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74

OCTOBER 2016

|

THE FOREIGN SERVICE JOURNAL

to lead to state control

of politics and loss of

freedoms.

Argentina under the

Kirchners, for example,

represented both

greater state interven-

tion and an attempt

to shift political

power to a smaller

cadre, often through

economic intimidation, as those in

opposition-tied media lost revenue from

government-controlled businesses. In

Thailand, the military regime has taken

advantage of its current political power

to place military men in leading state

companies.

With many developing nations

embracing it, state capitalism poses

a potential threat to the greater world

economy. Malaysia has been an eco-

nomic success with a state-capitalist

strategy historically, but recent stagna-

tion can be tied to burdens placed on

state businesses by the government,

such as ensuring ethnic Malay owner-

ship. Economic weakness in Malaysia

has carryover effects on regional and

global economic trends. The corruption

uncovered at Petrobras in Brazil has had

a devastating impact there, with an eco-

nomic recovery nowhere in sight.

The greatest threat comes from Russia

and China, where state-owned busi-

nesses become tools of warfare employed

against neighboring nations and entire

regions. In Russia’s case, the use of

state-controlled Gazprom as a weapon of

intimidation is well known.

Cutting off gas supplies to Ukraine

at critical times in the mid-2000s and

2010s sent a clear message of Russia’s

interests. Gazprom has done the same

with Georgia, as well. Both Ukraine and

Georgia have dealt just as much with

military pressure; all tools have

been blended together in Russia’s

hybrid warfare model.

Kurlantzick does not question

state capitalism’s success in China,

or China’s concomitant building of

strategic power. He cites the example

of Chinese state oil and gas companies

sending rigs into parts of the South

China Sea claimed by Vietnam as part

of a larger Chinese strategy to extend

influence in the area, including with

the building of airstrips and patrolling by

naval vessels.

Do we combat state capitalism, or just

talk about it? Should one model prevail?

These are questions for the thoughtful

reader.

Kurlantzick makes his views clear:

“State companies are not going away.

Western multinationals should under-

stand the areas where they still retain

advantages over most state firms and

ignore the idea of trying to beat state

capitalists at their own games.”

He reminds observers to focus on the

people of these countries, because over

the long term their governments require

public legitimacy and won’t get away

with mismanagement. He then asks the

rest of the world to keep an eye on a list

of key countries where political freedom

is under threat: Thailand, South Africa,

Ukraine and others.

We in the United States can play a role

in fostering democratic change, but only

by recognizing and understanding the

challenges significant state interventions

pose.

n

Josh Glazeroff is a Foreign Service officer

who has served in Santo Domingo, Durban,

New Delhi and Washington, D.C. He previ-

ously served on the FSJ Editorial Board and

is a current member of the AFSA Governing

Board.