State Capitalism: Why SOEs Matter and the Challenges They Face

The Global Financial Crisis and the COVID-19 Pandemic have highlighted the emergency role of the State and its smooth, seamless reactivation. SOEs have been a crucial part in delivering on this effort, but evidence suggests that they misallocate capital and mismanage resources. This is indicative of the conflicts of interests in owning and regulating enterprises, crony capitalism, the private agenda of public officials, internal management of SOEs, the significant role played by state-owned banks and financial institutions, and the conflicts that arise in the State's primary role vs. its ownership of enterprises. The studies of eight countries from different regions provide answers to these key policy questions related to state capitalism. The two most important conclusions that can be drawn from the country studies are that competition and regulation rather than ownership per se is key to efficiency.

Format: Hardback
Length: 386 pages
Publication date: 25 November 2022
Publisher: Oxford University Press

The crises stemming from the Global Financial Crisis and the COVID-19 Pandemic have underscored the critical emergency role of the State and its seamless reactivation in situations where private activity and markets are disrupted. In many countries, State-Owned Enterprises (SOEs) have played a pivotal role in delivering on this effort as agents of the State. While SOEs are increasingly sought to play a role during emergency situations, evidence suggests that they misallocate capital and mismanage resources. This is indicative of the conflicts of interests in owning and regulating enterprises, as well as between the commercial and non-commercial objectives of SOEs, crony capitalism, the private agenda of public officials, internal management of SOEs, the significant role played by state-owned banks and financial institutions, and the conflicts that arise in the State's primary role versus its ownership of enterprises.

To address these key policy questions related to state capitalism, the studies of eight countries from different regions undertaken for this book provide valuable insights. While generalizing from the results of multi-country studies to arrive at universally applicable predictions, prescriptions, and policy recommendations is inherently challenging, the book aims to extrude the principal common characteristics of and practices followed by successful SOEs independently of country context.

Among the key conclusions that can be drawn from the country studies are that competition and regulation rather than ownership per se are key to efficiency. This suggests that policymakers should focus on promoting competition and ensuring that markets are well-regulated to ensure that resources are allocated effectively and that SOEs can operate in a sustainable and competitive manner.

Furthermore, the studies highlight the importance of effective governance and management practices in SOEs. This includes the need for transparent and accountable decision-making processes, the development of skilled and competent staff, and the establishment of effective systems of monitoring and evaluation.

Additionally, the studies suggest that SOEs can play a significant role in promoting social and economic development. This can be achieved through the provision of essential services, the creation of jobs, and the promotion of innovation and entrepreneurship.

However, the success of SOEs also depends on the broader economic and political context in which they operate. This includes factors such as the level of infrastructure development, the level of investment in education and research, and the level of regulatory oversight.

In conclusion, the crises emanating from the Global Financial Crisis and the COVID-19 Pandemic have underscored the critical emergency role of the State and its seamless reactivation in situations where private activity and markets are disrupted. SOEs have played a pivotal role in delivering on this effort, but evidence suggests that they misallocate capital and mismanage resources. To address these challenges, policymakers should focus on promoting competition and regulation, effective governance and management practices, and the promotion of social and economic development. However, the success of SOEs also depends on the broader economic and political context in which they operate.

Weight: 606g
Dimension: 223 x 145 x 25 (mm)
ISBN-13: 9780192849595