State control of the commanding heights is what has allowed China to continue to grow robustly during the past decade while more advanced capitalist economies have struggled to recover from the Great Recession. In these, investment is driven by the private sector, which will only invest when and where there is the expectation of profit.
“In the last ten years, in the US, Europe and Japan, it has been capitalists who made the decisions on investment and employment and they did so on the basis of profit not economic recovery”, Roberts notes. “In contrast, China’s fixed investment increased rapidly because it was driven by a programme of both direct state investment and use of state owned banks to rapidly expand company financing.”
Keynesians have advocated government spending to stimulate bank lending and private sector investment as an alternative to austerity, but Roberts argues that “Keynesian stimulus policies do not work in a predominantly capitalist economy where the profitability of capitalist investment is very low.”