled with commerce. And Fifth Street, with its auto parts stores and car repair shops, has ground to a halt.

"We just stop," said Jesus Yanis, who paints cars. "We don't work."

Neither does the rest of Venezuela, where a punishing, months-old energy crisis and years of state interventions in the economy are taking a brutal toll on private business. The result is that the economy is flickering and going dark, too, challenging Venezuela's mercurial leader, Hugo Chávez, and his socialist experiment like never before.

No matter that Venezuela is one of the world's great oil powers -- among the top five providers of crude to the United States. Economists say Venezuela is gripped by an economic crisis that has no easy or fast solution, even if sluggish oil production were ramped up and profligate state spending were cut.

Chavez's continues to brag up his "21st-century socialism," but it is simply not delivering the goods, even with the high oil prices of the last few years.

But this is the typical performance of NOCs, or national oil companies:  "The oil industry is pumping 20 percent less crude than in the 1990s and is saddled with debt."

It produces less because it refuses the investment that must accompany the foreign technology, and it's saddled with debt because, in true rentier fashion, the government treats it like a piggy bank--and this little piggy (Chavez) has been greedy.

The more Venezuela is characterized by electricity blackouts, the more it comes to resemble its great model--Cuba. 


A conversation joined: I reply to Ian Bremmer's response to my review of "The End of Free Markets"

My original review at WPR triggered Ian's request to cross posts for the obvious reason that he's trying to generate as much buzz as possible about his book, The End of Free Markets:  Who Wins the War Between States and Corporations?  Gist of my review:  Bremmer delivered more a solid defense of free markets and less a celebration of state capitalism than implied by his title, which I found highly misleading--but a clever packaging of current fears by his publisher.

Here's Ian's post Tuesday at "The Call" (Foreign :

On Thursday, my new book makes its debut. It's called The End of the Free Market: Who Wins the War Between States and Corporations? Here's the book in a nutshell:

A generation ago, the collapse of communism made clear that government can't simply mandate lasting economic growth. To fuel the rising prosperity on which their long-term survival will depend, political leaders in China, Russia, the Arab monarchies of the Persian Gulf and other authoritarian states have accepted that they have to embrace market-based capitalism. But if they leave it entirely to market forces to determine winners and losers, they run the risk of enriching those who will use their new wealth to challenge the state's power.

Instead, they have embraced state capitalism. Within these countries, political elites use state-owned and politically loyal, privately owned companies to dominate entire economic sectors -- like oil, natural gas, aviation, shipping, power generation, arms production, telecommunications, metals, minerals, petrochem icals, and other industries. They finance all these institutions with the help of increasingly large pools of surplus foreign cash known as sovereign wealth funds.

In the process, the state uses markets to create wealth that can be directed as political officials see fit. The ultimate motive is not economic (maximizing growth) but political (maximizing the state's power and the leadership's chances of survival).

And with Europe in turmoil, a politically paralyzed Japan, and high unemployment with rising public anger in America, state capitalist China's robust recovery from the slowdown is looking awfully attractive for would-be imitators across the developing world.


The first reviews are in, and I want to draw attention to a really interesting piece written by my colleague Tom Barnett for World Politics Review. It raises some issues I'd like to go into further. Here's what Tom said about the book:

What should America do amid China's continuing rise? It should continue to believe in itself and free markets, says Ian Bremmer in his misleadingly titled, "The End of the Free Market: Who Wins the War between States and Corporations." .... Bremmer's slim volume is anything but an obituary for free markets. Indeed, his caveat-laden celebration of the "emergence of state capitalism" only underscores the inevitability of its eventual demise, as he explicitly makes clear throughout the text. 

After all, this "whole new kind of challenge" appears only in states that have never sustained democracy. That, though, is a tipoff for state capitalism's biggest weakness: It chooses the political survival of the regime over economic efficiency and innovation. Thus, according to Bremmer, "in the end, it's much more likely that the Chinese leadership will have to reconsider core assumptions about government's role in an economy than that the leaders in the United States will retreat fundamentally from free-market principles." 

Indeed, the weakness that characterizes Bremmer's list of "threats" posed by state capitalism should energize America's free marketers all the more: China drives up global commodity prices by paying above-market prices; Beijing's desperate race to lock down resources around the planet forces it into patron-client relationships with the world's most unstable, corrupt and needy regimes; China's amoral approach to trade and investment helps insulate these bad regimes from Western criticism; and, in its gross inefficiencies, China's state capitalism might prevent the global economy from reaching its productive potential just as the emerging global middle class needs it most.

That's it. China's state capitalism risks ghettoizing its economy and beggaring both itself and those regimes it manages to suck into its mercantilist orbit, while making the rest of the world a little bit poorer in the process: so much for the "war between states and corporations."

In the end, one should emerge from reading Bremmer's excellent, if grossly mislabeled, book with even more confidence in the future of free markets. Clearly, it's not our job to ape China's state-heavy economy, but rather to maintain -- as much as possible -- our own free market environment here in America, while continuing to champion that model's utility in unleashing and leveraging human ingenuity in the decades ahead."

Tom and I agree on a lot, including on the idea of sharing a few thoughts on this subject on our respective blogs. But it's most interesting to focus on those issues where I think we disagree.

So Tom, let me first address the question of the book's title: The End of the Free Market.  I'm actually a bit more circumspect here than I think you're giving me credit for. My view is that for the past several decades, it's pretty safe to say we've been living in a largely free market world. Multinational companies based in free-market economies became dominant economic actors on the global stage by profiting from increased access to capital, consumers, and workers in both developed and developing countries around the world. Governments seemed less relevant as ideas, information, people, money, goods and services crossed international borders at unprecedented speed -- and on a scale that makes these processes qualitatively different than anything that came before.

I think we've hit a tipping point with the rise of state capitalism -- particularly, but not exclusively, in China -- a trend compounded by the lasting damage that the financial crisis has inflicted on the free market model and the crisis of confidence we're seeing in America, Europe, and Japan.

I'm not arguing that the free-market world is gone with the wind. Ultimately, as Tom acknowledges, I believe that its core strengths -- and state capitalism's built-in problems -- will probably decide the outcome of the conflict between them. But that's a long-term process, and the outcome is far from certain ... which is why the full title ends in a question mark.

What comes next?

I believe that things are going to get worse for free markets before they get better. China might be sitting on a bubble, but it's not the one that James Chanos is pointing toward, one that will pop as soon as China's real estate boom goes bust. Nor is it the scenario described by Gordon Chang in which the Chinese people rise up to challenge the Chinese government. I could mention the labor bubble (200 million Chinese men with no hope of finding spouses), the environmental bubble (no water, no arable land, no breathable air), or any of the dozens of other bubbles floating ominously across the Chinese landscape. All of them are serious. None are certain to threaten China's state capitalist system anytime soon. I'd bet confidently on strong state-led Chinese growth over the next decade. Intensified national pride will only strengthen the system in the near term.

Second, the situation will get much worse for free markets because anemic growth and high unemployment in the developed world will feed a backlash against free market sentiment. We're already seeing more support for protectionism and a tougher stance on immigration in both Europe and the United States. In America, Goldman Sachs is today's scapegoat, but China is next in line, whether the subject is currency policy, cyber-security, trade imbalances, product safety, or something else. 

All of that makes the recommendation that you and I share -- strong government support of basic free market principles -- one that looks increasingly vulnerable to populist politics within free market democracies.  The problem is even larger in Europe and Japan than in America.     

It's encouraging that state capitalism isn't really exportable. In Stefan Halper's otherwise excellent book, The Beijing Consensus, he implies that lots of countries are going to join with China to support this model. I don't think so -- and it looks like you don't either. 

State capitalism isn't an ideology. It's more a set of management principles. It can never match the hold that communism once had on the popular imagination, because it wasn't born as a response to injustice. It was created to maximize political leverage and state profits, not to right historical wrongs. The system is not the same from one country to another, because the ruling elites in Beijing, Moscow, and Riyadh use it to meet distinctly different sets of needs. And no two state capitalist governments can ever fully align their interests. By its very nature, it's exclusionary; like mercantilism, it promotes one state at the expense of others. That's why there can't really be any kind of "state capitalist consensus."

Instead, you get client states -- mainly smaller Asian countries in China's shadow and energy exporting governments in Africa and Latin America badly in need of friends with deep pockets. Brazil, India and other big emerging markets that have elements of both free market and state capitalist systems have seats at the G20 table alongside some serious free market skeptics. The developed states don't have much to offer them at the moment that looks attractive for their economic stability.

In short, it's possible that I'm only an optimist on this subject because I'm an optimist about most things. Looking at the world more analytically, the global economy we can expect looks quite different from the one we've known these past several decades.

In reply, Ian, I would simply say that you're a bit guilty of trying too hard to sell the "unprecedented" nature of state capitalism's rise (a small editorial sin, considering you're selling a very good book).  I think it's misleading to suggest that the "past several decades" were some golden age for free markets and Western multinationals, because it's not like OPEC's national oil companies or China's state-owned/-dominated enterprises came out of nowhere--they've been there all along.  The rising relevance of these companies is real, but we're talking a matter of degree and only in states that have historically featured authoritarian governments, so the structural impact on the system is, in my mind, not as significant as you make it out to be (so it's taking longer than the optimists declared regarding political pluralism in recently marketized regions--big deal!). 

The vast bulk of wealth in the system remains in private hands; sovereign wealth funds control a mere fraction of that.  So I just don't recognize the "tipping point" that you do between a free-market-dominated global economy of yesteryear and one that's increasingly steered by single-party states, especially when, as you note both here and in your book, those regimes really don't share any truly exportable ideological consensus.  

I do see the world moving through an extended period of frontier-integration, and in such periods, the role of the state naturally grows, especially following a period of globalization's stunning expansion as part of three decades of progressive deregulation. I think we were fortunate to add all the democracies that we did during that rapid expansion, but I wasn't particularly surprised that most former socialist states didn't complete the journey, given their respective political histories and the pervasiveness of their poverty.  For most of those states, I think the usual historical expectations apply, meaning we're looking at single-party states (with elections or not) for 2-to-3 generations (or 4-5 decades).  That means we should expect a fourth great wave of democratization in the 2020s and extending into the 2030s--or 40 to 50 years after the great expansion of globalization began in the 1980s (opening these states up to wider market connectivity).

As you note, we don't see the world all that differently (I will note that you are--just like me!--another expert on globalization who began his career in the Soviet studies sphere).  I think we just have different comfort levels regarding how long it takes for these things to work themselves out. You spot a disturbing critical mass of state capitalism that portends a more uncertain future for free markets (i.e., an upper-hand argument), where I see a more natural course correction (i.e., more yin-yang) based on globalization's growth--namely, a period of expansion through deregulation and less state involvement followed by a period of consolidation through re-regulation and more state involvement.  But we both retain the same faith in the superiority of free markets accompanied by political pluralism, so it's a question of the journey's length and not of its final destination.

Again, I congratulate you on a most excellent book and I hope it does well.