Sunday, February 05, 2012

The privatization trap - The 99 Percent Plan -

The privatization trap - The 99 Percent Plan -
"Rather than solving problems with government, privatization often amplifies those issues to new extremes. Instead of unleashing market innovation, it often introduces new parasitic partners into the decision-making process. Instead of providing a check on the power of the government, it allows the state to circumvent constitutional and democratic accountability measures by merging with the private sector. And ultimately, the practice replaces the set of choices and constraints found in democracy, with another set found in the marketplace. Today’s political conversation is blind to these problems out of a mistaken faith in the efficiency and fundamental equality of markets, contrasted to the ineffectiveness and corruptibility of the state."
Mike Konczal takes privatization apart and shows how it turns out in practice.


Anonymous said...

The January 21st 2012 edition of The Economist devoted 14 pages to several articles about "The Rise of State Capitalism" and state-owned enterprises (SOEs).

With the West in a funk and emerging markets flourishing, the Chinese no longer see state-directed firms as a way-station on the road to liberal capitalism; rather, they see it as a sustainable model. They think they have redesigned capitalism to make it work better, and a growing number of emerging-world leaders agree with them. The Brazilian government, which embraced privatisation in the 1990s, is now interfering with the likes of Vale and Petrobras, and compelling smaller companies to merge to form national champions. South Africa is also flirting with the model.

In "Mixed Bag", the author writes that

State capitalism’s most obvious achievements are in infrastructure.
State capitalism has also enjoyed some success in tackling second-generation infrastructure problems such as building the information superhighway and mandating higher environmental standards. China’s mobile-phone network is the world’s largest, yet it suffers from fewer dropped calls or areas with no signal than America’s.
An OECD paper in 2005 noted that the total factor productivity of private companies is twice that of state companies. And a study by the McKinsey Global Institute in the same year found that companies in which the state holds a minority stake are 70% more productive than wholly state-owned ones.
But poor productivity has not stopped them from making lots of money.
The SOEs are recreating the old “iron rice bowl” (jobs and perks for life) with modern materials.
Yet there is little chance that state companies will be reformed soon. They provide comfortable berths for leading politicians and their children and hangers-on.

Admiral Ackbar said...

It's a trap!