Economists generally use the term crowding out to describe the way in which Government spending can reduce private sector activity. However, the term can also be used more broadly to describe the way in which any form of Government support can reduce - crowd out - other activity.
In Australia, the provision of Government guarantees favoured the bigger banks. This support may have been necessary, but the end result was a big bank dominance of the Australian financial system at a level not seen since the 1950s or 1960s. In China, Michael Pettis suggests that one effect of Chinese Government stimulus support was to enhance the position of the SOE (State Owned Enterprise) sector at the expense of small and medium business.
I am phrasing all this in broad terms because crowding out is actually a very useful concept in describing the way in which Government activities that favour one sector or activity can affect other immediately related sectors.
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