One of the foundational principles of Catholic social teaching is subsidiarity—and the growth of state capitalism is a serious issue of concern as the growth has occurred largely in totalitarian regimes.
State capitalism is a serious issue, though hardly a new one. It has been around forever and the use of state power to develop, protect, and enforce commercial trading commodities and routes is a notorious history; look into the Opium Wars for one example, and remember that the initial state-financed voyages to the New World were trade inspired.
Subsidiarity is addressed in the Catechism:
“1883 Socialization also presents dangers. Excessive intervention by the state can threaten personal freedom and initiative. the teaching of the Church has elaborated the principle of subsidiarity, according to which "a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to co-ordinate its activity with the activities of the rest of society, always with a view to the common good."
“1884 God has not willed to reserve to himself all exercise of power. He entrusts to every creature the functions it is capable of performing, according to the capacities of its own nature. This mode of governance ought to be followed in social life. the way God acts in governing the world, which bears witness to such great regard for human freedom, should inspire the wisdom of those who govern human communities. They should behave as ministers of divine providence.
“1885 The principle of subsidiarity is opposed to all forms of collectivism. It sets limits for state intervention. It aims at harmonizing the relationships between individuals and societies. It tends toward the establishment of true international order.”
What is the Future of State Capitalism?
May 2, 2008
Jim Heskett
Whether we think we are part of a free market or not, are we really living in an era of state capitalism? What are we to make of estimates that state-owned sovereign funds, led by Abu Dhabi and fueled mostly by oil revenues and trade surpluses, now total more than the value of the world's hedge funds and will grow by six times over just in the next seven years? Or that states like China and Russia now own the world's largest corporations? Or that, according to an estimate by the American Enterprise Institute, economies of countries with authoritarian regimes have grown faster over the past ten years than economies of the most politically free countries?
Whatever happened to the fears just a few short years ago that global corporations with allegiance to no government would constitute an important challenge to the world economic order, one that would be impossible to control with conventional laws and regulations? One doesn't hear much about that these days as state-owned corporations now dwarf even the largest privately-owned global organizations, with PetroChina currently leading the list with a market value of more than $1 trillion.
The impact of this phenomenon on competition is interesting. Just ask the manager of a privately-owned global corporation how easy it is to compete with a state-owned institution (and the state's sovereign fund investors) when his competitor is able to arrange to have state aid or investment provided or withheld in large quantities to a potential customer's country of origin depending on whether that customer favors a private or state-owned vendor.
The phenomenon has interesting implications for those in need of capital, particularly if the source of the capital is your strongest economic competitor. For example, the United States, European Union, and South Africa recently have seen several of their very large financial institutions seek help from sovereign funds or state-owned companies with ample money to invest. Among the largest investors have been Abu Dhabi's and Kuwait's Investment Authorities and the China Investment Corporation. There have been outcries for measures requiring investors to adhere to certain practices regarding disclosure and intent. But typically, unless majority investments are at stake, there is little other than moral suasion that can be used to persuade investors to avoid making investments for political reasons or adhere to certain standards for transparency in their investment practices. The stronger the need for capital, the fewer even the most modest requests placed on the investors. Only when investments in what is perceived as critical infrastructure, such as ports, is involved has the U.S. Congress, for example, drawn the line in prohibiting a transaction.
Lampstand Foundation website, http://www.lampstandfoundation.org/
"The sinner is at the very heart of Christianity. Nobody is so competent as the sinner in matters of Christianity. Nobody, except the saint." Charles Peguy (1873-1914)
About
- David H. Lukenbill
- I am a California native, married, we have one daughter and live close to the American River with two cats and all the wild critters we can feed. I am a management consultant to nonprofit organizations and have an Associates of Arts degree in Administration of Justice from Sacramento City College, a Bachelor of Science degree in Organizational Behavior from the University of San Francisco and a Master of Public Administration degree, also from the University of San Francisco.