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Until recently, relatively little attention was paid to states’ balance sheets. Measurement and reporting were neglected. Even today, states’ liabilities receive considerable attention, while their asset sides receive significantly less.

In an earlier era, states owned substantial industrial assets. This “commanding heights of the economy” model was rejected largely because it seriously under-performed, especially when state-owned sectors were protected from competition (as was the norm). Efficiency declined. But, more important, the absence of entry and exit by firms, a key ingredient of innovation, caused dynamism to suffer and losses to grow over time.

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