AGR : Authoritarian Governance Regime

Authoritarian Governance Regimes are those where the state dominates the listed corporate sector either through direct control or via a capability and propensity to intervene directly in the private sector.


Equity markets

Usually dominated by state-controlled companies, some of which may be re-nationalised formerly private companies. Equity market is usually small relative to GDP (China is a notable exception) and is usually only used as a financing mechanism when it can be done on the government’s own terms. Listed state-controlled companies will almost always place political considerations above the interests of external shareholders. A disproportionate number of AGRs consist of economies and markets, which are centred around the production of commodities, with China and Vietnam being the most obvious exceptions. There is usually a very low level of external accountability and financial transparency while the blurred boundaries between the state and private sectors, often leads to a very high level of rent seeking by politicians and managers alike.

Some AGRs are democracies though most are not and even when elections do take place they are not always free and fair. Market forces play a subordinate role in determining the allocation of resources. Privately controlled companies generally play second fiddle to SOEs in the more capital-intensive industries, although not necessarily in the more consumption related sectors. Both the economy and the corporate sector are subject to relatively arbitrary intervention, which in extreme cases can amount to confiscation. Much of the media, increasingly including social media is monitored and/or controlled by the state. Central banks are rarely able to take decisions independently of political factors.

Broader economy

and potential change factors

AGRs can better mobilise financial and economic resources at an early stage of economic development for example to facilitate urbanisation or in times of war or demographic stress. Outside these circumstances however, AGRs are generally inefficient at allocating resources as the absence of a systematic mechanism for creative destruction can lead to economic and financial stresses even if the degree of external dependence is relatively low. When external economic and/or financial circumstances change, there is no market-driven adjustment mechanism, although some non- democracies such as China have been able to implement contra-cyclical economic policies precisely because they have coercion mechanisms in place and do not have to worry about electoral considerations. AGRs also have very low levels of external transparency and give rise to blurred boundaries between the state and the private sector, often leading to systemic corruption.

United States