No one seriously denies that the state has a role to play in economic life. The question is what that role should be and how it can be performed in ways that simultaneously enhance economic efficiency and minimize the kind of rent-seeking behavior — “corruption” in all its shapes and forms — that tends to arise wherever the public and private sectors meet.

We are all state capitalists now — and we have been for over a century, ever since the modern state began its steady growth in the late 19th century, when Adolph Wagner first formulated his law of rising state expenditures. But there are myriad forms of state capitalism, from the enlightened autocracy of Singapore to the dysfunctional tyranny of Zimbabwe, from the egalitarian nanny state of Denmark to the individualist’s paradise that is Ron Paul’s Texas.

The real contest of our time is not between a state-capitalist China and a market-capitalist America, with Europe somewhere in the middle. It is a contest that goes on within all three regions as we all struggle to strike the right balance between the economic institutions that generate wealth and the political institutions that regulate and redistribute it.