2. WAVES OF STATE CAPITALISM 

Before WW1

• State owned most of infrastructure
• State guarantees

After WW1

• Continental Europe: state owned most utility companies
• State Capitalism more prominent in non totalitarian countries
  • The main reason: private capitalism seemed incapable to cope with the tasks of reconstruction

After WW2 > Major debut of State Capitalism: Nationalisation

• Supporting economic growth and protecting strategic/fragile industries
  • Industrial powerhouses in Europe and National Champions in Asia
  • Trade barriers in developing countries, to protect newly developed industrial enterprises from outsiders.

2. WAVES OF STATE CAPITALISM 

> Various forms of state intervention after WW2 led to increase in State Owned Enterprises, with monopoly/oligopoly tendencies, minimising market competition 

• Business literature: lack of market competition led to SOEs becoming victim of mediocrity and inefficiency

> Corruption and using SOEs as political tool > Privatisation 1980-1990 > reducing number of SOEs 

• Nationalistic reasoning or strategies in strategic sectors kept some SOEs

Development of 'hybrid' form of State entities:

Minority owned enterprises

2. WAVES OF STATE CAPITALISM 

Some argue: in developed countries more State owned entities after financial crisis of 2008
 

Most literature focused on emerging countries such as BRIC(S): where states used to have more power but capitalism prompted a new economic system: State Capitalism

• Liberal market capitalism has advanced from Western Europe, North America and Japan towards China, Brazil and India.

• Globalisation has provoked countries like China to create mechanisms such as economic zones of foreign direct investment to gain from the Western capital while maintaining its concepts of family values and authoritarians

Distinct feature of State Capitalism is the exceptional role of state ownership - providing the possibility to adapt the form of state capitalism 

3. Definitions?

1. Musacchio and Lazzarini (2012)  Varieties of State capitalism

Various state ownership structures

1. Leviathan as an entrepreneur
2. Leviathan as a majority investor
3. Leviathan as minority owner
4. State as strategic investor (Musacchio, Lazzarini and Aguilera, 2015)

Varieties of Capitalism theory?

2. Kurlantzick (2016)
State capitalist countries: those where the state has the majority stake in or significant influence over at least one third of the 500 largest companies.

4. Schmidt (2002)
State capitalism is the interventionist state that organizes cooperation among autonomous economic actors and directs their economic activities - interconnectedness of business, government and labour relations

5. Gilson and Milhaupt (2009)
State Capitalism is a new form of mercantilism

No coherence and definition lacks nuance 

(Musacchio and Lazzarini, 2012)

3. Definitions?

6. Bremmer (2010)
State Capitalism is as a ‘system in which the state uses its role as leading economic actor primarily for political gain’ and will less quickly protect the rights of individuals and economic productivity
Economic growth empowers state's power and it restrains productivity of the global free market system

Focussing on effects

7. Aligica and Tarko (2012)
The political strategies in state capitalism are defined in terms of ‘national interest’ and have an influential role on a countries economy

State Capitalism = presence of four mechanisms: National Oil Corporations, other State Owned Enterprises, privately owned state national champions and sovereign wealth funds

3. Definitions - Conclusion?

• Literature shows that state ownership has more presence in the former command economies than in western capitalist economies.
  • Additionally, there are some notable differences between emerging countries and the state ownership structures: in Brazil and India there are more minority investors while in China and Russia there are more majority investors 

Developed towards a combination of various ownership structures
of equity investment

State Capitalist countries?

 ‘Private ownership is now mingled with state capital on a global scale’

(Musacchio and Lazzarini, 2014) 

4. Motivations vs Manifestations

YES, needs further research

Combining definitions

Comparative framework

Global State Capitalism- ORBIS database

4. Motivations vs Manifestations

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Examples: sovereign wealth funds, pension funds (?) and when a state has a minority stake invested in an enterprise.

e.g. Norwegian Sovereign Wealth fund - slogan is also ‘to safeguard and build financial wealth for future generations’, they invest in 9000 companies in 78 countries (NBIM).

Return on Investment

Issues >

• State and profit?
• Social, political and economic returns on public services programs
• Mechanisms and methodologies

4. Motivations vs Manifestations

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Force for innovation and change, with the intention to create a path for actors in the private sector, by taking the role of key partner, willing to embark on risks businesses are afraid to undertake. In this position the state acts much more as a leader or a partner, rather than a provider of means, and provides aid to the private sector where it would have problems to thrive on its own. The state plays the role of venture capitalist (Mazzucato, 2014). 

e.g.     Nano Technology, various developments in the pharmaceutical industry, GPS, the internet and Silicon Valley and the current important innovative state investment is the stimulation of the new green technology 

Innovation

Issues >

• Innovation or industrial policy? (Rodrik, 2007)

4. Motivations vs Manifestations

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Financial support to a companies with financial difficulties. Usually with the intention to prevent further socioeconomic failures, however protecting a nation’s geopolitical power could be another reason. Therefore, bail-outs usually occur within strategic industries, e.g. transportation: airlines, petrol companies or auto industries.

e.g. US government approved low interest loans intended for the auto industry which got a big hit in 2008. General Motors, Ford and Chrysler & financial system after the financial crisis in 2008 is a rather prominent example. In the US a law called ‘The Emergency Economic Stabilization Act of 2008’ was enacted to spend $700 billion on distressed assets to banks such as Bank of America and Citigroup. 

Bail-out

4. Motivations vs Manifestations

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Strategically encourage growth and development of various sectors in an economy through industrial policy, improving competitiveness and efficiency of (domestic) businesses. The manufacturing sector plays a key role in industrial policy. These policies are sector specific rather than having a macroeconomic perspective. These corrective interventions are useful to allocate an efficient free market, and prevent or hinder the emergence of market failures.

e.g.  ‘import substitution industrialisation (ISI) enacted by countries in the Global South

Special Economic Zones in Asia in countries such as China and Malaysia are good examples of how industrial policy leads to ‘industrial clusters’ (UNIDO, 2009),

Strategic Industrial Policy

Issues >

• Special Economic Zones - purely a short term investment as it won’t provide enough positive spill-over effect into the wider economy (Good and Hughes, 2002 in DCED, 2014). 

4. Motivations vs Manifestations

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'[Goods] which all enjoy in common in the sense that each individual's consumption of such a good lead to no subtractions from any other individual's consumption of that good’ (Samuelson, 1954).

e.g. National security and defence

Partially public goods: shopping malls

Infrastructure: public-private partnerships (PPPs)

Public goods/ Infrastructure

4. Motivations vs Manifestations

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Executing political power in relation to other geographical areas. The current most important concern in geopolitics is oil; many countries try to claim oil rich areas

e.g. Melting of the Northwest passage on the icecap & the prospect of a sustainable future, and the accompanying climate change issues are dominant geopolitical issues

Sovereign Wealth Funds are often viewed as a state owned tool to implement geopolitical goals (Helleiner, 2009). According to some critics (e.g. Kimmit, 2008; Monk, 2009; Haberly and Wojcik, 2015) China is using its Sovereign Wealth Funds as geopolitical mechanisms. 

Geopolitics