Photopaper: 1.2 Government Linked Companies

Although many Western countries are seen as the poster children for liberal, free-market capitalism, they may support strategic industries when faced with a potential economic meltdown. Such was the case with the global recession that took place in 2008. As banks offered mortgages to lenders of questionable means, and blended small pieces of those mortgages into complicated financial packages, the huge amount of risk became clear as the bubble in housing prices burst. Because the financial system in America is such a pivotal piece of infrastructure for our economy, the US government passed the Bank Bailout Bill.

The US government declared many of the troubled banks to be too big to fail, meaning that if they were removed from the global financial infrastructure, the entire financial system was as risk of collapse. Thus is the backdrop to the US government becoming intimately connected with private companies through GLCs. The US-based car manufacturing companies GM and Chrysler were also included in the Bailout Bill, as their failure would cause a large ripple effect of job losses and add to the economic slowdown (Economist, 2011).

More generally, nearly all nations subsidize portions of strategic industries. In the United
States, a robust lobbying culture is alive and well on Capitol Hill, which is how many industries are able to maintain government subsidization. One might argue that this is also a distant relative of SOE via national involvement in private corporations.

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