The state and business

Leviathan Inc

Governments seem to have forgotten that picking industrial winners nearly always fails

See article

Readers' comments




Governments provided and still provide infrastructure for cars, trains, and airplanes. Without government funding in wartime the airplane would have missed out on many key advancements like jet power. Without the government the wright brothers probably wouldn't have bothered to get of the ground.

trains, planes, and automobiles, along with the internet is how people and information travel. And last time I checked markets dont do very well without people or information.

Kurt Lessing

A market is only as good as the policeman supervising it. Making a market function needs a fairly big government. And you have to work against Marx's predictions of concentration of firms and accumulation of capital. Every unattended market will degenerate into a dysfunctional oligopoly without strong government trust busters. Market participants will abolish the dangers of competition at the first opportunity, if you let them. And there are markets, who are a monopoly by nature and therefore should be run by the state: grid-bound infrastructure such as railways. The privatisation of British Rail is a good example for private monopolies being worse than state run monopolies.

Sense Seeker

Government should not pick winners, but it could select the criteria for winners. Perhaps it should not invest in solar energy, but if society negatively values CO2 pollution it might very well impose a carbon tax (preferably one that increases at a pre-determined pace). Which technologies then win is up to the market.


We all expect a separation of state and government as established during a time when religion held power both politically and financially.

Now we are in a time when corporate power rivals and exceeds the power of state. It must be time to change the laws for the protection of our democracies and have an expectation of separation of corporations and state as we did with religion.

The intent is to protect the people and their democracy.


I think this article is a little one-sided in its treatment of the concept of industrial policy. It's often forgotten that the entire IT industry owes its existence to research and development work sponsored by the United States Department of Defence. The article itself mentioned the Internet as a small aside - it only happens to be the one technology that has absolutely revolutionized the way the entire world operates. It should be remembered that the goal of private industry is to make money for its stakeholders - not to take risks and innovate. The true innovators in private industry are entrepreneurs and even here, it is only possible for an entrepreneur to take risks and innovate if he has some capital at his disposal. It could be far more difficult to get money (especially with unproven technology) from venture capitalists who, in this time of uncertainty, are going to be more cautious with their money. Only government (with an endless supply of tax dollars) can afford to take risks and encourage innovation since its primary motive is to advance the quality of life for its citizens, not to make a profit.


The Economist insults itself by asking its readers to engage in the frivolous debate about how much government management of business is appropriate. The extraordinary heat that surrounds this debate unfortunately sheds no light as has been the case for decades...maybe centuries.

The debate serves, by common consent, to mask a much more difficult issue. That issue is "why" we feel the need for government management of business not "how much". The writer has his own ideas of "why" such rules might be needed, but no doubt other readers have other reasons to offer.

The Economist would find in it staff that there a few very fundamental "reasons why" being proposed. A public debate on these root issues and possible ways of influencing them of time might serve a genuine purpose. Debating "how much" rather than "why" doesn't seem to have helped much does it.

Magistrat Planck

When will the Economist come clean and admit that the Leviathan today is the corporate system? interconnected board directorates, etc which control the US government though campaign finance? and other nefarious bends of the Constitution and even the Enlightenment Principles which gave birth to their beloved Liberalism? And the god of "the market".

...and worldwide institutions by extension like G8, G20, WTO, Security Council, World Bank, IMF, etc on the same basis?

When those guys wrote there were no global markets for anything. They were a dream. Today, local economies, communities, families lives are beholden to globalized corporations choices about capital, which are hardly based on open market principles. Nations are insecure because of global markets for food and fuel that evidence says are manipulated by speculators in London or NY who do nothing to allocate resources to proper places in this economy.

The fact that Bubbles are the only way any money was made last decades in NY or London while market fundamentals deteriorate for those underlying economies is more evidence. Freedom to throw concentrated capital behind new markets for any worthless piece of paper by the First in/First out to lure the Last in/Last out hardly a sustainable prosperous economy makes!

The very evidence these corporations depend on cheap supply of commodities or labor need US or UK military for coercion in so many spots is evidence there are no free choice transactions going on in these places in free markets. The only markets of free choice for transactions are by bought dictators, and compliant, self-satisfied, but small, haute bourgeoisie. Wealth is concentrated in these places, and so is poverty and violence.

This state of affairs is hardly the outcome Economist touted all these years later after Thatcher that would arise from "free markets".

Economist better start to come clean with a more honest and critical analysis of these last decades. There is plenty of great new canon out there about complexity and behavioural economics that if implemented could take a much more vibrant and productive capitalism to a higher level making more prosperous and evening out these Plutocracies which we know are bad for business, bad for politics and bad for safety. Otherwise, the next years are not looking good with growing and restive populations more and more left behind by bubble after bubble which only hands more and more of the chips to the First In, and leaves the Last Out in a shrinking dole!

I wouldn't blame them for fighting for socialism, communism, and "reign of terror" since even The Economist newspaper seems in favor of coercion and manipulation to control the people, the most fundamental building block for any so called market in today's world!


Game Theory,

pure and simple.

That's why countries pick thier "winners".

If country A does nothing, and country B backs an industry,
country A loses.



Most people grudgingly agreed to accept Obama program of socialising Big Banks mortgage bets and Big Autos debts as an necessary Evil which goes against the grain of free market Capitalism.


@ McCrindle-
I don't understand your post- you blame the inability of politicians to balance a budget on free market capitalism?
- "free market capitalism is a long term failure - it is built on an unsustainable mathematical model"... Leaving people alone to their own devices is an unsustainable mathematical model? The "Free Market" is not based on mathematical models, it's based on freedom.

- "Factor on top of this are two realities that result in in a situation where debt grows faster than GDP and this debt eventually strangles economic growth" Even more basic then the numbers you drop, debt grows by growth of spending over revenue. Cut the spending, and debt is cut.

- "What is ignored in this article is the role that Western Industrial Policy has played in the role of the rise of China and the like." Free Markets, as you noted before, are not driven by political policies but by the market. Any "policies" are the result of politicians.

- "My guess is that as the reality of this drop in wealth and status filters through we will see a rise in fascism / nationalism like we did during the last global depression." Fascist societies are heavily regulated. The NYTimes used to be a big champion of them. On your thinkng, won't increased regulation then boost the economy?



Viewed from the vantage point of East asia, it really is a no-brainer to not think the heavy hand of state direction has not had huge benefits and pay-offs. It is the common thread running through all the East asian success stories although each will adopt a different hybrid suited for its own peculiarities.

Smart governments tinkering with capitalist tools have worked wonders although deeper delving-into is needed to see if what works in East Asia can have universal applications. Even within the region, it isn't always fool-proof. How do you explain the stark contrasts of the success of Malaysia's state-owned Petronas against the failure of Indonesia's state oil behemoth Pertamina given fairly similar cultural/political systems, for example.

eu. j. urist

"The ISO was pushing for a more centrally controlled network-of-networks based on x.25 technology (think French Minitel system), it and the ARPA-inspired IP protocols were in a race for adoption. The fact that a headless, distributed system like IP won out is a damming indictment of centralized government control."

In fact, the ARPA-net was a loose coalition of academic research labs (non-commercial, non-profit) and the defense establishment; that's as hard core public sector as it gets. The ISO on the other hand operates as a platform for coordinating industry interests across countries and sectors. That's as private as it gets, only worse: a intergovernmental body where member states act only as intermediaries of the particular industry; in essence a private bureaucracy run by the industry.


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