Does 'State Capitalism' Spell the End of Free Markets?

In his new book, The End of the Free Market: Who Wins the War Between States and Corporations?, political scientist Ian Bremmer argues that a new threat to the free market is rising. Bremmer, president of Eurasia Group, a leading political risk consultancy, argues that powerful authoritarian governments in China, Russia and the Middle East are flexing their growing economic muscle through "state capitalism."

These governments are taking advantage of the financial crisis and recession in the U.S. and Europe to assert themselves on the global economic stage.

American Competitiveness Threatened

State capitalism, Bremmer explains, is a system in which governments use markets to create wealth and advance their political interests. In China, Russia and Saudi Arabia the state controls key industries and regularly favors domestic firms. In particular, state power can be seen in the global oil market, three-quarters of which is controlled by governments.

Bremmer argues that the rise of state capitalism threatens America's competitive edge as well as the future of the global free market system. Bremmer stopped by DailyFinance to talk about his new book and the current global financial environment.

"What we've seen in the last couple of years is that we've hit a tipping point and the global free market system is increasingly challenged by state capitalism," Bremmer says. "It is a fundamentally different and at base incompatible economic system. It's one where the state is the principal actor in the economy."