State Inc.

The most important new forces in global business are aggressive, wealthy, and entrepreneurial. But they aren’t corporations: they’re authoritarian governments.

…In the past five years, governments around the world have been transforming themselves into deal makers and business players on a scale never seen in the modern era. In China, state-owned oil giant PetroChina has become the largest company in the world, worth more than $1 trillion. In Russia, state-owned Gazprom has grown into the world’s largest gas company. States are also wielding influence by directly buying into major private firms: The investment fund run by the Arab emirate of Abu Dhabi is now the world’s largest, and recently spent $7.5 billion to become the top shareholder of the American financial giant Citigroup. Singapore’s state-controlled wealth fund, Temasek Holdings, sank $5 billion into Merrill Lynch, the largest US brokerage. By 2015, according to an estimate by Morgan Stanley, such state-owned funds will control a staggering $12 trillion, far outpacing any private investors.


The rise of states as global economic players marks a sharp reversal from decades in which private enterprise seemed an unstoppable force in global finance, commerce, and culture. It represents a new and unexpected fusion of state control with the business principles of capitalism. And it is already causing a significant shift in global power.

The new state capitalists – China, the United Arab Emirates, Russia, and others – are primarily authoritarian nations. And as they become bigger commercial players, they are gaining new influence in a realm once dominated by the democratic West. Some political scientists, such as Azar Gat of Tel Aviv University, who coined the phrase “authoritarian capitalism” to describe the trend, see these countries as the first major threat to the idea of free-market democracy since fascism and communism.

One striking recent study by the American Enterprise Institute, a conservative Washington think tank, shows that the economies of politically unfree nations have grown faster than those of politically free nations over the past decade, often through forceful use of business and financial power. A recent report by the global monitoring organization Freedom House found that “a group of market-oriented autocracies” were an important force in an overall decline in world freedom.

Boston Globe