The lack of an intellectual defence of capitalism has left free markets vulnerable. “The power of the state is reasserting itself,” said Daniel Yergin, co-author of The Commanding Heights and a free market optimist, in The Wall Street Journal recently.
In Latin America, the pro-market reforms of the 1990s are being swallowed by resurgent nationalism. Hugo Chavez’s program for national socialism in Venezuela includes the gleeful seizure of foreign assets in oil, mining, cement, steel, telecommunications and electricity. Ecuador, Bolivia, Nicaragua and neighbouring nations have fallen into step with Venezuela, further chilling international trade. Argentina, already burdened by high inflation, recently imposed taxes on grain exports so painful that farmers went on strike nationwide. Russia has pursued nationalization less noisily than Chavez, using selective prosecution and other threats to bully foreign investors like British Petroleum into surrendering valuable oil and natural gas interests. Even England, which for decades embraced Margaret Thatcher’s privatization program, despite a long tradition of state-run enterprise, decided earlier this year to nationalize a private bank, Northern Rock.
Other ominous symptoms of nationalism’s growth are the massive sovereign wealth funds springing up in the Middle East, China, Brazil — and anywhere else that oil and export revenues fatten government coffers instead of private balance sheets. The International Monetary Fund estimates that such funds may control $12-trillion in assets globally by 2012, up from $3-trillion today.