Today we are witnessing a massive proliferation in the number of new parastatal entities around the world. Such bodies are variously referred to as government-owned corporations, state-owned companies, state enterprises, publicly owned corporations, government business enterprises, or quasi-governmental nongovernmental organizations. Parastatals are wholly or partially publicly owned but often privately managed; they include wealth funds, extractive companies, utilities, administrative and judicial centers, export-processing zones, and urban-development authorities that run—with little or no democratic scrutiny—some of the most important pools of money and sites of growth. It is precisely in authoritarian-capitalist China and the petro monarchies of the Middle East that one finds the greatest number of parastatal. Power diffusion continues even in the shadow of strength.
The Rise of Hybrid Governance
The age of hybrid governance is already upon us. China today is a hybrid of 19th-century communist ideology and 21st-century capitalist practice, yet it stands on the cusp of becoming the world’s largest economy. Asian state capitalism is actually a centuries-old European practice dating back at least to the government of Victorian Britain, which gradually brought the British East India Company under its direct supervision and control over the course of the 19th-century, absorbing all of its colonies and wealth. Could China’s state-owned companies and banks today—with their expansive operations and lending across the developing world—be the East India Company of the 21st-century?
Is Hybrid Governance Better Governance?
It should come as no surprise that parastatals have emerged to unite whatever political will exists in the public sector with whatever resources can be corralled from the private sector. The post–Cold War period has witnessed dozens of ineffective and populist democracies, from Argentina to Greece to Thailand, as well as postcommunist states and postcolonial states still struggling with ossified public sectors.
There is no doubt that the current wave of parastatals has dramatically improved the efficiency of governance and thus represents to some extent the triumph of technocracy over democracy. The question thus becomes what impact will they have on accountability. Indeed, to a large extent each parastatal has a unique bureaucratic structure and legal mandate that makes its authority specific yet opaque and its management structure clear but detached from democratic oversight. Even if parastatals do not reflect a deliberated “will of the people,” at their best they can be stewards of Rousseau’s “general will,” improving companies that mobilize and empower struggling societies.
Parastatals have clearly become the tool of choice for governments to modernize governance and manage globalization. Despite the lack of public scrutiny, they have proven to be effective vehicles for harnessing scarce financial and managerial resources. Furthermore, as international competition for investment intensifies, increasing numbers of states are likely to take the path of parastatals to promote their attractiveness to the outside world. Governance has never ceased to be a competitive arena. Exporting parastatal models—whether Singapore’s land-management authority, Rotterdam’s port, or Songdo’s smart city—is a new economic and commercial field. Parastatals are spreading faster than any other institutional form because they have been successful in the absence of alternatives—and are competitive today, even against more democratic options.
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