While conservatives assert that government can’t create jobs or wealth, countries around the world are proving without doubt this is false. Continuing to believe in this myth guarantees that the federal government won’t be able to use its power on behalf of the country’s future prosperity.
From the book “The End Of The Free Market,” written by Ian Bremmer of the Eurasia Group:
“Between 2004 and the start of 2008, 117 state-owned and public companies from Brazil, Russia, India, and China (the so-called BRIC countries) appeared for the first time on the Forbes Global 2000 list of the world’s largest companies, measured by sales, profits, assets, and market value. A total of 239 US, Japanese, British, and German companies fell off the list. The percentage market value of this latter group of companies dropped from 70 percent to 50 percent over those four years; the value of the BRIC-based companies rose from 4 percent to 16 percent………
Bloomburg news reported in early 2009 that three of the world’s four largest banks by market capitalization were state-owned Chinese firms–Industrial and Commercial Bank of China (ICBC), China Construction, and Bank of China. The 2009 Forbes Global 2000 listed ICBC, China Mobile, and Petro China among the world’s largest companies by market value.”
Beezer here. The growth of these state owned and directed hybrid capitalist companies is no accident. Governments around the world are increasingly aware that the world’s growth is going to put intense pressure on gaining the raw materials necessary for modern economies. Bremmer puts it this way:
“…There is no way global consumption will remain at today’s levels for the next forty years…For simplicity, let’s focus only on automibiles. In 2009, about a thousand brand-new cars hit the streets of Beijing every twenty-four hours, and only about 4 percent of Chinese consumers already own automobiles. In other words, China offers a vast–and still largely untapped–market for cars….
“Who will profit from all that new consumption? The phrase ‘big oil’ conjures up images of Western multinationals like ExxonMobile, Royal Dutch Shell, and British Petroleum. But three quarters of global crude-oil reserves are now owned by national oil companies like Saudi Aramco, Gazprom (Russia), CNPC (China), NIOC (Iran), PDSVA (Venezuela), Petrobas (Brazil), Abu Dhabi National Oil Company, Kuwait Petroleum Corporation, and Petronas (Malaysia). These state owned giants are the world’s largest energy companies measured by reserves. The biggest multinationals collectively produce just 10 percent of the world’s oil and gas and hold about 3 percent of its reserves. The largest of them, ExxonMobile, ranks just fifteenth in the world.”
Beezer again. With 1.4 billion people already, China is expected to add another 300 million over the next 15 years. Almost another United States, which has a population today of slightly more than 300 million. China uses it’s government power to gain assets overseas–to lock up the raw material needed to grow.
Again from Bremmer. “From Algeria to Angola, in Nigeria, Niger, and Ghana, state-owned Chinese companies are competing with Western multinationals for energy supply contracts. China’s trade with Africa topped $100 billion in 2009, a figure ten times higher than in 2001. This trend is not limited to China, nor is Africa the only playing field.”
Bremmer points out national oil companies, as well as other nationalized or controlled companies (called national champions), have several advantages over totally private companies. They can work cooperatively with other nationalized oil companies where private companies are prohibited. They can invest in large scale projects with repressive regimes that multi-nationals can’t approach. And they can pay above market prices to lock up critical assets, such as oil or minerals. These state owned companies, in other words, are looking long term on behalf of their citizens, not just on short term profits which dictates private corporation thinking.
And national champions that are legally private (although the government may be a major shareholder, and the government gives them guaranteed dominance in their country) are on the constant lookout for attractive foreign assets.
“Vale, privatized in 1997, used government support to acquire Brazil’s second-largest iron-ore producer (MRB) and, in 2007, the Canadian company Inco for nearly $17 billion. Vale has now become the world’s second largest mining company. India’s Tata Group has become the country’s largest corporation, partly through acquisition of iconic Western brands like Britain’s Tetley Tea, Jaguar, Land Rover and Corus (formerly British Steel). Tata now operates across multiple industrial sectors in more than eighty countries.”
Beezer again. There was a time when America understood the reality of competition. It’s never fair or free. There are always corporate and government agents, often working in cooperation, intent on gaining advantage over competitors. That’s always been the case.
Bremmer’s list of the assets now being hoovered up by state owned capitalist companies around the world, or their national champion brethren (often funded by Sovereign Wealth Funds controlled by governments) is long and threatening.
If we don’t wise up and start wielding all our various powers, including the dynamism of our private corporations, then we will continue to lose our wealth and as a consequence, our prosperity.