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When the Free Market Dries Out: Bremmer’s Account of the Future Economics Essay (Book Review)

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Updated: Oct 3rd, 2019

It seems that the idea of a capitalistic society and the fact that capitalism is at present the only logical way to structure various social and economical relationships seems obvious enough; yet it cannot be denied that certain alternatives may exist and that capitalism is, after all, the idea created by people and can be, therefore, just as easily demolished by them.

Taking a closer look at the ideas which Ian Bremmer communicates in his recent book The end of free market, one must take into account the sad fact that capitalistic structure of society might finally prove less resistant in the competition with the rest of structures than expected.

Analyzing the book by Bremmer ad checking its verbosity, one can possibly come to the conclusion whether the humankind will finally be dominated by a less flexible system known as state capitalism or remain within the boundaries of the traditional democratic ideas.

According to what Bremmer says, it is the state capitalism that poses the greatest threat to the realm of the capitalistic world. Undermining the very principles of the capitalistic ideas, it is finally going to destroy the fundament of the society as it is today, making markets completing subjected to the power of the state government.

In Bremmer’s own words, the people obsessed with totalitarian ideas “have invented something new: state capitalism1”; according to the author, the given system is supposed to destroy the entire mechanism of the capitalist world and finally bring the existing financial economical and political relationships to an inevitable end.

Analyzing the given book, one must mention, first of all, that the arguments which the author offers are in fact quite string. Indeed, the concept if the state capitalism is not the product of someone’s inflamed imagination – on the contrary, the theory is rather old and has sufficient grounds to base o.

According to the evidence offered by Grinder and Hagel, the concept of state capitalism is quite a well-known idea which differs from the fundamentals of capitalism “with regard to the second proposition: that an inherent antagonism exists between banks and industrial corporations.”2

However, even back then, the authors could see the obvious flaws of the proposed system: “This is not to deny the possibility that localized conflicts of interest may frequently emerge between particular banks and particular industrial corporations over the perception of profit opportunities.”3

Therefore, it should be admitted that the threat of the state capitalism development has been quite an issue for a considerable amount of time.

In addition, among the arguments which Bremmer provides in his argument concerning the effects of the possible state capitalism advent, the fact that globalization enhances the above-mentioned process is evident.

According to the author, “All that movement across borders will eventually strip nation-states of their power, because governments will never be able to manage the international commercial, political, social, and environmental challenges that globalization creates”4.

However, the author misses the positive effects of globalization, namely, the significance which globalization has for a range of developing countries.

Indeed, dealing with the countries which are currently only developing their economics and are at their earliest stages of development is quite complicated and even dangerous; in addition, the leading countries do not bear such moral obligations as to help the developing countries strive for better economical conditions.

According to Lee and Vivarelli, globalization, despite the numerous controversies it might cause, does have a sufficient effect on such issues as unemployment, helping to resolve the issue:

When a developing country opens its borders to foreign capital, FDIs generate positive employment impacts both directly and indirectly through job creation within suppliers and retailers and also a tertiary employment effect through generating additional incomes and so increasing aggregate demand.5

Therefore, it can be considered that the ideas which Bremmer conveys might seem a bit selfish and appropriate only for the leading countries of the world, while the developing ones might fall into an even worse crisis. Because of the given issue, the ideas offered by Bremmer cannot be considered as completely true and unbiased suppositions.

If Bremmer had been less focused on the leaders in the world market sphere and paid a tad more attention to the concerns of the third-world countries, he could have come to a different decision.

Another important element in Bremmer’s assessment of the existing policies concerning markets and their variations all over the world, which borders prophecy, is the fact that the author traditionally considers the Russian and the Chinese markets as not fully compatible, since they are supposedly still influenced by the state, though legitimately governed by free entrepreneurships.

Indeed, the effects of the Cold War are still evident.6 However, according to what the report offered by Dun and Bradstreet Ltd. Says,

The combined impact of the new monetary policy direction and increased investor risk aversion will result in further downward pressure on the Real, which experienced a rapid depreciation against the US dollar in September and continues to experience volatility in light of the euro-zone crisis. Notably, inflation has remained stubbornly high despite the slowdown in the economy; CPI inflation rose to 7.3% in September although we anticipate that it will ease slightly by end-2011).

No matter how hard it is to accept the bitter facts which Bremmer offers in his work, it is still clear that the Eastern Europe and the Asian countries, namely, China7, are suffering considerable crisis currently and, which is even more significant, are going to face another economic challenge in the nearest future. According to the statistics data and the economical prognoses provided in the D&G Special Report,

D&B expects the economy to slow in 2012. Russia remains vulnerable to the risk aversion that gripped global financial markets during August-October 2011. In Q3 alone the country registered USD18.7bn in net capital outflows, and the rouble fell by 12% against the US dollar.8

Hence, Bremmer offers a precise analysis of the current state of economy in the world’s largest countries, thus, basing his research on completely verified and, therefore, impeccable and trustworthy data. However, it is still worth noticing that the researcher does not compare the data with the previous records, offering only the results of a relatively short time period.

Despite the somewhat insistent tone of the book, Bremmer does provide solid research; among the most impressive pieces which the author offers, the classification of the state capitalism models is an all-embracing overview of the shapes which the phenomenon has taken or can presumably take. As the author himself warns the readers,

State capitalism is not a single coherent political ideology. It’s a set of principles that a government can adapt to meet its particular needs. As we’ll see, Saudi royals, Russia’s elite factors, and China’s senior party leadership design policies intended to extend their domestic power within very different political environments. (85)

Thus, the fact that the author acknowledges the existence of various types of state capitalism due to the difference in cultural, economical and political peculiarities of different countries is an obvious advantage of the book.

Offering a more profound analysis and allowing to investigate the problem even deeper, the classification which the author offers is extremely important for the further prognoses for the future of the capitalistic relationships and the free market.

However, it can also be considered a major drawback that the author apparently diminishes the role of government concerning of the financial and economical processes which are going on in the corresponding countries.

According to what Bremmer says, the states should not interfere the economical or the financial situation which the state companies are currently in, providing only financial support for the state-owned enterprises: “To finance all these state-owned and state-supported companies, governments should simply print the money they need, but they would lower the value of their currencies, stroke inflation, and undermine the value of their assets in the process”9.

In addition, Bremmer never refers to the obvious “moral hazard”10, as Mostrous, Gue and Dittman defined the issue concerning the state capitalistic system in action.

Nevertheless, among the negative aspects of Bremmer’s work, the overall tone of the research and the emphases put on certain issues are worth being reconsidered.

For instance, Bremmer does not stress the importance of the change where it comes as an obvious and undeniable fact: “In meetings of much greater consequence now taking place around the world, this inability to agree on the proper role for the state in the performance of markets will change the way we live”11.

In addition, it seems that Bremmer, though acknowledging the necessity and inevitability of the globalization process, still does not approve of it. The latter could be considered an opinion which must be taken into consideration, yet the author does not convey the exact negative results of the globalization except the fact that it is likely to spur the above-mentioned fusion of different countries’ economical and financial policies.

According to Bremmer, the latter is likely to drive to state capitalism structure emerging in the rest of the countries and finally gripping the world, ousting the current capitalist system:

The most obvious example comes from the transition from an international bargaining table dominated by heads of state of the G7 group of industrialized nations—all of them champions of free-market capitalism—toward a G20 model that acknowledges the need to allow relative free-market skeptics like China, Russia, Saudi Arabia, India, and others to join the conversation.12

Addressing the positive aspects of the research conducted by Bremmer and the ideas which obviously contain a grain of truth in them, it is necessary to mention that fact that the author considers the possibility of enmity between Russia or China and the United States, comparing it to the has-been Cold War experience (Bremmer).

Despite the fact that the author reassures that there is no longer any trace of hostility between the countries and that the past prejudices and arguments are long gone, there is still considerable anxiety in Bremmer’s work:

China might one day pose a broader military threat than it does now, but its economy has grown so quickly and its living standards have improved so dramatically over the past two decades that it’s hard to imagine the kind of catastrophic, game-changing event that would push its leadership to pose a Soviet-scale military challenge to America and Europe (Bremmer).

Even though the supposition that the good relationships between the states might finally end is not offensive in its existence, it is still a considerably far stretch.

As Cohen and Grinberg explain, the relationships between the USA and China are quite stable at present, since both countries are willingly integrating into the Smart Power, which is “based on, as Secretary Clinton outlined in her confirmation hearing, the fundamental belief that ‘We must use… the full range of tools at our disposal- diplomatic, economic, military, political and cultural – picking the right tool, or combination of tools, for each situation.’’’13

In addition, in regard to the topics discussed by Bremmer, the issue of economic globalization should be addressed as well as one of the elements most closely intertwined with the concept of capitalism. However, it is worth keeping in mind that the threats of the state capitalism as the structure which allegedly is supposed to make the entire world market subjected to the state government and the governmental structure.

If taking into account all the factors which shape the world market situation, one must admit that the impact which state capitalism is going to have on the world markets is rather unpredictable and cannot be considered a “totalitarian regime” a priori.

As Kagarlitsky explains, “attempts to create a state sector may give rise to state capitalism and even to semi-feudal relations, or may remain a pure formality14.” Therefore, it can be deduced that Bremmer includes a number of exaggerations in his book, thus, depicting the future of the human race in the darkest ways possible.

The given method is, no doubt, extremely efficient for the people to start act and change the course of the history as soon as possible, without letting the dreadful threat take over the world and turn what at present is Bremmer’s suspicion about the future into the exact reality.

Hence, one must give Bremmer’s book certain credit for extremely vivid images of the world without democratic economy and the markets belonging entirely to states and the people who are currently at the helm.

It can be considered that, in his theory concerning the possible flaws of the capitalistic structure, Bremmer has a point.

Therefore, judging by the analysis introduced above, despite the evident drawbacks of the existing structure of relationships between people, either economical, or social, or political, the democratic one is the least flawed and by far the most promising in terms of people’s further development and the growth of the international business relationships which will finally lead to prosperity.

Hence, it can be considered that the potential threat which state capitalism poses to the society can still be eliminated. Nevertheless, it must be accepted that the current tendencies in the economical systems of certain countries obviously and willingly accept the fact that have-been free markets are controlled by the governmental structures.

Hence, entrepreneurs should strive towards a free economic space which is not dominated by the government. Once reaching complete independency, the world market will be able to evolve.

Bibliography

A D&G Special Report. Outlook for key emerging markets. Virgin Islands, US: Dun & Bradstreet Ltd, 2011.

Braun, Aurel. NATO-Russia relations in the twenty-first century. New York, NY: Routledge, 2008.

Bremmer, Ian. The end of the free market. New York, NY: Penguin Publisher Inc., 2010. Web.

Cohen, William S., & Greenberg, Maurice R. Smart power in U.S.-China relationships. Ottawa, CA: CSIS, 2009.

Grinder, Walter E. & Hagel, John III. “Toward a theory of state capitalism: ultimate decision-making and class structure.” Journal of Libertarian Studies, 1, No. 1 (1977): 59-79. Kagarlitsky, Boris. The twilight of globalization. Sterling, VI: Pluto Press, 2000.

Lee, Eddy, & Vivarelli, Marco. “The social impact of globalization in the developing countries.” IZA, No. 1925 (2006): 1-26.

Mostrous, Yiannis G., Gue, Elliott H., & Dittman, David F. The rise of the state: profitable investing and geopolitics in the 21st century. Upper Saddle River, NJ: FT Press, 2010.

Swaine, Michael D. America’s challenge: engaging a rising China in the twenty-first century. Washington, DC: Carnegie Endowment, 2011.

Footnotes

1. Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010.).

2 Walter E. Grinder & John III Hagel, “Toward a theory of state capitalism: ultimate decision-making and class structure.” Journal of Libertarian Studies, 1, No. 1 (1977): 66.

3 Walter E. Grinder & John III Hagel, “Toward a theory of state capitalism: ultimate decision-making and class structure.” Journal of Libertarian Studies, 1, No. 1 (1977): 66.

4 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010.).

5 Eddy Lee & Marco Vivarelli, “The social impact of globalization in the developing countries.” IZA, No. 1925 (2006): 6.

6 Aurel Braun, NATO-Russia relations in the twenty-first century (New York, NY: Routledge, 2008).

7 Michael D Swaine, America’s challenge: engaging a rising China in the twenty-first Century (Washington, DC: Carnegie Endowment, 2011).

8 A D&G Special Report. Outlook for key emerging market ( Virgin Islands, US: Dun & Bradstreet Ltd, 2011), 4.

9 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010.)

10 Yiannis G. Mostrous, Elliott H. Gue, & David F. Dittman, The rise of the state: profitable investing and geopolitics in the 21st century (Upper Saddle River, NJ: FT Press, 2010), 13.

11 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010.).

12 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010.).

13 William S.Cohen, & Maurice R. Greenberg, Smart power in U.S.-China relationships. (Ottawa, CA: CSIS, 2009): 4.

14 Boris Kagarlitsky, The twilight of globalization, (Sterling, VI: Pluto Press, 2000): 53.

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