When does large-scale public ownership work?

Matt and Ezra both comment on my post that most of the largest Chinese firms are state-owned or controlled by state-owned banks.  (Both blogs, by the way, have interesting running coverage of the same China trip.)  How can this be the case in the world's greatest economic growth miracle?  How come it works (sort of, there were lots of privatizations, starting in the 1980s) in France too?

Yet state-owned industries do not have a fantastic record overall; ask England.

In part this is a puzzle but in part France and China have one important feature in common: it's high status to be a ruler.  Very smart Frenchmen often grow up wanting to work for the government.  Hardly anyone in France thinks that is weird and so the French bureaucracy has some of the best talent in the country.

There is also a long-standing tradition of the prestige of the Chinese mandarin.  Furthermore, and perhaps more importantly, the Chinese Communist Party is the ultimate source of control and prestige for the entire society and it too attracts many talented people. 

It's not enough to attract talented people, however.  Unlike in the former communist Soviet Union, the Chinese government is (somewhat) dedicated to improving the nation.  At least at a ten percent rate of growth, this political equilibrium works.  And the state-controlled enterprises have to compete in a commercial environment, again unlike many former socialist experiments with state ownership.  Most of all, China is grabbing the low-hanging fruit by moving smart, hard-working individuals from rural jobs to highly productive jobs and when you are grabbing the low-hanging fruit many things are possible.  A lot of systems work OK until you get near the "you ought to shut down" constraint.

It's also possible that the successes of state ownership "decay" with time, as was arguably the case with the French model before the privatizations and has been the case with NASA in the United States.

The United States is far from having the right pieces to make public ownership work on a widespread basis and of all the major capitalist economies we have experimented with it about the least.  Federalism, a regionalist Congress, separation of powers, and a high proportion of political appointees all militate against successful government ownership.  Plus we are a large economy with relatively little external discipline in the form of international trade.

We could "respect" our bureaucrats much more than we do, yet they still would not have the real status they enjoy in France.  It's simply not built into our culture, which worships wealthy businessmen and also the so-called "common man."

Imagine if everyone wrote a tweet: "Hey guys, over at the Department of Education.  You're awesome. Luv ya!"  It wouldn't much matter because still not many people deeply and sincerely wish to emulate them.

I also prefer to live in a society where the public sector does not have so much prestige.  Very often governmental prestige stifles innovation and implies a series of more general insider, elitist, and sometimes authoritarian attitudes.  It's also worth a quick look at the histories of what France and China had to do to build up so much governmental prestige; not pretty.

We should recognize that the public ownership model has worked for China, but I don't want to see it widely copied.  I don't want to see it in Venezuela, Argentina, Turkey, Pakistan, Sri Lanka, Cuba, India, the Philippines, Nigeria, Central African Republic, or anywhere in Eastern Europe, to name a few other candidate countries.  Do you?


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