Why Do State-Owned Enterprises Exist? The Political Rationale of Public Ownership

This proposed paper is designed to explore the political motives, logics of action and rationales that seem to be significant factors in shaping the way how state-owned enterprises (SOEs) come into and stay in existence. In... [ view full abstract ]

This proposed paper is designed to explore the political motives, logics of action and rationales that seem to be significant factors in shaping the way how state-owned enterprises (SOEs) come into and stay in existence. In doing so, we also take issue with the established discourse on SOEs that appears to be predominantly couched in terms of economic theory and managerial considerations. By way of contrast, we propose that political interests and rationales are unduly neglected as potentially powerful drivers of public ownership and/or trends of ‘corporatization’.
For the purpose of this paper, we interpret the existence and – even more importantly – the roles and functions of SOEs as the product of the public policy making process. It flows from this that we will have to turn to major factors and dynamics of these political processes to fully appreciate the meaning of SOEs as an institutional choice in the public sector.
Against this background, our argument unfolds in the following steps: ‘input’ politics tend to highlight the importance of ‘political ideologies’ and party-political programs as drivers of public policy; in a similar vein, we argue that well-organized special interests may have a stake in the proliferation of SOEs; focusing on the ‘through-put” institutions of the politico-administrative system, we suggest that self-interested actors – both in political or administrative capacities – pursue their utility function also by means of SOEs that create opportunities for patronage or risk-avoidance. From an ‘output’-oriented perspective, finally, the role of SOEs as policy instruments – in particular as part of wider strategies of ‘developmental states’ or ‘regional development plans’ – has to be appreciated.
In our paper, we take a historical and comparative perspective, drawing on empirical evidence from selected country cases and going back in time also beyond the recent and contemporary ‘new public management’ (NPM) and ‘post-NPM’ eras. As a result, we are able to show that there is no single or unified ‘political rationale’. Rather, political considerations fall into different categories of possible explanations of the proliferation of SOEs as public sector institutions (e.g. supply- vs. demand-driven explanations, rent-seeking- or policy-oriented approaches). In sum, however, we are on relatively safe ground to assume that political dynamics and policy-making processes have to be seriously taken into account to improve our understanding of the role of SOEs in the set of institutional choices in the public sector.