Call it what you will — privatization, deregulation, denationalization — it amounts to one thing only: the conquering force of the market has returned. State controls are out, private initiative is in.
In principle, this belated development is to be heartily welcomed. The collapse of bureaucratic socialism is best exemplified in the failure of a superpower like the Soviet Union to provide bread for millions of citizens. But before we prostrate ourselves in front of the market, dreaming of pots of gold for everyone at the end of the rainbow, we might pause to consider some nagging means and ends.
Mr Sartaj Aziz intends to ‘privatize’ 115 public sector corporations in the space of eighteen months. Considering that a tenacious privatizer like Mrs Margaret Thatcher could only manage 14 companies in as many years in the UK, this is breathless pace indeed. Which, of course, is precisely the occasion of a new set of nasty problems.
The Muslim Commercial Bank deal provides a perfect instance of thinking before leaping. Stonewalled by the law courts on account of bumbling governmental methodology, this show-piece case has unnecessarily breached public confidence and embarrassed the Prime Minister. Another 10 banks are lined up for delivery into private hands. But the recently established ‘point-system’ method for privatizing these inadequate and doesn’t preclude further controversy.
In its headlong rush to flog a good idea, the government has paid scant attention to a plethora of complexities which lie ahead. Unlike other countries also attempting to moderate their lumbering state sectors, our government has carried out no preliminary investigations or detailed case studies. The thinking clearly is that we should get on with it, and cross the bridges when we come to them.
This is dangerous reasoning. A host of major consequential and practical questions remain unanswered. In what way is the ‘denationalization’ of certain companies going to differ from the ‘privatization’ of others in the kitty? What will be the status of the original owners’ vis a vis new bidders? Is the government building-in secure guarantees against private monopolization in any region, province or sector? What is the appraisal system for different projects? Are there any simultaneous plans to retrain and absorb the resultant pool of labour released in the wake of privatizing certain industries? In short, what are the rules of the privatization game?
If, for one reason or another, the government is inclined to fudge or ignore these rules, a bureaucratic logjam of disastrous proportions may be on the cards. High expectations will flounder on the rock of poor performance, implicit faith diminish in the context of specious methodology. All the PM’s good intentions could drown in a murky sea of unsavoury suspicions of political favouritism and broken promises.
Assuming, however, that the government does manage to stumble through a large chunk of its bare ‘marketing’ plans without too many deleterious effects, we must still ask ourselves whether such a policy will provide the sufficient conditions for growth of our economy. And here, regrettably, there is even less room for optimism.
Left to itself, in the absence of institutional and financial discipline, the market is a notoriously inequitable and wasteful allocator of scarce resources. Efficient profit maximisation in the short-term conflicts with equitable growth maximisation in the long-run. Regional disparities are exacerbated, labour loses out to capital, the environment is threatened and squalid unbarnisation is the result. If anarchic privatization is unleashed without the framework of a comprehensive plan, without an accompanying rationalisation and enlargement of the resource base of taxation, without large scale investments in the infrastructure of roads, communications and energy, without a pruning of wasteful expenditures, its potential gains can all too easily be frittered away.
Marketing the profitable state sector is easy. Marketing the unprofitable units will require ingenuity. The bureaucracy will create hurdles. But, by hook or by crook, it will certainly make for tons of money in the PM’s treasury. If the exercise is limited to marketing the industrial units rather than marketing the concept of planned, long-term, rational economic development, all is lost already. The government may succeed in mopping up billions of rupees in FEBCs and ‘black’ money. But if the idea is to use this one-shot in the arm to opportunistically combat the current budget deficit rather than construct an elaborate savings and investment climate in the country, we are doomed.
If the ‘privatization’ dividend of billions is squandered away, within a couple of years the deficits will loom larger and we will be forced to borrow afresh. The economic mess will be worse than ever before. We will have nothing to fall back on. And the expected bonanza from a long overdue restructuring of the economy will have perished prematurely.