State Inc.

The Boston Globe ^ | March 16, 2008 | Joshua Kurlantzick

[forkinsocket]

The most important new forces in global business are aggressive, wealthy, and entrepreneurial. But they aren't corporations: they're authoritarian governments.

IT WAS THE biggest corporate deal in the history of sub-Saharan Africa: Last October, a foreign firm spent nearly $6 billion for a chunk of Standard Bank, the South African company that has long dominated finance on the continent.

more stories like this US: Olympic host China lacks freedoms Asian markets mixed China vows to control inflation China premier promises to cut pollution Wen says Olympics key for development Yet the foreign suitor was not Citigroup, or UBS, or some other titan of private commerce. It was the Industrial and Commercial Bank of China, a company owned wholly by the Chinese government.

On a business level, the deal gave ICBC's Chinese customers access to banking across Africa, and set the stage for closer relations between Chinese companies and African nations. In a bigger sense, it embodies a change that is reshaping the dynamics of global business.

In the past five years, governments around the world have been transforming themselves into deal makers and business players on a scale never seen in the modern era. In China, state-owned oil giant PetroChina has become the largest company in the world, worth more than $1 trillion. In Russia, state-owned Gazprom has grown into the world's largest gas company. States are also wielding influence by directly buying into major private firms: The investment fund run by the Arab emirate of Abu Dhabi is now the world's largest, and recently spent $7.5 billion to become the top shareholder of the American financial giant Citigroup. Singapore's state-controlled wealth fund, Temasek Holdings, sank $5 billion into Merrill Lynch, the largest US brokerage.

[forkinsocket]

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[DManA]

Finally someone talks about this. The statists rail against the big evil oil companies, but oil is controlled by authoritarian governments.

[yefragetuwrabrumuy]

Ironically, capitalism may prove to be the death knell of autocratic regimes through evolution, not revolution. That is, businessmen above all things, must be efficient. But this is a broad definition of efficiency, to say the least.

Being a political apparatchik doesn’t mean you are a good businessman. Good businessmen want to surround themselves with other good businessmen, for the simple reason that it is good for business.

As in the United States, there was a fear that this would lead to corporate rule. But there’s the rub. Businessmen do not want to rule, they want to do business. They are the power behind the throne, but that is where they like to be.

One of the few intelligent things Jesse Jackson ever said, was the truism that, “If you can ever get 100 businessmen to agree on something, it becomes the law.”

There is a bad habit of assuming corporate businessmen are politically right wing, or even conservative. In a bizarre irony, many of them are liberal and left wing. So if they are the power behind the throne, what are they whispering in the king’s ear?

Well, of course they want government policy that is good for business. But beyond that, they want government that doesn’t bother them. The best way to do that is to have a government elected by the people. A democracy.

Now China is about the most unmanageable place on Earth. It is to a great extent a confederacy of provinces who do as they please despite the dictates of the central government.

The typical man on the street is not unhappy with the central government, in fact, it is pretty popular. However, the people are outraged when the provincial leaders refuse to obey the central government. And many of the provincial leaders are rotten and corrupt, so they are not liked.

But importantly, they are also bad for business. And this may signal their end. Whether this would lead to a democratic China is unlikely, but eventually “business China” will have to eliminate them, precisely because they are bad for business.

[afortiori]

Will these state-run enterprises be different than the ones before them?

Are they efficient or will they suffer the historic infirmities of most state-run enterprises?

Do the kleptocratic heads of authoritarian governments engender sufficient “self-interest” in these business to make them immune from the democratic pressures that have have turned most state-run enterprises into basket cases?