Are Government-Backed Corporations Inherently Less Profitable?

The popular attack of government-backed enterprises is that it encourages inefficiency and takes the enterprise’s focus off of profit. Is that true?

In the cases where the corporation must have other social agenda (promoting social welfare as a general goal), government backing definitely encourages that. Now, they have a large financier for any social task that is conducive to the government’s goals, whatever they may be (Think: Samsung and Korea).

In other cases, is that attack true? Think back to the bailout days when banks left and right got money (but with strings) from the treasury. In response, the companies clamored to climb back to profitability in order to pay back the treasury and drop any suggestions that they were acting against the interests of the taxpayer.

And just now, after GM is 60% nationalized (Yup, we own 60% of GM now), it announces that it “cannot afford business as usual,” implying that it could prior to nationalization.

Clearly, it is not always the case that having government backing for some enterprises or industries is the worse way of organizing economic activity, and in many cases it is the better way–for industries that have significant national impact or cannot sustain themselves.

Samsung could not have achieved a fifth of Korea’s entire GDP and a third of its trade volume without the backing of the South Korean government. Given the facts, America should reexamine its fears of national industries, say, starting with health, insurance, and energy.