National Champions, Global Victims: The Dirty Logic of State-Protected Monopoly -By Fransiscus Nanga Roka

Whenever states protect domestic companies and that can mean shielding state firms as well, subsidizing ones they like or throwing regulatory walls against foreign competition, they tend to sing of the national interest. But far more often that this is not economic strategy. This is patriotism disguised as state-sponsored market distortion.

The term national champion has a ring of nobility. It also evokes competence, a sense of purpose and steadiness. Yet in practice, however, it often represents something far less respectable: a politically-secured business sheltered from true competition and sustained by the public purse as well as enfeebled to dominate markets that should remain open, fair and contestable. It also comes at a cost not just to foreign rivals, but ultimately consumers and taxpayers as well and the integrity of the rules based worldwide trading system itself.

State support, however, is not simply an issue of backing domestic development through things like large subsidies to national firms and privileged access to credit or preferential regulation or guaranteed procurement. And it is preemptively redesigning competition. Private foreign actors can jockey to get in, theoretically but on the ground they face an opponent armed with not only wealth but also the coercive and fiscal apparatus of government. That is not competition. It is a result engineered politically.

It is particularly corrosive when state backed enterprises participate as both commercial actors and implements of policy. In contrast, they can tolerate losses longer than private companies and win clients at a loss for political purposes while entering sectors where profit is secondary to great-power rivalry or domestic politics. Foreign competitors are then presumed to compete on the basis of market rules against firms untethered from those same market disciplines. This type of asymmetry erodes any claim to competition being held on a fair and level playing field.

Advocates of these measures frequently appealed to development, sovereignty or strategic autonomy. Sometimes these concerns are legitimate. Even among serious observers, there is no denying that states might be required to exercise protection on critical infrastructure or energy security and essential public services. But that argument has become dangerously malleable. Within its cover almost any intervention is justifiable: a government can hope to preserve inefficiency, entrench corruption and exclude better competitors.

The outcome is an American economy less and less driven by merit, innovation or efficiency but rather political patronage in many places around the world. Countries gain not because they are better at serving consumers, but more often than not by being closer to power. Bureaucratic protection replaces competitive merit. Public funds reward us for market dominance instead of public value. When goliath firms expand overseas, they transport to other countries the domestic distortions that enabled them to begin with.

The victims are not abstract. Smaller private companies are squeezed out before they can expand. Closed doors, disguised as regulation for international investors. Essential products become less useful, with fewer choices and slower innovation; the price is paid not at check-out but in hidden costs. It allows for monopolies that could not survive without indefinite help from the state which taxpayers are forced to pay. And governments preen about defending sovereignty while discreetly eroding productivity and accountability.

The moral camouflage of state-protected monopoly makes it particularly dangerous. Whereas private monopolies are openly attacked, state sponsored domination is shrouded in the cloak of national pride. Turning an questioning it is branded treachery. It is framed as capitulation to regulate it. But this makes reform politically more difficult, even when economic harm is evident.

The international system should not carry on pretending that this is a trivial aberration. It is a systemic risk to equitable commerce and competitive neutrality. If governments wish to promote sectors of strategic significance, they should do so transparently and in a proportionate manner under rigorous legal frameworks. Subsidies should be disclosed. Procurement rules should be scrutinized. Patriotic exemptions should not apply to state-owned enterprises competing internationally; hard constraints should. And trade law has to be much less timid in addressing state supported monopoly power.

Hiding inefficiency behind flags does not build a stronger nation. More chronically absent, smug and reliant on political shelter. It is institutions that prize performance, competition and accountability which are the real foundation of economic strength.

The dirtiest trick of state protected monopoly is selling privilege as patriotism. However, when markets are indeed rigged in the name of a nation then sooner or later that very thing like our own country ends up bearing consequences for all this.

Fransiscus Nanga Roka

Faculty of Law University 17 August 1945 Surabaya Indonesia