StamoCap

The AfE tower in 2012.

One day last week, I was cruising along an avenue of my birthplace heading west. A gray high-rise building caught my eye. You can see nice views of it above and here. I remembered that this building used to house the Departments of Education, Social and Political Sciences of my alma mater when I was student some 30 years ago.

The AfE tower elevators, still temporarily out of order after 35 years.

At the time, the elevators were too few, too small, and too slow to cope with the rush hour traffic and used to be notoriously overcrowded. You had to arrive way before the lectures and seminars began, if you wanted to reach your floor in time and garner a seat inside the room.

Some of the classes dealt with system comparisons. Germany was a split country then. The German Democratic Republic was following the socialist principles of a planned economy. The Federal Republic of Germany embraced the principles of free market economy. One culture and two diametrically opposed systems lent themselves perfectly to examination, keeping armies of faculty occupied.

Commonly, the academic debate ended in the exchange of trivia, like capitalism provided plenty of luxury goods that nobody could afford whereas socialism was not capable of delivering the wares the citizens could afford, or we in the West had the freedom of movement and choice whereas our brothers and sisters in the East were bought over with affordable comprehensive daycare and cheap rents for everyone instead. The nuclear reactor accident at Three-Mile-Island had just happened. The debate over the safety of nuclear power was raging. Crowning the ideological nonsense was the argument that nuclear power plants in the East were safe because they were run by responsible socialists unbesodden with capitalist greed. Seven years later, the disaster at Chernobyl proved this delusion about the Sovietmensch's benevolent domination of the forces of nature catastrophically wrong. It took another three years for the German Democratic Republic to unravel. I felt that this East-West debate was a total waste of time and turned the gray tower my back.

However, one tidbit percolated up in my memory when I saw that tower again the other day. There was a group of faculty who were proposing a third path between planned and free economies.  They called it state-monopolized capitalism or StamoCap for short. According to this idea, the economy was allowed to function in a free market. However, the State, i.e. the leadership of government, was supposed to hold all entrepreneurial stakes. It struck me that what these proponents meant we essentially witness happening in the People's Republic of China today, as if the leaders of that country had been listening in on these seminars and lectures, as if this gray tower could be the cradle of Chinese economic success.

Recent Chinese history shows that such mixture of governance and entrepreneurial spirit may extol a hefty price from the populace at large. Today, the US is about to embark on a fateful path that will give government unprecedented control over instrumental aspects of banking and manufacturing in order to save the economy. I trust that the empowered will use their newly gained influence wisely.

Addenda

• Alan Wheatley describes China's present woes in depth in his report for Reuters on Jan. 5, 2009, entitled  "China's brand of capitalism faces monumental odds " (01/05/09).
• Niall Ferguson provides an informative outlook on the future growth of the Chinese economy compared to the rest of the world in his essay with the title "In China's Orbit" published online in The Wall Street Journal yesterday. The author has written extensively on the history of economy and finance. I recall his fascinating book on the rise and perils of hedge fund management with the title "Inside the House of Money, Revised and Updated: Top Hedge Fund Traders on Profiting in the Global Markets" co-authored with Steve Drobny and am looking for forward to his new book "Civilization: The West and the Rest" on matters outlined in his Wall Street Journal essay to be published next March (11/21/10).
• David Leonardt published an exhaustive report with the title "In China, Cultivating the Urge to Splurge" published online in The New York Times Nov. 24, 2010, describing the economic and social challenges China faces in the years ahead. It is an interesting read (12/02/10).
• Take a peek at National Geographic photographer Gerd Ludwig's documentary project with the title "The Long Shadow of Chernobyl", commemorating the 25^th anniversary of the nuclear reactor disaster (02/02/11).
• A controlled explosion demolished the AFE tower this morning 9:30 am local time, two days into the Year of Horse (02/02/2014).