April 15, 2020 - 7:00am
Foreign Affairs Select Committee chair Tom Tugendhat MP has summoned UK-based microchip manufacturer Imagination Technologies to answer questions from MPs over concerns the firm has resumed efforts to transfer sensitive technology patents to China. In 2017, Theresa May’s government allowed the sale of Imagination Technologies to a Palo Alto-based fund manager part-owned by the Chinese government, after assurances that the new owners would continue to be bound by US law. Now the firm has moved its base from the US to the Cayman Islands, prompting fears that efforts are being made to transfer patents to China.
In this story we can see the increasingly overt convergence of politics with big business. The corporate world has long claimed to be politically neutral, inhabiting a transnational realm where everyone benefits from the maximally free flow of money, people and things. But this claim finds itself in growing tension with re-emerging power struggles between nation-states, themselves newly salient as we deal with the pandemic despite repeated claims of their obsolescence. In the 21st century, state capacity in high-tech industries is taking on the importance that such capacity in fossil fuels did in the twentieth. Even the most free-market western nations are waking up to the duty they have to stop that capacity draining away to other nations.
We saw rumblings of this conflict in the pre-coronavirus (how long ago that now seems!) debates over including Huawei in the UK’s 5G infrastructure. Speaking to the BBC, Tugendhat said: “Whoever writes the code, writes the rules for the world, more than any regulation passed by bureaucrats. There’s no point in taking back control from Brussels, only to hand it over to Beijing.”
Tugendhat has made no secret of his hawkishness on China, taking to the Daily Mail to denounce the ‘toxic brew of lies and fear’ China uses to maintain power across its own empire. It is good to see politicians abandoning the Clinton delusion that absorption into the global economy would inescapably make China more democratic. But less remarked-on is the extent to which the pandemic is forcing Western nations to become more like China.
Yesterday, EU competition chief Margaret Vestager called for European nation-states to buy stakes in businesses at risk of bankruptcy due to coronavirus. She indicated that this should be not just permitted but encouraged, even as the EU fast-tracks new regulations designed to slow or stop the acquisition of distressed European businesses by state-backed buyers (ie China). The alternative, simply put, is that China will buy everything.
To stop a post-pandemic fire-sale of Europe’s corporate crown jewels to companies backed by the Chinese state, then, European nations must themselves create and deploy their own government-backed corporations. That is, western nations are being forced to adopt China-style state capitalism — because the alternative is hostile takeover by a foreign power, via the increasingly politicised space of corporate boardrooms.
Free market devotees may protest that the way forward is open standards, not corporate geopolitics. But as long as China refuses to play by the rules of the free-market game, placing CCP officials on company boards, government funds behind key businesses and a long-term state plan behind everything, what else is the West to do?
The likely result is that we will emerge from the pandemic with the government having at least part-nationalised swathes of UK business. This may not necessarily look or feel that different to how things already are, but it will necessitate some big and serious conversations. How do we protect against workers being exploited? How do we ensure the presence of democratic checks on the oligarchies that will inevitably emerge? Is state capitalism, even in some mild-mannered British form, even compatible with democracy? How do we balance individual privacy against the desire (and, going by China, ability) of a state-capitalist regime to gather and leverage data on us all?
It is by no means a foregone conclusion that state capitalism need be more intrusive, rapacious or exploitative than the model we currently have. But whether it is or not, it is inescapably coming to the West. It is time for a frank debate about which aspects of the Chinese model we are willing to accept — and which we should fight tooth and nail.
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SubscribeOne cannot disagree with a word of this. It is all very unfortunate, but inevitable. Much though one detests the state and the EU, western states and the EU are at least marginally better than the Chinese state.
State run businesses are a terrible idea. State influenced business are a terrible idea. Community investing in businesses as a group to keep control and sovereignty of businesses for the Nation, well that is a very old idea.
Small government does not have to exclude community investment in key infrastructure and other businesses. Taiwan and South Korea has used this model and has had tremendous success.
As long as the investment is made arms length like a shareholder and control is not part of the investment. Capitalism works best when there is a simple framework that allows all parties to benefit.
For example, the coal industry of Queensland Australia. Australia was an importer of coal until Sir Leslie Theis did a deal with Premier Joh Bejelke-Petersen. The industry needed rail and ports. Premier said fine I will build them and cartage will be $X/tonne. Great! Then Joh did a smart thing for the people. He said ” Oh and the coal your digging up that belongs to the people of this state I will let you know the locations that you can drop off 3% of it.” For my entire young life first passing by then looking at the huge stockpiles of coal at QLD power plants I could not understand why they kept so much until I found out this story. Cheapest power to build state economy. Had free health before Australian Medicare in 1980’s average growth of economy was always >4%.
Government’s only job is to provide an environment, not management, in which the nations free market can thrive.
Worth reading Marrianna mezzucato many writings on this very subject.