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Balance Between Market and State

Author: Julia E. Sweig, Nelson and David Rockefeller Senior Fellow for Latin America Studies and Director for Latin America Studies
April 25, 2012
Folha de Sao Paulo

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First published in Portuguese in Folha de Sao Paulo.

The effects of the global financial crisis of 2008-2009 remain. Not only in Europe's unemployment, debt crisis, and populist surge, but also in the once dormant debate about capitalism and the state. Sound like a Marxist lecture? Not this time. The deterioration of the twentieth century American social contract and the crisis in Europe has blown open one of the most important questions of the twenty-first century: what is the appropriate balance between the market and the state in providing both opportunities and protections for its citizens?

There isn't only one answer. And as last weekend's International Monetary Fund (IMF) and World Bank meetings demonstrated, neither is there a consensus on how sovereign states—whether Brazil, the United States, Germany, France or China, for example, operating within multilateral institutions, but also independently, should coordinate policies to alleviate financial crises. For an idea of why the major economies have yet to converge around an answer, a brilliant, ambitious new book provides penetrating insights: David Rothkopf's Power, Inc.: The Epic Rivalry Between Big Business and Government and the Reckoning that Lies Ahead. An editor-at-large and blogger of Foreign Policy magazine and author of half a dozen other books, Rothkopf's basic premise is that nation states, most of them at least, cannot make sovereign decisions about the financial, economic and global policies their citizens require without contending with the enormous market power of large global businesses whose corporate profit and autonomy far outstrips most national GDPs.

For this reason, Rothkopf argues, we must take a less ideological look at models of capitalism that attempt to manage the dynamism of the markets without quashing their benefits. Rothkopf's message is especially relevant for the United States, where the market fundamentalism of the 1990s fed a deregulation frenzy of explosive consequences for the decay of today's middle class, and of the country's infrastructure and human capital.

Among the five capitalisms Rothkopf describes, one model, "democratic development capitalism," is on display today in Brazil. With a large, albeit declining population still living in poverty, Rothkopf writes that Brazil boasts an appropriate "mix between activist government and a respect for the power of markets." Rothkopf has been among Brazil's champions—for its sometimes-controversial foreign policies that have successfully created space and legitimacy for emerging powers, and for Brazil's clean energy matrix. He also hits some cautionary notes. One anecdote about Petrobras illustrates the complexities for Brazil inherent in setting priorities for a huge global company that is governed by both private shareholders and public policy prerogatives. Could Brazil's "national champions" also become the unaccountable global behemoths Rothkopf warns against?

Decades before the Occupy Wall Street movement, the slogan "Capitalism with a Human Face" captured the aspirations of the socially-minded. Last weekend's IMF and World Bank meetings showed the many faces of Rothkopf's competing capitalisms, democratic countries nearly all of them. Yet none seemed very happy. Is the gloom permanent? The 800 years of history covered in this courageous, learned, and timely book suggests that we still have a choice.

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