Roubini and Bremmer: Financial Crisis Ended the Era of Free-Market Capitalism

The global financial crisis just might give those in the U.S. who advanced the idea of a "new world order" their wish – but not exactly in the way they wanted.

Ian Bremmer (right), president of Political Risk Research, and influential economist Nouriel Roubini lay out a compelling argument in the September Institutional Investor asserting that the free-market system of capitalism has been so damaged by the recent financial crisis that the U.S., Europe and Japan face a future in which they will struggle to keep pace with deep-pocketed developing nations like Brazil, India, China and Saudi Arabia. The result could be a world in which the Western political and economic dominance that existed prior to the crisis is gone, with little hope of coming back.

"Conventional wisdom has it that a U.S.-dominated unipolar global system is giving way to a multipolar order, one in which various emerging powers advance competing ideas for how the world should be run and act to further their agendas," the men write. "The financial crisis and global market meltdown have created conditions for a 'nonpolar' order -- one in which America's chief competitors remain much too busy with problems at home and along their borders to bear heavy international burdens."

'An Era of State-Driven Capitalism Has Dawned'


In a new global economy in which countries compete for market share on almost everything, national self-interest and protectionism is likely to flourish. With many of the major free-market economies mired in slow growth as they recover from the financial crisis, emerging nations with faster-growing economies and authoritarian governments will begin using state-sponsored capitalism to attempt to dominate markets.

"An era of state-driven capitalism has dawned, one in which governments inject political calculation into the performance of markets," Bremmer and Roubini write.

The two men predict that with national politics guiding many global economic decisions, former trading partners will become rivals for market share, and nations with the wealthiest and fastest-growing economies will gain influence and political power internationally. Free-market capitalist nations and state-driven capitalist nations may wind up forming two camps. Conflicts between nations over monetary policy, currency devaluations and other critical matters will increase: The G-20 group of nations will likely be unable to agree on sustainable measures to prevent cycles of financial crises from reoccurring with greater frequency.

While these grim projections are not etched in stone, Bremmer and Roubini offer enough evidence to suggest free-market nations have a tremendous job ahead of them to repair their waning economic influence and prevent such a sorry scenario from unfolding.

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phillyboy

We can thank 8 YEARS OF THE BUSH FAILURE for this!!!!

September 11 2010 at 8:29 AM Report abuse +2 rate up rate down Reply
ginnatycpa

In the late 1990's the US was the dominant economic power with budget surpluses and the market soaring. Then the government went crazy with spending and debt. The problems we have were brought on by two economically stupid Presidents massively interfering with the market. That's by far the biggest factor in our decline. Check debt levels and increasing governmental expenditures from then to now and how can anyone blame the market. Ti's uncontrolled government that is sinking the boat, not capitalism. China and India are progressing because they have adopted capitalistic policies, loosening the governments role not increasing it. The US, China, Europe, India are all mixed economies with the most vigorous economies adopting more capitalistic policies while those suffering adopting less capitalistic policies.

September 10 2010 at 2:50 PM Report abuse +4 rate up rate down Reply
1 reply to ginnatycpa's comment
Dan

ginna- You would make a better economic advisor than austan Goolsbee! Obama's commie buddy.

September 10 2010 at 6:58 PM Report abuse -1 rate up rate down Reply
jgrienin

We just have to get back to making things again. This idea of manipulating capital for the enrichment of a few investors and bankers is not going to keep our country strong. Like President Obama said, we need a strong middle class to compete and a strong middle class means jobs making things. We need incentives that are results driven. Incentives that just help the money manipulators make more money is not what capitalism is really about. Capitalism is about financing new industies and creating new jobs which in turn create a strong middle class. Let's get back to basics, please.

September 10 2010 at 2:21 PM Report abuse +3 rate up rate down Reply
rjflei

It seems to me that "Free Market Capitalism" is it's own worst enemy. The Wall Streeters, corporations, and government have established a corporatocracy which is anti-American. They don't have to worry about socialism or communism to destroy us, they're doing it themselves with their unethical business practices. They don't want to play by the rules and be honest - they'd rather gamble and squander your money at the derivitives casino than to work for a living. They lose at the casino and cry, over looking the fact that they've done it to themselves. They don't want regulations. They want to continue to play at the casino at taxpayer's expense. Always playing with somebody else's money.

September 10 2010 at 1:48 PM Report abuse rate up rate down Reply
Bearmaul

Gee, I thought I was reading an article from Pravda from the old USSR.So two days after Castro said that after trying for 50 years state driven economies don't work these two clowns publish this far left article, talk about bad timing...........

September 10 2010 at 1:24 PM Report abuse +3 rate up rate down Reply
gcsteven

Louis Kelso -Similar- Quotes: "Conventional wisdom says there is only one way to earn a living, and that's to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, 'Voila! The productivity of the labor has gone up 900 percent!' I say 'hogwash.' All you've done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don't have it." (Louis O. Kelso, Journal Asset Based Finance, 1982) "Socialism has been discredited. Plutocracy is in the process of being discredited. Democratic capitalism has yet to be tried." (Louis O. Kelso and Patricia Hetter Kelso, Democracy and Economic Power, 1991) So who was the real political economist? PASS CAPITAL HOMESTEADING NOW! PASS CAPITAL HOMESTEADING NOW! PASS CAPITAL HOMESTEADING NOW! "The marvelous success story of the Keynesian (forever trickle and Top Down) new economics is built upon the suppression and obscuring of the distinction between economic employment and non-economic employment. It measures economic performance by the degree to which the economy achieves undifferentiated full employment and annual increase...The increase may represent goods and services that are utterly useless to man; they may even consist of goods and services intended to do nothing but to kill, cripple and to squander precious natural resources in the process." ~ Louis Kelso, 1967 – Full Employment Act is “full toil and waste for all forever” Louis Kelso said as much as above headline in 1958 as Co-Author of 'The Capitalist Manifesto"

September 10 2010 at 12:28 PM Report abuse -1 rate up rate down Reply
gcsteven

Louis Kelso -Similar- Quotes: "Conventional wisdom says there is only one way to earn a living, and that's to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, 'Voila! The productivity of the labor has gone up 900 percent!' I say 'hogwash.' All you've done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don't have it." (Louis O. Kelso, Journal Asset Based Finance, 1982) "Socialism has been discredited. Plutocracy is in the process of being discredited. Democratic capitalism has yet to be tried." (Louis O. Kelso and Patricia Hetter Kelso, Democracy and Economic Power, 1991) So who was the real political economist? PASS CAPITAL HOMESTEADING NOW! PASS CAPITAL HOMESTEADING NOW! PASS CAPITAL HOMESTEADING NOW! "The marvelous success story of the Keynesian (forever trickle and Top Down) new economics is built upon the suppression and obscuring of the distinction between economic employment and non-economic employment. It measures economic performance by the degree to which the economy achieves undifferentiated full employment and annual increase...The increase may represent goods and services that are utterly useless to man; they may even consist of goods and services intended to do nothing but to kill, cripple and to squander precious natural resources in the process." ~ Louis Kelso, 1967 – Full Employment Act is “full toil and waste for all forever” Louis Kelso said as much as above headline in 1958 as Co-Author of 'The Capitalist Manifesto"

September 10 2010 at 12:25 PM Report abuse -1 rate up rate down Reply
2 replies to gcsteven's comment
mojobujak

Please explain post ; I guess I'm just an educated, successful, happy idiot.

September 10 2010 at 12:29 PM Report abuse +2 rate up rate down Reply
Bearmaul

mojo..some people feel the need to impress by saying or posting a whole lot of nothing, simular to an Obama speech, long on wind-short on substance.......

September 10 2010 at 1:33 PM Report abuse +1 rate up rate down Reply
supermat1

BS

September 10 2010 at 12:12 PM Report abuse +1 rate up rate down Reply
JESUS F ALFONSO

This process of destroying the free world western economics is nothing new. The only thing now is that the generation that inherited this economic power are completely blind as to what economic power is and how to maintain it. You do not have to go to the University or have a doctorate degree to see, that if the masses were geared to credit instead of savings and got into service oriented economics instead of production, that the outcome is what we are leaving today. On top of all that the morals and principles are gone. So what we have is a type of sleeping on our laurels attitude and the outcome will be sure failure. To be or not to be that is the question, and the answer is to be. Time is running out but there is still a slim chance to turn all this around.

September 10 2010 at 12:06 PM Report abuse +1 rate up rate down Reply
3 replies to JESUS F ALFONSO's comment
bggdg

"An era of state-driven capitalism has dawned, one ion which governments inject political calculation into the performance of markets," Bremer and Roubini write. Somebody might want to alert Bremer and Roubini that in American this era dawned nearly 80 years ago. It has been growing ever since, contiues to accerate today, and remains the root of our challenges.

September 10 2010 at 11:45 AM Report abuse +1 rate up rate down Reply