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The
Three Pillars of Washington Consensus – Privatization or
Briberization?
‘Austerity, Privatization and
market liberalization were the three pillars of Washington
Consensus advice through out the 1980s and 1990’ - says Joseph
Stiglitz.
But privatization to what end?
Stiglitz makes a point, ‘The IMF argues that it is far more
important to privatize quickly; one can deal with the issues of
competition and regulation later. But the danger here is that a
vested interest has been created, it has an incentive, and the
money, to maintain its monopoly position, squelching regulation
and competition, and dictating the political process along the
way …Whether the privileged monopolies are more efficient in
production than government, they were often more efficient in
exploiting their monopoly position; consumers suffered as a
result’ (p.56).
Unlike many other intellectuals,
Stiglitz expresses his concern for the workers and unemployment.
He writes, ‘Privatization has also come not just at the expense
of consumers but at the expense of workers as well. The impact
on employment has perhaps been both the major argument for and
against privatization, with advocates arguing that only
through privatization can unproductive workers be shed, and
critics arguing that job cuts occur with no sensitivity
to the social costs……Privatization often turns State
enterprises from losses to profits by trimming the pay roll.
Economists, however, are supposed to focus on overall
efficiency. There are social costs associated with employment
which private firms simply do not take into account (emphasis
original). Given the minimal job protections, employees can
dismiss workers, with little or no costs, including at best,
minimal severance pay. Privatization has been so widely
criticized because, unlike so-called Greenfield investments –
investments in new firms opposed to private investors taking
over existing firms. Privatization often destroys jobs rather
than creating new ones.’. (p.56-57, emphasis added).
All credit to Stiglitz that he
mercilessly unmasks the disastrous effects of privatization on
the workers in the developing countries. He correctly says, ‘In
industrialised countries, the pain of lay offs is acknowledged
and somewhat ameliorated by the safety not of unemployment
insurances. In less undeveloped countries, the unemployed
workers typically do not become a public charge, since there are
seldom unemployment insurance schemes. There can be a large
social cost nonetheless – manifested in its worst forms, by
urban violence, increased crime, and social and political
unrest. But even in the absence of these problems, there are
huge costs of unemployment. They include widespread anxiety even
among workers who have managed to keep their jobs, a broader
sense of alienation, additional financial burdens on family
members who manage to remain employed, and the withdrawal of
children from school to help support the family. These kinds of
social costs endure long past the immediate loss of a job. There
are often especially apparent in the case when a firm is sold to
foreigners. Domestic firms may at least be attuned to the social
context and be reluctant to fire workers if they know there are
no alternative jobs available. Foreign owners, on the other hand
may feel a greater obligation to their share holders to maximize
stock market value by reducing costs, and less of an obligation
to what they will refer to as an “over bloated labour force”
(p.57).
Stiglitz’s findings are very
correct and this is what is experienced by the trade union
movement, left political parties and radical masses and that is
why unemployment has been a focal point in the
anti-globalization struggle. But one point needs to be clarified
here. Stiglitz distinguishes between the attitude to job cuts
between the indigenous capitalists and the foreign capitalists
so to say the MNCs. But the fact is that since job cuts
tremendously increases the profit margin of the capitalist
owners, be it indigenous or foreign, thus even the indigenous
capitalists have practically no qualms in resorting to job cuts
and along with the foreign capitalists, the indigenous
capitalists also complain of ‘Over bloated labour force.
But Stiglitz makes the most
devastating criticism of privatization when he deals with
corruption associated with privatization.
According to his own experience
and study, ‘Perhaps the most serious concern with privatization,
as it so often been practiced is corruption. The
rhetoric of market fundamentalism asserts that privatization
will reduce what economists call the “rent seeking” activity of
Government officials who either skim off the profits of
government enterprises or award contracts and jobs to their
friends. But in contrast to which it was supposed to do,
privatization has made matters so much worse that in many
countries today privatization is jokingly referred to as
“briberization”. If the Government is corrupt, there is little
evidence that privatization will solve the problem. After
all, the same corrupt Government that mismanaged the firm will
also handle the privatization. In country after country,
government officials have realized that privatization meant that
they no longer needed to be limited to annual profit skimming.
By selling a Government enterprise at below market price, they
could get a significant crunch of the asset value for themselves
rather leaving it for subsequent shareholders. In fact they
could steal today much of what would have been skimmed off by
future politicians. Not surprisingly the rigged
privatization process was designed to maximize the amount the
government ministers could appropriate for themselves, not the
amount that would accrue to the government treasury, let alone
the overall efficiency of the economy. As we will see, Russia
provides a devastating case study of the harm of ‘Privatization
at all costs.” (p.58 emphasis added).
This is a very thorough exposure
of the zeal for privatization. But Russia may be a glaring case
study of the phenomenon in countries like India as in Indonesia
or such other countries, similar phenomenon is observed when
stock-money is looted by not only the bureaucrats, but by the
masters of the corrupt governments to their heart’s content.
Thanks to Stiglitz that he, having held such high position in
the White House as well as World Bank, he has mercilessly
exposed the inside story and motivation for privatization.
James Petres and Henry Veltmeyer
examine the phenomenon of privatization from an altogether
radical angle – as a strategy of the imperialist interests
forcibly imposed upon the national governments both in the
Western countries as well as the developing countries. They
argue, ‘Today privatization must be understood as part of global
strategy which has its roots in an attack on civil society and
democratic politics, in violent military interventions and in
the use of arbitrary executive powers. Today privatization is
carried out under the orders of imperial-controlled
“international” bank, by imperial-funded consultants and
government agencies that devise programmes, decide on prices and
identify potential buyers. The time frame and scope for
privatization is dictated by the imperial super-powers, whose
priority is to ram through transfers of property that will make
the transition to neo-liberal capitalism irreversible.
Privatization is essentially a political act, having little or
no “intrinsic value” as a national economic strategy and
certainly not adding anything to the creation of new jobs,
higher rates of savings and investment or new productive forces.
The privatization strategy of the imperial centre is in the
first instance to homogenize every region of the world economy
subject to its penetration, while differentiating access to the
world market according to the productive capacities of each
region. The process of privatization is thus not principally
a means of taking over enterprises and penetrating markets so
much so as it is a means of eliminating alternative structures
of production which could compete or challenge an imperially
dominated world. That is why the miserable performance of
the privatizing economies does not bother imperial policy-makers
as much as does the tempo and scope of privatization. Once an
economy has been privatized the fruit of that policy can be
harvested by lucrative enterprises or captured markets, without
fear of ”nationalist” or “socialist” backlash…..
‘The advance of privatization is
thus located within a global strategy of empire; building
during a period of counter-revolution in the third world and
collapse of communism in the East” (p.92 & 93, emphasis added).
The two authors analyse the
strategy of privatization as an imperialist-impelled strategy
with a view to penetrating the productive forces of the
concerned region. The authors, here, speak of
‘counter-revolution in the Third World’. It is true that the
privatization strategy of the imperial
powers are being implemented through the national governments of
the third world – many of which either right-wing or extreme
right wing governments or governments taking the right wing
shift. But all these governments cannot be defined as
counter-revolutionary – although many of the governments which
undertook privatization measures over-zealously as in Indonesia
were definitely counter-revolutionary.
The question of Labour in the
present world economy, the two authors have examined the issue
from a more radical and class angle.
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