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State capitalism versus naked capitalism


Published: Jul 23, 2013

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A new ideological battle is taking place in the world today. Since the demise of communism in Russia, brought about by Ronald Reagan with the support of Mikhail Gorbachev, China has transmuted itself from a communist state into a state capitalist nation, challenging to the core the naked capitalism system practiced in the United States and in the rest of the world. Some definitions are in order.

Capitalism or naked capitalism has its origin in the mercantilism era of the 16th to the 18th century, when trade for profit was the motive of merchants from Holland, Great Britain and France. They were scooting around the world to put their hands on commodity and mineral resources from China to the Americas, buying at the lowest price possible to resell at high markups in Europe. The capital assets of these corporations were owned by private individuals, who used wages to secure the labor necessary to mine the ore and cultivate the land.

The governments adopted a position of laissez faire, giving a free hand to those capitalists to recapture their profits and distribute in the guise of capital gain. The excesses of this practice have led to some interventions at different degrees by different governments.

In the Scandinavian countries, the governments have put in place a series of welfare institutions that cover health, education, housing and labor to cushion the ravages of naked capitalism on the population. In the United States and in most of the European countries, legislation was put in place to protect the environment, to frame the scale of wages and to interdict child labor. Capitalism in the rest of the world has a free hand to conduct its business without too much interference from the regulatory agencies, except when a law is called for as in Bangladesh, where hundreds of workers died recently in shoddy garment factories.

State capitalism has its origin in China. Using the material of a strident critic of state capitalism, “China in Ten Words” by Yu Hua, we find that state capitalism was put forward to circumvent the Great Leap Forward disaster that started in 1958. It produced famine and shortage in the midst of overproduction. The central government, to spur economic activity, incubates local government with funding for large scale public works and manufacturing. As such, from 1999 to 2006, some 5.4 million found employment.

At the same time, China overtook Russia, India and the United States in supporting higher education. Some 25 million new enrollees in university at a cost of less than $1,000 per year put China on the map as a forward-looking nation, ready for world leadership.

Here in Haiti, state capitalism was practiced, long before its implantation in China, by Toussaint Louverture, Jean Jacques Dessalines and Henry Christophe, the leaders of the new black republic of the Western Hemisphere, who conceived the idea that the colonial patrimony should serve equally the state, the owners and the workers.

The profit from the utilization of the land was broken in three parts: one third would go to the state for nation building, one third for the owners to perpetuate their industry, and one third to the workers for their labor. As such, the state became an active director in leading the shape of the economy, contrary to the naked capitalism system where the doctrine of laissez faire is recognized.

Under these three governances, Haiti rapidly recovered from the destruction of its revolutionary war to rebound once more as a rich and prosperous island, as during the colonial period. In fact, right after the suicide of Henry Christophe, his successor Alexander Petion introduced the doctrine of laissez-faire capitalism into the country and the descent of Haiti into the abyss of misery has been without end.

The United States and the rest of the world are facing difficult moments these days, with the rate of unemployment climbing slowly but surely from all sectors of the economy. It is no more possible for a young graduate, even from the best universities such as Harvard, Columbia or Stanford, to expect a ticket to a secure job upon graduation.

China, with its state capitalism system, has set itself as the preferred global recipient of technology transfer to transform any creative idea from a seedling proposition anywhere in the world into a finished product. As such, most of the plants of the industrialized world are slowly closing their doors, because producing in China is cheaper, easier and gradually with the same standard of quality that one would expect in the home country.

As such, will naked capitalism survive when state capitalism in China is solidifying not only its human resources through education, but its access to raw material through diplomatic ventures in the rest of the world and through its control of quality from top down?

It will survive only if Western governments are willing to come clean with their younger generation in incubating higher education for a critical mass of the population. It is not the case in the United States where the debt ratio for any young graduate is overwhelming. Saddled with an education loan of some $50,000 upon graduation from college, with the prospect of no employment or underemployment, we are entering into generational deficits that will undermine the capitalism system at its core.

Karl Marx failed in his prediction that communism and socialism will replace capitalism. The preferred prediction is that state capitalism will finally replace naked capitalism. The latter is losing ground, whether in Europe or in the United States, with no fresh idea on how to spur the economy for a sustained growth. On the other hand, China state capitalism must find a way to spur internal consumption; resting mainly on naked capitalism for the sale of its products has already produced a slowdown in the world economy.

The discussion on state capitalism versus naked capitalism is the topic of tomorrow. The earlier this discussion takes place in the different capitals of the world, the earlier we will start to live in a new paradigm where sustained growth is the lot of most nations on this planet.


• Jean H. Charles LLB, MSW, JD is a syndicated columnist with Caribbean News Now. He can be reached at: jeanhcharles@aol.com and followed for past essays at caribbeannewsnow/haiti. Published with the permission of caribbeannewsnow.com.

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