The Role of State‐Owned Enterprises in an Artificial Monopoly Market: The Case of Turkey

Bora Coşar, Hakan Yilmaz and Erkut Altindağ

American Journal of Economics and Sociology, 2019, vol. 78, issue 5, 1171-1199

Abstract: State‐owned enterprises (SOEs) benefit from many privileges based on their unique structure, their substantial capital, and their position in the economic system. Like all business corporations, they have no fixed duration, which makes them effectively immortal. In addition, they are adjuncts of the state, which enables them to survive in noncompetitive markets with little effort. Therefore, under today's ruthless global market conditions, SOEs engage in unfair competition with privately financed businesses. By relying on their identity as state operations, they do not follow the rules of the market—they define those rules. In addition to SOEs, which are direct arms of the state, some privately financed businesses dominate markets in which the state allows them to develop an artificial monopoly and thus increase their power day by day. These artificial monopolies distort market processes and create conditions that frequently give rise to corruption. This study examines the problems associated with monopolies, with a special emphasis on establishing more efficient market structures for SOEs in Turkey. The original mission of SOEs was to balance markets through regulation and to be transparent and accountable to the public. Simply striving to meet those criteria would go a long way toward preventing the abuse of power and unfair competition. In addition, SOEs and artificial monopoly markets distort public institutions by promoting rent‐seeking behavior that corrupts politics and blocks innovation from potential competitors. Privatization has been employed by international financial institutions in recent decades, but it has mostly transferred monopolies from the public sector to private owners, which has made the problem worse and done little to enhance competition. Establishing genuinely competitive economies will require a new political culture around the world.

Date: 2019
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