WHEN Jeremy Corbyn unveiled his Labour manifesto ahead of the recent British election, opponents gawked at pledges to renationalise the postal and rail systems. Such enthusiasm for state ownership smacks of a philosophy long since abandoned by leaders on both left and right. Despite Labour’s decent electoral performance, nationalisation is not everywhere on the march; on June 5th Donald Trump made public his desire to privatise air-traffic control. But the rise of Mr Corbyn and Bernie Sanders hints at a weakening of the rich-world consensus that the less of the economy owned by government, the better. That is a pity. Expanded state ownership is a poor way to cure economic ailments.

For much of the 20th century, economists were open to a bit of dirigisme. Maurice Allais, an (admittedly French) economist who won the Nobel prize in 1988, recommended that the government run a few firms in each industry, the better to observe the relative merits of public and private ownership. Economists often embrace state control as a solution to market failure. Since there is no way to provide national security only to citizens who sign up to pay for it while denying it to the rest, it requires a government with the power to tax to provide defence. In cases of natural monopoly, in transport and telecommunications, nationalisation is an alternative to allowing a dominant firm to use its market power to overcharge for subpar service. And state control looks attractive when private markets are bad at providing universal access to critical services. Private schools or health insurers have an incentive to skim off the best-prepared students and healthiest patients, and to deny services to harder cases, creating a large pool of people that cannot profitably be served.

But in the 1970s economists came to see state ownership as a costly fix to such problems. Owners of private firms benefit directly when innovation reduces costs and boosts profits; bureaucrats usually lack such a clear financial incentive to improve performance. Firms with the backing of the state are less vulnerable to competition; as they lumber on they hoard resources that could be better used elsewhere. Inattention to cost-cutting is not always a flaw. Oliver Hart, co-winner of last year’s Nobel prize for economics, pointed to private prisons as a case in which profit-focused managers might accept a cost-efficient decline in the welfare of prisoners that society would prefer not to have. Yet economists saw in the productivity slowdown of the 1970s evidence that an overreaching state was throttling economic dynamism. Mr Corbyn first won election to parliament when the Tory government of Margaret Thatcher, inspired by Milton Friedman, was busily selling off bits of state firms like British Leyland (the nationalised carmaker), British Airways and what was then called British Petroleum. Other governments followed suit although public assets in most countries remain large (see right-hand chart).

State-owned firms pose risks beyond that to dynamism. Government-run companies may prioritise swollen payrolls over customer satisfaction. More worryingly, state firms can become vehicles for corruption, used to dole out the largesse of the state to favoured backers or to funnel social wealth into the pockets of the powerful. As state control over the economy grows, political connections become a surer route to business success than entrepreneurialism. Even botched privatisations can improve governance in corruption-plagued emerging economies.

If antipathy to nationalisation is fading, however, that has less to do with newfound confidence in state competence and more with disappointment in private business. Although studies typically find that countries with more of the economy under state control grow more slowly than those with less, much of the rich world—including enthusiastic privatisers like America and Britain—is limping through productivity doldrums. High corporate profits suggest that private markets are not hotbeds of cut-throat competition. Recent economic growth has done more to enrich shareholders and a small set of highly skilled workers than the public as a whole. Tech dynamos like Google and Facebook delight consumers, but these companies increasingly wield unsettling economic and social power. Both the financial crisis and growing suspicion of Silicon Valley fan suspicions that private ownership is not a sure way to advance the public good.

Modern forms of public ownership are designed to look more benign than the old models. The new nationalisation might involve governments sitting quietly in the boardroom, grabbing a share of profits for the public purse and reminding firms not to neglect their social responsibilities, while leaving enough shares in private hands to harness the benefits of red-blooded capitalism.

Hire, not fire

Even this modest version of state capitalism could disappoint. Shared ownership, even at small scales, has the potential to blunt competition in ways that harm consumers. The rise of large asset managers, like BlackRock and Vanguard, means that huge stakes in firms representing much of the stockmarket are controlled by a few passive investors running money for private savers. Recent research suggests that this concentrated ownership may be bad for competition. As a result of common ownership of airlines by asset managers, for instance, fares are estimated to be 3% to 5% higher than if ownership were more dispersed.

Some on the left might see higher prices as an acceptable cost for a reduction in corporate power (and it is hard to imagine service at some airlines getting worse in public hands). Yet there are other risks to consider. China’s state-owned sector is proving difficult to shrink in part because it accounts for so much employment. Governments trying to deliver good jobs may be tempted to lean on state-controlled firms to hire more staff, particularly in countries with powerful public-sector unions. Consumers and taxpayers would bear the costs of such bloating. Corporate power, inequality and underemployment are all real worries. Expanding state ownership is the wrong way to tackle such ills.

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