Projects
January 2009 / December 2010

State Capitalism 2.0

After two decades of privatizations and rolling back of the State from the economic activity, we are now witnessing a sudden shift in economic policies. The solutions proposed to the current financial crisis (such as the Tarp or bank recapitalizations) imply...

After two decades of privatizations and rolling back of the State from the economic activity, we are now witnessing a sudden shift in economic policies. The solutions proposed to the current financial crisis (such as the Tarp or bank recapitalizations) imply a massive intervention of the State into the financial sector. The efficiency of the market system is being seriously questioned. Economic research has been (partly) taken off guard by this abrupt shift in policies. In our opinion, this is the right timing for starting a research project supporting a very broad reflection on the new role of the State in the economic activity: State Capitalism 2.0. Although it is still unclear whether we face a temporary expansion of the State, or rather a structural change, the revamped role of the State will probably take different forms and will be along several dimensions. We would like to focus on a few of them, those more in line with the traditional research activity of the Fondazione Eni Enrico Mattei (FEEM), that is corporate governance and regulation.

Main Results and Outputs

FEEM believes that understanding the mechanics and the effects of State capitalism is important because alternative economic scenarios will largely depend on the future economic role of the State.
In order to better understand the actual landscape of uncertainty, we propose four topics:

  • the role of sovereign funds as investors. What is the extent of the involvement of SWF in target firms? How is the corporate governance of target firms affected by the presence of this shareholder?
  • the hybrid structure of governance of firms heavily financed by the State. How will private firms react to this new competitive environment?
  • how political interference affects product market interactions and equilibrium outcomes?
  • the scope for regulation when firms are under the influence of the State. Which is the perimeter and the course of action of regulation in these hybrid ownership structures?

The number of unknowns is larger than the number of equations available. In a complete and utter market’s confusion, brainstorming, discussion and cooperation seem a fruitful way to promote research, fertilize new ideas while facing big challenges.

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