BRICS and SOE Experiments

EconomyThe BRICS summit showed its teeth by announcing the creation of $50billion BRICS Bank, which will be an alternative to the World Bank, helping developing nations manage their infrastructure demands. We can expect Africa to be a focus.

At the same time they revealed a $100 billion currency reserve fund. This will be used to stabilise their currencies in the event of attempts to destabilise any of their currencies. This is similar to the Chiang Mai Initiative of 2000, which did the same protection for Asean, China and South Korea.

These are protection against the like of Soros who set off the attack on sterling and then the Tigers in a profit grab in 1992 and 1998. So the nations covered will be protected from global attacks while they sort their currency and core causal issues out.

BRICS is a serious player on the world market and the problem for European and British Governments is that they increasingly have little in the way of formal or informal influence.

The UK and Europe has to step up their game with the new emerging forces.

While Western media may play up the challenges, the developments at BRICS shows not so much a competitor for the World Bank, more an alternative based in the new developing economies.

The other significant news is the 3 new SOE reform experiments, which suggest preparation for separating the State control to a macro level through a more shareholder relationship, leaving the companies to develop their own strategies, bring in private shareholders, and hire their own staff.

This will lead to a new form of State owned enterprises in the world. It moves away from the traditional choice of privatisation as China has studied the world’s experience of those phenomena.

China has found that privatisation created large-scale unemployment as profits were created in the privatised companies by offloading staff. While they may have been overstaffed they shifted the burden of unemployment onto the State, and the taxpayer, instead of developing internal long-term solutions.

China needs its core of SOE’s to ensure the economy is developed in a stable way. They believe the Northern Europe approach of managing growth is preferable to the market being left to spontaneously develop growth.

China prefers managing development and, ultimately, a managed market economy.

Some may label this as Capitalism with Chinese characteristics. But it is much more about employing capitalism because it is the proven method of providing growth and innovation, but managing it so its inherent drive for profit is contained within more balanced social and economic objectives. Adam Smith pointed out that the inherent greed that motivates capitalism is also its core weakness. Chinese Socialism is based upon this key point. Using what works but improving upon it. Using the global experience and improving upon it.

It is a form we could not contemplate because of our historical development. While we may like their development that emerges, we are too caught in history. But we can learn from their management of their economy and their management of social justice.

These reforms that are being tested out are the future. They show what China’s SOE’s will look like.

The foundations of a Socialist China are being built now, and they are unlike any previous form of socialism in the world.



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