All the alleged key causes of SOE [State-Owned Enterprise] inefficiency—the principal–agent problem, the and… — Chang Ha-Joon
All the alleged key causes of SOE [State-Owned Enterprise] inefficiency—the principal–agent problem, the and the soft budget constraint—are, while real, not unique to state-owned enterprises. Large private-sector firms with dispersed ownership also suffer from the principal-agent problem and the free-rider problem. So, in these two areas, forms of ownership do matter, but the critical divide is not between state and private ownership—it is between concentrated and dispersed ownerships.
p. 116Source: Wikiquote · CC BY-SA 4.0
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Markets have a strong tendency to reinforce the status quo. The free market dictates that countries stick to what they are already good at. Stated bluntly, this means that poor countries are supposed to continue with their current engagement in low-productivity activities. But their engagement in those activities is exactly what makes them poor. If they want to leave poverty behind, they have to defy the market and do the more difficult things that bring them higher incomes—there are no two ways about it.
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