Moscow, Beijing hell-bent for irrelevance.

As noted in StrategyPage

China has shown a preference for tyrants and police states, and is eager to get access to key raw materials (rare metals and oil). China does not care about criticism, and has no guilt about helping to prop up dictatorships.

and Eurasia Daily Monitor,

Putin himself has acknowledged the distorting effect of energy exports on the national economy and urged businessmen and government officials to find ways to increase development in Russia’s high-technology sectors that will manufacture products that can compete in the global economy.

Beijing and Moscow are still setting themselves up for a Mercantilist future, and depending on exports for an economy, rather than a sustained increase of the domestic markets.  Russia is the biggest sinner in this, but China’s dependence on African raw materials, and how they’re going about getting them, is a clear sign.

Trick is… mercantilism has had its day… in the 18th century.  It was shunted aside in favor of capitalism, and “contemporary reformed capitalism with certain socialist/regulated characteristics” because the latter simply work better.

This does not bode well for either power, and not merely in relation to the U.S.  If Iran shrugs off the nutjobs, it’s positioned to become a prime player almost overnight, and Iranians are great for business.  India as well has both the cleverness, the growth, and, now, the “BBB-” investment-grade credit rating (hat tip:  Samizdata), to mark them as a serious player.

No amount of state-regulated export economics can compete against that over the long haul.

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10 Comments

  1. Mike

     /  February 2, 2007

    Oh yeah. I do so love capitalism.

    Reply
  2. Alex

     /  February 2, 2007

    Does beg the question – what great financial concept will come after Capitalism? I’m of the opinion that while capitalism as a thought still holds, it still needs some fine tuning in terms of in-use practice, especially for the concept of the corporation, which in most cases is little improved upon the older concepts of feudalism, petty despotism, and maybe at best greek-style democratic city states.

    If only I had gotten that PhD in psychohistory….

    Reply
  3. Zathras

     /  February 3, 2007

    Trick is… mercantilism has had its day… in the 18th century… in the West. Maybe it can be seen as a necessary step to capitalism?

    Reply
  4. Alex:

    The notion of the corporation is an INCREDIBLE improvement over what came before. There is literally no way to overstate the benefits of having your contracts remain valid even if the guy you happened to be talking to on the phone has a heart attack or gets hit by a truck next week.

    In 1830, when somebody keeled over from pneumonia, your contracts were dead as dirt. Even if he had your product ready and waiting to be shipped to you, whether or not his heirs did so was an open question, and you had no way of enforcing that dead contract except for their goodwill and desire to get your money.

    Seriously, this isn’t an ideological thing: it’s what makes the full-on Industrial Revolution possible. Well, that and trains, but without corporations, trains are horribly limited creatures.

    Now, in terms of evolution of systems, we had anti-laissez-faire (them “robber barons” didn’t have l-f, what they had was the ear of the government at all times. That shifted through to a form of “managed capitalism” that we have now, where OSHA comes in to make sure things are right. Increasingly, corporations themselves are self-regulating and THEMSELVES looking for the safety equipment, as union models that are cooperative rather than antagonistic come to the fore (e.g., Toyota, vs. GM, respectively).

    To some extent, we have true Marxist socialism now. The workers DO own the means of production, with their 401Ks, etcetera, and the big bosses and owners of capital are working 70-80 hour weeks. The “CEO class” in the U.S. is out of whack, but salaries there are staying high b/c it’s recognized how significant one of those people who’s good can be for the fate of a company.

    Reply
  5. Zathras: That’s a decent question. I tend to think not, b/c mercantilism is, by and large, a critter of the government. It offers a short-term boost… but does nothing to help develop internal markets or grow your middle class.

    And some amount of government IS required, and clearly so — anarchists won’t be happy with that, but the bazaar functions oh so much better if there’s a venue in which contracts can be legally enforced.

    Capitalism doesn’t inherently involve corporations (although the two make sweet music together), and there are places with capitalism that have never practiced mercantilism, but if you can offer a counter-argument, you’ll definitely have my full attention.

    Reply
  6. Alex

     /  February 3, 2007

    I’m going to quote you completely here:

    “Now, in terms of evolution of systems, we had anti-laissez-faire (them “robber barons” didn’t have l-f, what they had was the ear of the government at all times. That shifted through to a form of “managed capitalism” that we have now, where OSHA comes in to make sure things are right. Increasingly, corporations themselves are self-regulating and THEMSELVES looking for the safety equipment, as union models that are cooperative rather than antagonistic come to the fore (e.g., Toyota, vs. GM, respectively).”

    And now – the rebuttal:

    Do you know why corporations self regulate? It’s not because they want to, it’s because they’re forced to – all thanks to the Lawyer. Without the lawsuit, they have no reason or desire to self regulate – regulations just get in the way. So now due to fear of losing in court which hurts the bottom line, they self regulate to the bare minimum. This is why the pro-business administration REALLY wanted to limit tort reform; not to prevent a few bad apples from abusing the system, but to remove this “speed governor” on most corporations.

    But you’re missing my point to some extent. Yes labor may own the means of production, but they have no control over what gets produced or how and why it gets produced. Corporations are certainly better than older systems, but they are mini-governments/entities that produce & consume like any other country – and they are run like petty fiefdoms and oligarchies. Companies that start to involve their workers in day to day decisions actually start running better and becoming better at competing. This is my point – that the corporation as a concept is still stuck on outmoded forms of organizational structure/rule, and I wonder what the next form will be.

    Reply
  7. Tort reform is caught up in political and other messes… too involved to discuss here. But you’ll note that I did NOT suggest that governments have have no role.

    Regarding corporations… of course they’re run that way. The corporation is the property of the people who OWN it. As a worker, I *don’t* inherently have a say in what gets produced.

    Unless I get off my ass and start my own company, that is, and use my savings and/or financing to become a “capitalist”…

    and it’s pretty much going to stay that way so long as we believe that property rights exist. Because the alternative is to accept the notion that other people have a right to tell you what to do with your money.

    Reply
  8. Alex

     /  February 4, 2007

    Maybe as workers we should have a say in what gets produced within our own company. One gets a whole lot more motivated to do good work when:
    1) You have a truly vested interest in seeing something you came up with succeed.
    2) You know EXACTLY why you’re producing something not just because someone told you to do so.

    Of course, this means that the employees do truly own part of the company, not just lame-o stock that isn’t worth anything. Because you truly own part of the company (in a sort of way making you self-employed – without the company you invested in you don’t have a job) you truly have a say in what gets done and why it is getting done. And yes – I know that Co-ops don’t work perfectly, but corporations that get their employees more involved and treat them as almost equals do seem to survive a lot of the economic turmoil that is affecting everything these days. I also further accept that some people just want a job – they don’t want a say in how things go – just give them a paycheck and tell them what to do.

    My ultimate point is that Corporations run the way they are may be an outdated model of financial theory/evolution, and I wonder, out loud, if the next big financial invention to move us forward is a change in how Corporations are run.

    Reply
  9. What you’re positing is part and parcel of why some corporations kick ass, and some, well, do something else… but I don’t agree with using the Big Brush ™ and corporations in general.

    Co-op and communal arrangements work well: but they don’t work well for *everything.*

    Reply
  10. blackpine

     /  February 6, 2007

    Also, the reason why corporations do well is something we seem to be agreeing on. The ones that succeed are the ones with a cooperative model vs the antagonistic model. So, they do have an interest in happy workers, profit sharing, and workplace safety. Their motivation for self regulation isn’t altruistic (whose is), but it’s vested. Corporate culture varies from place to place.

    Reply

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