0.11 States and markets - soes  (Page 3/9)

The overwhelming majority of poorer nations had numerous SOE ^s in the forties, fifties and sixties. SOE ^s were dominant not only in natural resources such as oil and gas, but in electric power generation and such diverse fields as airlines, aircraft manufacturing, banking , construction and many others. Many of these SOE ^S were previously owned by the occupying colonial powers. After independence, most of these were nationalized.

Enthusiasm for relying on SOE ^s to achieve economic and social goals began to wane in the eighties because in country after country, the SOE ^s were bleeding losses that hindered, not helped development.

A salient example was Indonesia’s Pertamina, the grossly mismanaged state-owned oil company, which in 1976 had international debts almost as high as Indonesia’s GDP. Only government rescue program saved the firm, at very great cost.

In the eighties governments in many parts of the world began to either close down or sell off (privatize) their SOE ^s to the private sector.

In some nations, privatization worked fairly well, as in Colombia. In other nations the process of privatization was deeply flawed, and involved high degrees of corruption. This was especially so in Russia after 1981, especially in the oil and gas sectors. In still other nations, such as Brazil the process of privatization brought mixed results, as we shall see.

Still, by 2005 SOE ^s remained dominant in a large number of economic sectors in emerging nations. More than 75% of Chinese firms were SOE ^s in 2013. In Russia 62% of firms are SOE ^s , and in Brazil 38%.

The world’s largest natural gas firm is Russia’s Gazprom. Petrolbras, a Brazilian SOE initially thrived after partial privatization in 1990. The new CEO of Petrobras in 2012 was a former minister of energy in Brazil, not a good sign of independence from the government.

Proponents of state capitalism maintain it combines the best of regulatory tools available to the state with the best of the features of capitalism. History may or may not prove otherwise.

In any case, young people worldwide entering the labor force in the 21 ^st century will have to learn to live with the implications of the resurrection of state capitalism. Before the 21 ^st century, state-owned SOE ^s only dominated their own country’s economy (i.e. their national markets). Today many seek dominance on the international stage, in international markets such as oil, gas, nickel, copper etc.

The Chinese and Brazilian experiences are especially interesting, given their somewhat different histories.

In China, under Mao Tse Sung the government controlled everything, and ran everything into the ground. But since about 1995, China has made some startling economic policy changes, especially those pertaining to SOE ^s .

• In 1995 there were 1.2 million SOE ^s .
• By 2001, 732,000 of these firms had been closed or sold off.
• So by 2001, there were 468,000 Chinese SOE ^s .

The absolute number of SOE ^s in China continued to decline, but not their assets and revenues. Assets in 2003 were $1 trillion. But by 2010, assets of SOE ^s were $3.75 trillion. Revenues in 2003 were $650 billion. By 2010, revenues had reached $2.5 trillion.