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SOS, SOEs!
ANY SOE WHICH ENTERS THE MARKET WITH SPECIAL PRIVILEGES (TAX RELIEF, DISCOUNTED ACCESS TO SCARCE RESOURCES, REGULATIONS THAT ARE TAILORED TO FIT SOEs) CAN EVENTUALLY BE CONVERTED INTO A GOVERNMENT MONOPOLY, WHICH ALLOWS THEM TO FORGET ABOUT EFFICIENCY
Moreover, as market prices permanently change, a SOE can be accused of simultaneously underestimating and overestimating the prices. That is especially easy after some years from the moment when prices were used. It can be difficult to prove what the market prices were, and somebody can still
label the differences between market and SOE prices as huge (or claim that the prices were bad for customers). In fact, accusing the prices of being wrong is easier and more frequent. Quality claims require a higher expertise, but accusations of wrong quality or design can be much easier, though more difficult to prove. 2. Risk-taking SOEs are ordinary companies and they operate in a competitive environment. Although they sometimes operate in sectors with few or no direct competitors, consumers can always look for alternatives. Therefore, for SOEs, nothing is guaranteed but government and treasury backing with protection, subsidies, and bailouts. The two sources of risks SOE managers undertake in seeking closer relationships with the government, rather than trying to please customers, are bribery and political corruption in exchange for special privileges. 3. SOE as a monopoly Any SOE which enters the market with special privileges (tax relief, discounted access to scarce resources, regulations that are tailored to fit SOEs) can eventually be converted into a government monopoly, which allows them to forget about efficiency. Governments attempt to defend their policies (including maintaining SOEs) with many arguments. They try to invent different reasons for the importance of SOEs and introduce special legislation to save them from competition. One of the examples of such interventions are so-called “natural monopolies�. It is believed that there are some mar-