Paper Economic Geography
State capitalism in Europe
In the recent history and the current global financial crisis governments have nationalised banks in the Western world. They did this because the banks had too many debts and if the banks would go bankrupt it would create social unrest, political instability and economic problems because people will lose confidence in the monetary system. In other words, these organizations were “too big to fail” and the governments had to step in to solve market failure. State capitalism is the widespread influence of the government in the economy, either by owning majority or minority equity positions in companies or through the provision of subsidized credit and/or other privileges to private companies. There are two different forms of state capitalism: through majority control (state-controlled SOE’s) or in a more hybrid fashion through minority investments by development banks, pension funds, or the government itself.
The difference of state involvement in Western and Eastern Europe If we look at table 1 we see a list of the number of State owned enterprises. If we compare the countries from Western Europe to the countries from Eastern Europe we see a significant difference Eg. the number of SOE’s in the countries and the percentage of government minority positions in SOE’s. The countries listed are all part of the OECD. The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world.
Poland has 1189 SOE’s, while the Netherlands only has 44 SOE’s. Although the government in Poland has in 58% of the SEO’s a minority position, the total volume of SEO’s is still very high. In the Netherlands this percentage is 36%, but the total volume of SEO’s is 44. The reason that for example Poland and Czech...
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