In the late 1980’s even before the fall of the Berlin Wall, the eminent Futurist John Naisbitt was writing and lecturing about the rise of Free-Market Socialism as a trend for the 1990s. Giddens’ Third Way and the Blair New Labour project are examples of the UK contribution.

Where are we now? Where are we heading? The promise of a shareholder democracy I argue is far from the trajectory we are currently on.

On Wall Street listed companies are spending far more on share buy backs than on R&D. If that trend continues we would be following a voluntary liquidation strategy.

If we look at the Rise of Private Equity, family owned companies and sovereign wealth funds since 1990 an increasing proportion of the private sector is not tradable on public markets. Add the growth of social enterprises and community interest companies and the picture suggests a relative decline in the scale of the tradable private for profit sector globally.

Marianna Mazzucato, in her excellent book “The Entrepreneurial state” shows how even in the case of Apple, the relationship of the private sector to the state does not fit the dominant narrative of our time. Every technology in the iPhone started off as a publicly funded project, nothing having started in a private R&D Lab. The algorithm behind Google’s success also started with Public Funding.

So, far from rolling back the frontiers of the state as foreseen in the late 1980s, we see the opposite. The idea that the state crowds out private investment and innovation hardly fits with the evidence.

There was an old joke in socialist circles:
“What’s the most neutral country in the world?”
“Czechoslovakia!”
“How come?”
“It doesn’t even interfere in its own internal affairs!”

In Animal Farm, Orwell describes how the original principles of the Farm become modified over time. Probably the most famous is “Four legs good, two legs better”.

In the UK, the argument has frequently put that “the state should have no role in running businesses” as the argument for privatisation. The reality now is that we need to add to the end of that phrase “in its own country”. The ownership of UK assets by foreign sovereign wealth and state owned companies is well documented. Are we the new Czechoslovakia?

This wasn’t what was promised. The aim of Long Finance and this blog is to ask questions about how we would know that finance is working. The aim is market-oriented.

So, are we watching the rise of state capitalism as John Naisbitt forecast for free-market socialism in the 1990s?

When the dominant narrative and the evidence are so out of alignment, it concerns me that we may follow the maxim:
"When the facts don’t fit the theory, change the facts".

What is the 21st Century relationship between state-finance-economy-market? I am here not arguing about the size and the reach of the state, but its primary role.

With the Chancellor calling for a Northern Powerhouse supported by a Sovereign Wealth Fund we appear to be moving in a direction that has not been debated or fully appreciated. In Scotland the SNP has talked of a Sovereign Wealth fund for North Sea Oil.

I leave it as an open question. Is this direction one that should command support, or will we end up in a place we should feel uncomfortable with?