Business
The liberalization wave of the 1980s and 1990s did not get governments out of business. It changed how they hold companies. States kept minority stakes in firms they sold off, and they began buying small shares in private companies through wealth funds, holding companies, and development banks.
Direct state operation, majority state stakes, minority state stakes, and pure private ownership tend to coexist within one country. The useful task is to identify the conditions under which each form improves company efficiency and national development, rather than to crown a winner.
Government-controlled or government-backed firms make up a large share of listed company value: 30–40 percent in some emerging markets, over 60 percent in others, and 20–30 percent in parts of Europe. Their presence among the world's largest companies more than doubled in five years.
The oldest model has the government both owning and running companies directly. It collapsed in the 1980s, after oil shocks and a credit squeeze. State firms worldwide lost the equivalent of about 2 percent of national output, and twice that in developing countries.
To attract minority private shareholders, state companies listed on stock exchanges and hired professional managers. Keeping majority control while granting financial autonomy and professional management reduced many of the classic problems of state ownership. Chief among these is managers with weak incentives to perform.
When the state takes only a minority share in a private company, it can ease the firm's shortage of capital without running it. This can let companies use abilities they already had but could not fund.
Neither majority nor minority state stakes fully stop governments from interfering. The pull is strongest in natural resources and large strategic companies, where political goals override business ones.
A development bank meant to fill gaps in private finance can end up lending to already successful companies that could have raised money in the markets. Those same companies may be generous political donors. The aid then buys political dividends rather than development.
Asking whether state ownership is universally better or worse than private ownership no longer makes sense. The two are now mixed together across the global economy. Companies with state stakes have not performed systematically worse than purely private ones.