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Privatisation - A Delusional Perfection

The world has enough for everyone's need but not enough for one man's greed – Mahatma Gandhi

Incident 1:

It was 2004, and I was in Tunisia on a ship. Being a new sailor on the job, everything excited me. I was always the first to leave the ship when it reached the shore and always the last to return. New places and new people excited me still more. My ship was brought along the jetty by two tug boats, and we were awaiting our shore passes from the captain. I was on the open deck looking around this typical place that had not let go of its vintage architecture just about anywhere. Holding onto my oversized cup of coffee, I was moving along the deck to look around the neighbourhood when I noticed a small ferry ship that was busy loading its cargo.

Although it is a routine thing one gets to watch at any harbour, this particular ferry got my attention. The cargo that got loaded started with big barrels of lubricating oil, then came the big consignments of machinery in boxes, followed by big carton boxes holding utility items. This loading continued until there was hardly any space to manoeuvre. Despite that, more items like courier covers and flower bouquets kept pouring to fit into the little extra spaces between the boxes. Finally, after all of this, pet animals and chickens were onboarded. They were expected to find a place for themselves or remain on top.

Although this process took a lot of time, the one thing that fascinated me more was that only two young boys were employed to carry out all these activities. One looked strong while the other was a bit on the weaker side, yet he managed well to accomplish the job. When I thought their loading was over and they were about to start their journey, the two boys wore oversized suits and rushed to their ferry's entrance. A black Rolls Royce stopped in front of the ship, and a family of four headed by a tall, heavily suited man got out of the car. They were welcomed by a welcome drink by these two boys and were escorted safely into the ship, probably into a luxury cabin reserved for the elites.

As I watched this, I felt a little tap on my shoulders. I turned back and noticed that my captain had joined me on the open deck. He wondered how I resisted getting out of the ship while the ship was already on the jetty. Giving an acknowledging smile, I informed him I had some more crew to join me later that day. More importantly, I was hooked to the unusual loading activity on that little ferry behind our ship.

He smiled and told me, "Well, I remember seeing the same ship over a decade back, and things were different then."

I kept looking at him, expecting him to speak more.

"Those days, despite the ship being in prime condition, the cargo was never filled to the brim like this. It also had special provisions to transport needy people for free. And interestingly, I could have easily spotted at least a dozen employees working on the cargo those days."

"Then why is this happening?" I was concerned.

The captain smiled and said, "The government ran the ferry themselves those days, and now they have handed them over to private players to manage."

As I tried to make sense of his words, he said something to me before returning to his duty. "Son, trust me, we are lucky. For all I can see, the future ships will have just a dog and a man."

I was taken aback by this sudden statement and asked. "What would they do?"

"Well, the dog's job is to take care of the man, and the man's job is to take care of the dog." He smiled and walked away without telling the ultimate truth: the future private ship won't need them both anyway.

Incident 2:

Sometime back, I had an opportunity to meet the Managing Director of a top Government Enterprise. Despite being in a top post, he was humble and friendly. Our conversation, which started with the basic premise of the department's general work, eventually deepened as we began discussing just about anything and everything under the sun. Our opinions on events and people started to get reflected, and that was when our discussion opened about the BSNL, the public telecom company. I had my apprehensions about how BSNL was treated and how it was left to die a natural death with no support from any side. He, however, had different opinions.

The first question he asked me was if I was using the BSNL network for my calls. Unfortunately, I wasn't, as I was resorting to a private carrier. This gave him a further boost to prove a point which he was doing rather enthusiastically. He told me that the customer is the king, and when he is not served to his satisfaction, there is no point sticking to it, no matter what. Unable to resist his argument, I acknowledged his words which led to the diversion of the topic, much to my satisfaction.

He started speaking about his humble roots. He was born and raised in a remote village in South India, and his father was a farmer. He was among the eight siblings who struggled to come up in life, considering his family's financial status and the remoteness of the village he was living in. Going by his words, if there was something that made him reach his life's height was the education and the midday meal he received from the small government school, the health care he received from the small government primary health care centre in that village and finally but most importantly the low-interest agriculture loan his father received from the only government bank situated in that region which made his life's table turn.

While taking leave, I thanked him for his time and his perspective. I couldn't ask him the most critical question I had in mind to the person who was on the verge of his retirement. "How would your life have changed if there were no government facility in your village then?"

I presume he would have hardly bothered to give an honest answer.

Why is Privatisation a delusional perfection?

It is unfortunate that Privatisation is often referred as a solution for eliminating imperfection in a state-owned setup. However, most people fail to notice that flaws remain in every sector. It is that the government setups are transparent while the rest are not. One believes he has all the right to question a government setup but not elsewhere. Once everything gets privatized, this only opportunity to even ask something gets muted in the capitalist economy, where a commoner loses his ability to question or bargain.

Corruption is another point raised in favour of Privatisation. Without a pinch of guilt, I can assure corruption in a private setup is as rampant as in the Govt setup. The difference is that one is transparent, and the other is not. If we consider the UK, one can argue that the increasing inequality of the eighties was partly due to privatization. The Government was selling off state assets (owned by everyone) to a wealthier subset of the population, thereby increasing the gap between the rich and the poor.

Adding further, standard economic models of privatization imply that new private owners raise productivity and reduce costs, potentially resulting in job losses and wage cuts for workers.

I must also mention some other issues below that go against Privatisation.

  • You pay more as a taxpayer and directly when public services are privatised.

  • You can't hold private companies accountable

If a private company runs a service, they are not democratically accountable to you. You don't have a voice. Contracts to deliver public services are agreed upon between private companies and the Government behind closed doors. There is very little transparency, public accountability, or scrutiny. The companies are not subject to Freedom of Information requests because of 'commercial confidentiality.

  • When private companies fail to deliver, the public has no powers to intervene, and Government (local and national) doesn't always have the time or expertise to force them to keep their promises.

  • In a privatised service, profits must be paid to shareholders, not reinvested in better services. Interest rates are higher for private companies than they are for Government. Plus, there are the extra costs of creating and regulating an artificial market.

  • Private companies cherry-pick services

Private companies cherry-pick the profitable bits of service to make as much money as possible. For example, bus companies will only run services in busy areas, so rural communities lose out unless the Government steps in with a subsidy. It's more efficient to run public services in public ownership so that profits can be reinvested across the whole network as needed.

  • Privatization in some sectors where there is low competition may lead to the monopoly of a single private firm. Having a monopoly over a particular sector, the firm gets a free hand to compromise its quality, fix higher price rates, etc., to churn out large profits. On the other hand, a government-run agency would have prioritized public interest over profit.

  • Private companies dealing mainly in public welfare sectors like health, education, banking, and others are more profit-oriented than welfare-oriented. This dearly costs the ordinary person in the form of excessive taxes, higher prices, and a poor state of quality and services.

  • Privatization slips the power of financial and other managerial decisions out of the Government into private hands. This means that the Government has limited or no say in the company's decisions; neither can the Government impose much regulation over the functioning of the company or its policies.

  • Privatisation creates a divided society

Public services are essential to meet everyone's basic needs, so we can all be part of the community. Schools, Hospitals, and Banks are not optional extras. We all need and rely on public services - they are universal. That means they need to be accessible and high quality for everyone.

  • Privatisation often goes hand in hand with encouraging more affluent people to pay more and opt out of the services we all use. This leads to division, making it harder to provide excellent public services for everyone.

  • Private firms, out of the Government's regulation and control, may look out for short-term gains, compromising long-term future projects. This forces the companies to invest in short-term beneficial projects rather than long-term ones.

  • Privatization might lead to the breaking up of one giant company into several other relatively small enterprises. This fragmentation ultimately decreases efficiency and also reduces accountability in the management. Companies throw the responsibility for any losses onto each other and try to escape responsibility.

  • Privatisation means less flexibility

Councils and government departments are responsible for meeting the needs of the public – but Privatisation means less flexibility for changing circumstances.

  • Privatisation is risky

If private companies are running our public services and are too big to fail, the public has to pick up the pieces when things go wrong.

Is there any good in Privatisation at all?

No matter what, private companies and institutions will thrive based on market demands and regulations. The problems will only arise if there is no alternative from the Government, especially in the essential services. If even they get privatized, then we are entering the red zone.

New-age Privatisation is still more dangerous where a single entity gobbles the smaller start-ups and companies to become a unicorn leading to further distress in the growing economy. This is becoming evident, especially when you see a company recording 1120 per cent growth in just about three years, creating the world's second-biggest billionaire.

Government has no business to be in business. Really?

I remember a joke in a Tamil movie where the comedian spends quite some time describing the recipe of the food item he wants to eat to the server in a hotel. He looked forward to the same explanation being communicated to the chef by the server. However, the server simply says one onion uthappam (name of the food item) to the chef and moves on to the next table, making the comedian stare at him in despise.

Well, jokes apart, isn't this happening when the Government gives a blank statement citing, "Government has no business to be in business." And by the way, this is not a joke.

Isn't the basic welfare service like education, healthcare, water, electricity, and financial upliftment the job of the Government? And if this is not their business, what business do they have other than dealing with the welfare of the people?

There is enough corporate already in the country; hence, we need good governance from the Government that cares for its people with good reforms.

Women and Privatisation

If there is one thing that makes women of this country raise their heads in pride is their position in the government setups across the nation. Anything detrimental here in line with Privatisation can cause a severe blow to their future and the nation's future. I am a firm believer in this, and I have written more about Women and their growth impact on Privatisation. Check it out here.

Privatisation - The One Man

A Government firm is something that operates for something beyond profit. It homogenizes all the differences and aims for the overall welfare of the country, its people, and its economy. Given its scale, inefficiencies and discrepancies are unavoidable. It's a work in progress, and I am sure with the help of technology and honest young minds, we will reach the pinnacle of growth very soon.

Private Firm – It all ends up in the hands of that one person. He can move hills and earth to get profit. Similarly, he won't bother moving an inch if there isn't anything that doesn't serve his interest.

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