Chilean copper and Chinese SOEs

One reason the Chilean reforms went well was that the state had nationalized the copper mines.  That provided a steady flow of money, thus minimizing the need for revenue-raising distorting policies elsewhere.  More generally the revenues helped build a stable state backed by a secure coalition, which in turn liberalized much of the rest of the economy.  For all the talk about laissez-faire and the Chicago boys, the Chilean privatizers never gave up their hold on those mines.  And the mines proved easy enough to run and convert into revenue…and they are still a lucrative source of foreign exchange.

One reason the Chinese reforms went well was that the state had nationalized the SOEs.  That provided a steady flow of money, thus minimizing the need for revenue-raising distorting policies elsewhere.  More generally that ownership helped build a stable state backed by a secure coalition, which in turn liberalized much of the rest of the economy.  For all the talk about dismantling communism, the Chinese reformers never gave up their hold on those SOEs.  And the companies proved easy enough to run and convert into revenue, at least until the low-hanging fruit was plucked…and they are still…?

The problem of course is that privatizing the SOEs is the economic reform China needs over the medium term, yet it may not be consistent with their political economy in support of broader market forces.