The Trouble With Capitalism: Investment promotion

Investment promotion (pp. 23 & 24)

Besides undertaking to apply the weapons of macroeconomic management to influence the level of output and employment, governments resorted to other forms of intervention to help sustain activity. Most conspicuously, they became significant promoters of investment, whether through state subsidies or incentives to private investment, or else through direct state equity participation in enterprise. The proliferation of such mechanisms — including grants, tax concessions, loan guarantees and subsidies to research and development — was for many countries (notably those of continental Europe as well as Japan) simply an extension of their traditional approach to economic development. Yet its rapid growth throughout the Western market economies (including the United States) in the post-war period meant that 'corporatism' had become a universally accepted element in the post-war capitalist system. What was scarcely perceived at the time — and is still not widely accepted even in the supposedly more laissez-fair 1990s — is that such uncontrolled use of state support for enterprise (whether in the private or public sectors) was bound to result in serious distortion of competition and international trade patterns.⁵

5. See H. Shutt, The Myth of Free Trade, Basil Blackwell/The Economist, Oxford 1985

Note that I would certainly agree that, here in the US, the "grants, tax concessions, [and] loan guarantees" have certainly gotten rather out of hand. More on that when I cover the later chapters.

Transnational corporations (p. 32):

Such was the basis of what was later to become known as the 'global economy'. Perhaps surprisingly, it has been widely acclaimed in the 1990s as the very model of a dynamic, free-market economic system in which the inability of either governments or private corporations to control the pattern of development is treated as a positive virtue. However, as suggested in this chapter, it is really the legacy of a post-war attempt to organise the world economy along the lines of international cooperation rather than uncontrolled competition & in a climate of opinion which had, indeed, come to reject laissez faire as an intolerably unstable basis for economic management. The fact that it proved a recipe for anarchy based on rampant market distortion was the result of misplaced commitment to the idea of the sovereign nation-state, combined with a lack of political will to curb the power of transnational corporations.