Since the publication of debates between Robert Kagan, Senior Associate at the Carnegie Endowment for International Peace, and Gideon Rachman, Chief Foreign Affairs Columnist of the Financial Times, the challenge posed by Russo-Chinese illiberal capitalism to Western liberal capitalism is one of my key focuses. The United States, Europe, and Japan should wake up from post Cold War daydream, and re-strengthen the trilateral alliance of top industrialized democracies, in order to manage various global challenges in this century.
The clash of capitalisms is nothing new. Shortly after the Cold War, a French businessman Michel Albert argued a rivalry between the Rhine capitalism and the Anglo Saxon capitalism in his book, “Capitalisme contre Capitalisme”. This is just a matter of economics, particularly, government-industry relations. However, the challenge of authoritarian capitalism in Russia and China is not just the matter of economics but that of political and security rivalry against the West. Kagan and Rachman agree that resurgent autocracies like Russia and China defy Western democracy, and help their fellow autocrats in the Third World to win geopolitical power game against the West.
In addition to their warning, Ian Bremmer, CEO of Eurasia Group, a political risk consulting firm, presents in depth analysis on the clash between state controlled capitalism and free market capitalism in his latest book "The End of The Free Market", from a businessman’s viewpoints. Bremmer says, "We are no longer in a global, free-market economy. There are now two systems out there. There is a free-market system, largely in the developed world. There is a state capitalist system in China, Russia and the Persian Gulf. The systems are mutually incompatible." In China, Western multinational corporations face unfair competition with state sponsored Chinese companies. In the long run, state controlled capitalism will fall into bureaucratic inefficiency, but in the next 5 to 10 years, free market economies will face challenges by rising state controlled capitalisms.
Why is state controlled capitalism rampant now? In the midst of savage competition of neoliberal economics at the end of the Cold War, some developing nations tried to maintain economic stability and government influence in their domestic markets. The global financial crisis has undermined the trust for free market capitalism, which bolsters authoritarian capitalism furthermore. According to Bremmer, state capitalism is not socialist central planning economy. It is a system that authoritarian bureaucracy dominates markets for their political survival, not for the well-being of citizens in their country, which leads to political conflicts with free market corporations ("The Rise Of State-Controlled Capitalism"; NPR News; May 17, 2010).
In addition to illiberal capitalism, the rise of cheap labor Asian manufactures poses another challenge to developed economies. It takes workers’ jobs away from industrialized nations, and erodes their economic supremacy over Asian tigers.
The United States, Europe, and Japan share common strength to manage the above challenges by illiberal capitalisms and rising southern economies. It is the value of freedom that makes liberal democracy capitalists far more attractive than authoritarian state capitalists. Regarding rapidly industrializing Asian economies, top developed nations have vital advantages in knowledge and education. Just before the last general election in Britain, Susan Watts, Science Editor of BBC, stressed importance of science policy (“Let's talk about science”; BBC Newsnight; 29 April 2010). This is a common agenda for all developed nations.
A closer Trilateral Alliance of the United States, Europe, and Japan, will augment the soft power of the Best and the Brightest Club. Resurgent autocracies and rising economies may be gaining relational power to impose their will on others. However, when it comes to structural power to make the system of four areas of the Susan Strange model, (production, finance, security, and knowledge), the Trilateral Alliance towers over the rest of the world. Jointly upgraded soft power of the Trilateral Alliance will bolster structural power of top democracies furthermore to counter challengers.