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When Governments Go Corporate

Joshua Kurlantzick, one of the few to see the big picture, has a good piece in the Boston Globe on the rise and rise of authoritarian capitalist states:

As the global business momentum shifts from private companies to national governments, the implications are far reaching. Many authoritarian governments realize that, in the post-Cold War era, a wealthy nation can extend its power very effectively without trying to build an army to compete with the US in military force in the short term. (…)

Yet these state funds are often far more opaque than major investors in the West. Even the largest, like Abu Dhabi’s, reveal little about their workings. And unlike hedge funds, which are also secretive, they could be acting on political motives rather than purely financial ones. When a Russian fund buys into companies in Eastern Europe, for example, it is impossible to tell if it is doing so for financial reasons or to boost the Kremlin’s political influence over its neighbors. (…)Wealth also can be used in other ways. Within authoritarian countries, the new model allows governments to dilute potential opposition without giving up political power. In China, the government’s co-opting of entrepreneurs, now allowed to join the Party, has helped ensure that the middle class, which in the 1980s usually supported reform, increasingly tolerates the regime. In Russia, nationalizing the energy industry has reduced the possibility that any future Mikhail Khodorkovsky, a tycoon who once used his petroleum wealth to fund civil society groups, might emerge within Russia itself.