Privatization no panacea for economic ills

By Op Rana ( China Daily ) Updated: 2011-07-04 17:57:21

It has become second nature for many an economist, expert and commentator in China to see privatization as a panacea for all the ills plaguing many a business and service.

The recent power shortages in some areas were blamed on the "monopoly" of the State power generators. The contention was that they didn't lack the capacity to generate more power but "decided" not to produce more for fear of increasing their losses.

These economists and experts say commodity prices are rising because the market is devoid of fair competition, or laissez faire. If some farmers do not get a fair price for their products, it is because market forces do not run the show.

Any disruption in the supply of water in cities is also blamed on the "monopoly" of State-owned enterprises (SOEs). So there are calls to privatize the water supply, even it means putting a rope around the necks of the poor and lower middle class.

The problems with airlines and the railways, we are given to believe, are again the result of unfair competition. Not enough trains. Blame it on non-competition.

High-priced air tickets. That is to be expected, given the control of State-owned enterprises over the air carriers.

Voices have been heard against "government intervention" in the functioning of the two stock exchanges on the Chinese mainland, too. The despondent economists and commentators want the mainland bourses to function like Nasdaq.

There is no shortage of complaints and grievances this group of "free-thinking, market-oriented" experts have.

But to be honest, there is nothing wrong with the conclusions that most economists not only in China, but also the rest of the world arrive at. Theoretically, they are right, because that is what the books authored by "leading" economists across the world say. We are talking about mainstream economists, many of whom consider even John Maynard Keynes to be conservative because he supported some intervention by the government in the market. It's another matter that he helped the Western world to emerge out of the Great Depression.

For many top economists today, Keynes is pass. He is too conservative for hungry capitalists and multinationals to continue their triumphant march across the world. And how can the Forbes 500 or Fortune 500 be wrong? That is what effective propaganda is all about; it makes us believe that money is truth, truth money - "that is all ye know on earth, and all ye need to know".

But there is another aspect to the free market that many of its proponents fail to mention. Writing in Rolling Stone in July 2009, this is what journalist Matt Taibbi said: "The first thing you need to know about Goldman Sachs (or any investment banking and securities firm) is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Yet we are blind to the workings of a free market. Is human memory so short that it has already forgotten the global financial crisis? Aren't the same laissez faire economists telling us that the crisis is not yet over?

Are we supposed to forget so soon that countries like China and India were saved, to a large extent, from the full force of the financial epidemic that the free market system let loose on the world?

The global financial crisis and the economic recession that followed exposed the impoverishment of mainstream economics, which still does not know how to get the economy in the Western world back on tracks. Even Paul Krugman, though regarded as a leading Keynesian, has said that Keynes was right in his day when the world was in serious trouble. But economists now say all it takes "to get the economy going again" is a "surprisingly narrow, technical fix". But where is that technical fix? Why is there no end to the European Union's debt crisis? Why are the United States and Japan still not back on the fast economic track?

It's easy to blame the ills in a country on a government's bias toward the public sector. But it took the governments across the world to bail out the private sector giants from the crisis of their own making. Before calling for privatization across society, we should check the facts.

The author is a senior editor with China Daily.