The Coming Invasion

Nationalized Companies: A Threat to American Business

by R. Joseph Monsen, by Kenneth D. Walters
McGraw-Hill, 178 pp., $17.95

Fifteen years ago Jean-Jacques Servan-Schreiber sent a chill through the West with the opening words of The American Challenge: “Fifteen years from now it is quite possible that the world’s third greatest industrial power, just after the United States and Russia, will not be Europe, but American industry in Europe.” We can now see that Servan-Schreiber was wrong about the continued predominance of American industrial power, but right about “multinationalization” as marking a new chapter in the economic history of capitalism. In much the same way, Joseph Monsen and Kenneth Walters, professors at the business school of the University of Washington, may be wrong about the nature of the “threat” of nationalization, but I believe they are right in calling attention to a striking change in the structure of economic life. This is the rise of state-owned companies, as perhaps the most rapidly expanding form of modern enterprise.

Monsen and Walters write:

Capitalism in Western Europe is changing rapidly. In some countries state-owned companies amount to nearly half of the industrial sector, including control of key industries. European governments now have a direct ownership stake in over half of Europe’s fifty largest companies. Few Americans are aware that many familiar companies are government owned. Renault, Alfa Romeo, British Petroleum, Airbus Consortium, British Leyland, Volkswagen, Swedish Steel, and Rolls-Royce—to name only a few—are companies in which governments are the sole or largest shareholder. Government companies in Western Europe make aluminum pans, air-plane engines, tractors, computer software, cakes, office equipment, advanced electronic equipment, computers, and cars and trucks—and run hotel chains. Although the private sector is for the moment still larger than the state-owned sector, the state-owned segment is beginning to dominate in more and more industries, and it expands to new products and markets each year.

Monsen and Walters make an impressive case for their position, both by country and by industry. A country-by-country summary would look like this:

France. The Mitterrand government has brought thirty-six banks into state hands, essentially nationalizing all major sources of credit. These nationalized banks continue to expand their business, the largest single recent expansion being the purchase by the Banque Nationale de Paris of Bank of the West in California. “The top four French banks are listed among the ten largest banks in the world,” write the authors, “a claim that neither the United States, Britain, nor Japan can make.”

France was already nationalizing important firms well before the Mitterrand election. The takeover of the two largest French steel companies, Usinor and Sacilor, took place in 1978. Meanwhile state control had also been spreading through diversification: Edouard Bonnefous, president of the French senate’s finance commission, pointed out in 1977 that whereas the number of state-owned companies had declined from 170 to 130, the number of subsidiaries of state companies had grown from 266 to 650. Hence the Mitterrand government only accelerated an existing trend when it bought out CGE, the top electrical, electronics, and nuclear engineering group, St.-Gobain …

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Letters

The Right Volvo February 16, 1984