Throughout the world, states, not just federal governments, must deal with the state of their fiscal situation. Great attention is typically paid to states’ liabilities but not to their assets. Instead of short-sighted government interventions, states can take free market steps to begin rebalancing their balance sheets, says Michael Spence, a Nobel laureate in economics.
In the past states owned industrial assets, which performed inefficiently when protected from competition.
This led to privatization around the world, particularly in Europe, which eliminated the ability of the state to favor its own enterprise through public procurement, hidden subsidies and regulation.
Where state ownership does not exist, regulations can equally shelter sectors, creating inefficiencies and low productivity in the absence of competition.