Public enterprise in the modern western world: an historical analysis

The aim of this paper is to explain the pattern of public enterprise in Western Europe, Japan and USA in the late 20th century, just before the onset of privatisation. It is argued that this requires an understanding of the origins which date from the early 19th century. The task then becomes one of explaining differences over time and across countries. The focus is on those enterprises levying prices and required to break even financially. A common misconception is that the establishment of such public enterprises at both the state and municipal level was a device for overcoming problems of natural monopoly and/or a socialist instrument for mitigating worker exploitation. It is argued that the former was mainly dealt with by arms’ length regulation and that socialist forces were limited. The key questions that have to be answered and around which the paper is organised are: why was public enterprise common in grid networks; why were state owned enterprises in manufacturing more common in Germany, Spain, Italy; why were USA and UK (up to 1939) different; was municipal and state socialism important; what does the privatisation experience tell us about public enterprise; what do performance studies reveal? The answer is that public enterprise was often an instrument for promoting social and political unification, securing national defence and related strategic considerations, increasingly in the 20th century for promoting economic growth, with regulatory failures and socialist pressures playing a more subsidiary and/or occasional role.