Re-looking an old policy
Is the New Economic Policy outdated? Does it need to be phased out or at least reviewed?
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Epoch Times
11-08-2025
- Epoch Times
China's Disappearing CEOs and the Flaw of ‘State Capitalism'
Bao Fan, founder, chairman, and CEO of China Renaissance Group, an investment bank led by one of the country's most famed rainmakers, holds a news conference on its IPO in Hong Kong on Sept. 13, 2018. Bao Fan, founder, chairman, and CEO of China Renaissance Group, an investment bank led by one of the country's most famed rainmakers, holds a news conference on its IPO in Hong Kong on Sept. 13, 2018. Bobby Yip/Reuters Commentary Imagine you are working as an investment banker in one of China's most famous companies. Everything is going well—a high-paying job, good social status, and finally, you're making money from the math you learned in university. Then, suddenly, your CEO disappears! This is what happened in China. Bao Fan, a Chinese billionaire and chief executive of China Renaissance Holdings, went missing in February 2023. A year later, news came out that he had resigned from all roles at his firm. Still, no one knows where he is. This is not a unique event—it is part of a larger phenomenon: the disappearing Chinese CEOs. Story continues below advertisement 'The Machine Refused to Obey' The mixture of capitalism and socialism is not new. The Economist published an article titled ' The Case of China's Vanishing Chairmen .' Losing contact with chief executives has become a common theme in China. Two listed Chinese companies announced in November 2023 that 'their chairmen had vanished without a trace.' They tried to reach them via WeChat and contacted family members, but with no success. There's an interesting pattern: executives most often disappear from firms with high levels of debt. This phenomenon of disappearing CEOs reveals something deeper. It's not just a tactic of the Communist Party; it exposes an inherent flaw in the Chinese mixture of capitalism and socialism is not new. Though with different characteristics, Lenin tried state capitalism as well. After the enormous failures of his War Communism policies (7,196 percent inflation in 1922, just to name one), he launched the New Economic Policy (NEP). And from the beginning, he noticed the problems of state capitalism. 'The machine refused to obey the hand that guided it .... It was like a car that was going not in the direction the driver desired, but in the direction someone else desired—as if it were being driven by some mysterious, lawless hand, God knows whose, perhaps of a profiteer, or of a private capitalist, or of both.' It wasn't a lawless hand; it was the invisible hand. Lenin's subtle but profound amazement reveals the flaw in the Chinese model: the machine refuses to obey the party that guided it. The Internal Contradictions of State Capitalism The term internal contradiction is mostly used in Marxist literature, but it's well-suited to explain what's happening in China and other state capitalist countries. There's an inherent paradox in the Chinese model—after a while, the vague distinction between market and state stops working. One of Xi's favorite sectors is the public-private partnerships: firms that aren't fully state-owned or privately owned, but a mixture. In theory, they aim to capture the productivity and efficiency of the free market, but at the same time, they resist the mission-indirection that is inherent to market processes. Story continues below advertisement This is the core contradiction. The productivity and efficiency of the private sector are possible only through risk-taking—betting on an unknowable future. That's why Frank Knight argued that entrepreneurial action is tragic at heart—it is uncertainty. And the sad truth is: most entrepreneurs fail. According to the US Bureau of Labor Statistics, 49 percent of new businesses fail in their first five years. But this failure is as important as success. It's what makes economic growth possible. As Ludwig von Mises wrote , 'It is profit and loss that force the capitalists to employ their capital for the best possible service to the consumers.' Without loss, there is no discovery. Without discovery, there is no innovation. The Future of State Capitalism Although the Chinese model is showing its weaknesses—from vanishing CEOs to The 'loss' part is what guides us. But the Chinese model—and all state capitalist models—seek to eliminate loss, through regulation or planners' 'wisdom.' They want an economic system that doesn't fail. But what we get is the vanishing of CEOs and chairmen. The internal uncertainty embodied in the market cannot be solved with government regulation and planning. Uncertainty should be embraced rather than tamed, because it deals with known unknowns and unknown unknowns. Only epistemological humility can help us navigate it, not attempts to play the Chinese model is showing its weaknesses—from vanishing CEOs to shrinking growth —it seems the world is moving toward state capitalism. As Ilias Alami and Adam Dixon argue in their book ' The Spectre of State Capitalism ,' this is a global phenomenon, not confined to China and Asia. Since 2000, the scales of the mixed economy have tilted toward the state. The number of state-owned enterprises (SOEs) among the world's 2,000 largest firms has doubled over that period. These state-linked giants now control $45 trillion in assets—half of global GDP. And it's not only SOEs. The number of sovereign wealth funds (SWFs) has increased sixfold in the past two decades. As of 2024, 176 sovereign wealth funds operate worldwide. By 2023 figures, they control $11.8 trillion in assets—more than any hedge fund in the world. The world is drifting toward greater statism—a trend that is far from new. As Milton Friedman put it in one of his final speeches 'After the fall of communism, everybody in the world agreed that socialism was a failure. Everybody in the world, more or less, agreed that capitalism was a success. And every capitalist country in the world apparently deduced from that what the West needed was more socialism.' Story continues below advertisement His remark captures the irony of our time: even in victory, capitalism is retreating. The double-digit inflation of the COVID era, the productivity puzzle in the West, shrinking growth, and vanishing CEOs in the East are all signs of the failure of the state capitalist model. But we can't overcome this new statism until we change the climate of opinion. The challenge is that this model is portrayed as 'neoliberalism' or 'capitalism.' At least with postwar statism, everyone agreed it was statism. But not this time. If you read the so-called critiques of neoliberalism, it sounds like we are living in Nozick's Utopia—but we're not. The evidence is quite clear, and we must understand this new statism in order to overcome it.
The Star
08-08-2025
- The Star
Re-looking an old policy
FINALLY, it seems like we are talking openly about that elephant in the room. Is the New Economic Policy outdated? Does it need to be phased out or at least reviewed?
New Statesman
25-06-2025
- New Statesman
How a Moscow archivist exposed the KGB, file by file
Photo by ALEXANDER NEMENOV/AFP via Getty Images In the autumn of 1988 I travelled from Helsinki to the Soviet Socialist Republic of Estonia. The reformist Soviet leader, Mikhail Gorbachev, had allowed a limited free-market enterprise to take hold in Estonia and elsewhere in the communist Baltic. Not since Lenin had introduced his abashedly capitalist New Economic Policy of 1921 had profit-making sought to transform the monolithic face of Soviet communism. Gorbachev did not intend to dismantle the ailing Soviet project, however, and was unaware that the USSR was on the verge of disintegration. It was my first visit to the communist bloc and I was filled with excited suspense. My mother was born in the Baltic in 1929 but, having lived most of her life in London, she was resigned to a permanent British exile. She had not been back to her birthplace since the end of the Second World War. In the capital of Tallinn, an air of Kremlin austerity hung over the shops in which Estonians queued with their string 'perhaps-bags' for the odd windfall purchase. The talk was of Gorbachev's economic reforms, but Tallinners looked harried and cowed, and they were mindful not to dally outside the KGB headquarters on Pagari Street. Officially the top floor of the Intourist hotel where I was staying did not exist; it was occupied by the KGB whose listening devices came to light only after the collapse of the Soviet Union. Room telephones were tapped and electronic limpets fitted to the underside of dinner plates. One evening, two very polite detectives from the Spets Sluzhba (Special Branch) of the KGB came to interview me. 'Your mother is from Tallinn? A Baltic German? When did she leave?' The absurd interrogation had one effect: afterwards all three of us went to the Café Moskva in the Old Town to share a bottle of Caucasian Champagne. I was careful to speak in platitudes only: Soviet intelligence was as insidiously effective under Gorbachev as it always had been. What happened next happened quickly. The Berlin Wall came down in 1989 and with Ukraine's independence proclaimed two years later, the Soviet Union underwent what historians call sudden 'state death'. It rapidly disintegrated into 15 independent countries, the largest being the Russian Federation; the smallest, Estonia. Considering the magnitude of what happened, remarkably few people died in the last days of the Cold War. The deaths, thousands of them, would come later, in the inter-ethnic rivalries over Chechnya and Nagorno-Karabakh, and in Vladimir Putin's murder war in Ukraine. Vasili Mitrokhin, a senior KGB operative, had expected to end his days in his native Russia under communism. The demise of the Soviet regime was as unthinkable to him as the prospect that KGB plotters would one day mount a coup against Gorbachev: the world was divided into the communist East and the capitalist West and that was the immutable order of things. Instead, Red Moscow had gone before Mitrokhin knew it. As the KGB's in-house archivist, he had despaired at the inhuman, penalising labour of the gulag and what the Soviet regime had done to Russia and the Russian people in the seven decades since the 1917 revolution. Telling the 'truth' about the Soviet past would serve to strengthen and purify Mother Russia of its accumulated corruptions, he believed. The belief prompted him to note down particulars of the crimes and atrocities as revealed to him over a number of years in the KGB archives. The work was risky in the extreme but Mitrokhin felt he had no choice. As an instrument of Kremlin surveillance, he had himself witnessed enough 'horrors', as he called them. In Ukraine, where he worked as a Soviet prosecuting lawyer in the late 1940s, he most likely sent hundreds of 'class enemies' to the Siberian ice fields as punishment. He seems to have felt some remorse for that. In 1992, while post-Gorbachev Russia opened up to American capital with an undignified free-for-all scramble for state assets, Mitrokhin and his family were smuggled out to the West by MI6. He arrived with an extraordinary cache of top-secret Soviet foreign intelligence files which ranged in chronology from the aftermath of the 1917 Bolshevik uprising to the eve of the Gorbachev reforms in the late 1980s. The notes Mitrokhin had taken from the thousands of files in his care contained details of KGB operations in most countries and identified some 1,000 agents. Mitrokhin's was, said the CIA, the biggest counter-intelligence 'bonanza of the postwar period'. The story of Mitrokhin's exfiltration to the West via the Baltic and repudiation of Soviet communism is the subject of Gordon Corera's pacy, John le Carré-influenced work of non-fiction, The Spy in the Archives. Corera, a former BBC security correspondent, presents Mitrokhin as a Slavophile patriot figure driven by a quasi-spiritual mission to bear the truth. Mitrokhin's aversion to Kremlin-directed communism deepened after 1956 when the Soviet premier, Nikita Khrushchev, denounced Stalin's 'personality cult' and the murderous purges and Moscow show trials of the 1930s. While Khrushchev did not admit to all the regime's depredations – he was implicated in many of them – the unmasking of Stalin paved the way for Gorbachev's perestroika 30 years later and the Soviet Union's eventual demise. During the uneasy thaw that followed Khrushchev's revelations, Mitrokhin became ever more outspoken in his criticism of the KGB's unreformed bureaucracy. He was viewed as a potential liability. Therefore, in 1956 he was demoted from operational assignments overseas to what looked like a dead-end job in the state intelligence archives, where he worked for the remainder of his career. Mitrokhin was energised in his secret work by the example set by the holy redeemer personality (as he saw it) of Aleksandr Solzhenitsyn. The half-Ukrainian Red Army officer, having been jailed for making jokes about Stalin, had gone to ground in Estonia in 1965-67 in order to write his memoir, The Gulag Archipelago, which compared the Soviet penal system to a cancer metastasising up and down the railways and rivers of the USSR. Solzhenitsyn's was a documentary of unsparing lucidity and stern moral judgement that impelled Mitrokhin to expose more of what he called the 'the trail of filth' left in the archives by KGB operatives. He came to see the entire Soviet system as the negation of everything that Solzhenitsyn stood for. In the Soviet state's vaunted egalitarianism he found no promise of a bright, red future but a spirit of malice and suspicion, in which every Russian lived in fear of his neighbour and schoolchildren were urged to spy on their own parents. The initials 'KGB' came to have flesh-creeping associations for him. In Mitrokhin's view, the nomenklatura system under the Soviets had replaced the career nobility system under the tsars. A fawning class of policemen-bureaucrats had dogmatised Marxian thought to their own self-serving ends. Subscribe to The New Statesman today from only £8.99 per month Subscribe Mitrokhin wanted nothing so much as to 'destroy' the nomenklatura, says Corera. He saw his chance in 1972 when he personally oversaw the transfer of the KGB archives from Moscow's infamous Lubyanka to an HQ outside Moscow. He began to smuggle out, concealed in his shoes or socks, scraps of the notes he had been taking in shorthand; he then secreted them in milk churns under the floorboards of his dacha. After his retirement in 1984, he plotted ways to move the archive out of the shadows into the West. Only after the USSR's dissolution was he able to take samples to the British embassy in Riga, Latvia's capital, where MI6 Baltic took him at his word. On the 75th anniversary of the Bolshevik revolution – November 1992 – he was allowed to settle in the UK. Mitrokhin, the man who waged war on Red Russia from from the archives, died from pneumonia in London in 2004 at the age of 81. The Spy in the Archive: How One Man Tried to Kill the KGB Gordon Corera William Collins, 336pp, £25 Purchasing a book may earn the NS a commission from who support independent bookshops [See also: Giorgia Meloni's selective memory] Related
