Page 71 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

More Government Ownership of Companies

As part of the efforts to stabilize the domestic economy—and
in an attempt to secure jobs, facilitate necessary restructuring,
and protect businesses from foreign ownership—governments
are becoming active shareholders in many companies, not solely
financial institutions. We doubt that politicians will achieve
their goals, because governments—at least in the past—have
not demonstrated superior skills in running companies.
Nonetheless, given the increased pressure of public opinion
and the eagerness of some politicians to be the saviors of last
resort, government ownership will become a more common
sight. And it is unlikely that governments will dispose of their
equity positions quickly once the crisis is over. Experience from
the past shows that the denationalization process can take
years, if not decades—even in countries that embrace free-
trade principles.
In addition to buying stakes in companies, governments will
also promote measures designed to prevent foreigners from
acquiring important businesses. In France, the government set
up a fund designed to help prevent domestic companies from
being acquired by foreign investors. In China, The Coca-Cola
Company was unable to acquire a local juice manufacturer after
the authorities cited competition reasons.

More Regulation

The mandate for a new regulatory regime in the financial sec-
tor is overwhelming. In all regions of the world, politicians and
regulatory authorities are debating how to avoid a repetition of
the financial crisis. They remain concerned about the high
leverage ratios of financial institutions, the potential reemer-

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