Passing Through . . . .

Economic theorists talk about the Invisible Hand of Capitalism, State Capitalism is quite visible to shareholders and company managements

• From the Economist Magazine

IT IS EASY for a casual visitor to China to be fooled into thinking that he is in a normal capitalist country. The big cities are dotted with Starbucks and Kinkos. The newspapers run stories about small businesspeople falling prey to loan sharks. Business executives are whisked around in Mercedes cars with blackened windows. Their wives and mistresses idle their afternoons away in doga classes—yoga that includes the pet dog.
But the form of capitalism on display is highly idiosyncratic. Company bosses are routinely moved to rival companies without any explanation. Company headquarters have space set aside for representatives of the armed forces. And the deeper you look, the queerer things become. In his indispensable book, “The Party”, Richard McGregor points out that the bosses of China’s 50-odd leading companies all have a “red machine” sitting next to their Bloomberg terminals and family photographs that provides an instant (and encrypted) link to the Communist Party’s high command.”

This article in the Economist points out key differences in the way that governments in China, Russia and Brazil control businesses to an extent unparalleled in the west.  I made a recent post that discussed the so-called BRIC countries ) Brazil, Russian, India and China and pointed out why I favor Brazil over the other 3 countries as a source of finding non-US investments to balance my investment portfolio.  Thus far, Brazil’s government has largely left managements free to manage, but the article points out recent cases where the government may, in a few instances, think they are the new economic geniuses.  Should that happen with greater frequency, I will start investing elsewhere.

The article is a great read if you are interested in learning more about state vs. more democratic capitalism.