Privatization is one of the economic policies of modern governments, be it large or small, democratic or authoritarian, capitalist or socialist. Privatization is a global phenomenon. The trend towards privatization can be traced back to the 1970’s and 1980’s.
Firstly, it was President Jimmy Carter who in the year 1976 said American Administration ‘lacked administrative skills’ for the performance of daily work, which shook entire public administration and changed its traditional performance. This led to the emergence of new approach in the discipline of Public Administration called ‘New Public Management’ (NPM) perspective. The successor of Jimmy Carter was Ronald Reagan, who was convinced that the administration must undergo changes to tackle new problems. America was facing huge budget deficits and inefficiency, which Reagan accused as the result of the misallocation and mismanagement of public funds.
The idea which promoted privatization was that government is not the solution to the problem, but rather it is the problem to the solution.
In England Margaret Thatcher, then prime minister, was faced with similar situations. The public spending was increasing, as productivity and efficiency of public bodies were in decline. This also added fuel to the growing idea of free markets, deregulation and privatization. The government which governed least, or the ‘rolling back of the state’, was the idea behind privatization.
What about communist and socialist states?
For a long time China was regarded as an ‘inward looking’ and isolationist country. During the revolution in 1949 chairman Mao was much inspired by the writings of Marx and Lenin which led to establishment of the communist state. However in the year 1979 Chinese leadership felt it must compete in international trade to help boost their economy. Today China is regarded as the world’s second largest economy, with growth rates around 10% per year.
With the fall of the Berlin wall in the year 1991 the Soviet Union disintegrated. This marked the end of the rivalry between communist Russia and Capitalist America, and was regarded as a triumph for democracy and capitalism. This made the whole world believe that democratic states are the best states and capitalism is the best economic policy. To perpetuate the idea of capitalism and democracy which favored privatization, international institutions such as IMF, World Bank and WTO promoted ‘Washington Consensus’ in the interest of the West.
It is also interesting to note that the so-called socialist state of Cuba, under the leadership of Raul Castro, talked in favor of privatization. Cuba planned to layoff half a million state workers stating that too many workers with low productivity burdens the budget.
The Indian case
Indhira Gandhi was the champion of Indian socialism during the 1960’s. The word ‘socialist’ was added into the Indian constitution to direct its policies towards socialism. The nationalization of 14 Indian banks and its coal industry came when socialism in India was at its peak. However India entered into a debt trap by the end of 1990’s because of excessive wasteful public expenditures and inefficiency in the public sector. Therefore India adopted the new economic policy Liberalization, Privatization and Globalization (LPG) in the year 1991 under the leadership of the then finance minister Manmohan Singh. Today India is regarded as one of the major emerging economies of the world with the growth rate of around 8% per year.
Privatization of the Maldivian economy has been a hot topic since 2008, with the arrival of the first popularly elected government under the leadership of Mohamed Nasheed. Since this government came into power one of its economic policies has been privatizing the economy. The sale of Male’ International Airport to Indian company GMR was one of the very first steps in this direction. As Maldives tries to expand its tourism sector the need for a modernized airport and efficient management arises to compete with its counterparts, such as neighboring Sri Lanka. The airport was not developing enough to compete and give decent service to the tourists. The airport remained as it was without a major improvement in infrastructure.
In the upcoming year the current government has decided to privatize 5 more companies. This includes STELCO, Maldives Post Limited, Island Aviation, Housing Development Corporation and Maldives In-Flight Catering. However the privatization of these 5 companies was rejected by the parliament, which stated that it violates Maldivian financial laws.
There were plenty of objections to privatization in England and the US during 1980’s, protests in India during the 1990’s and also in Maldives since 2009 against the idea of privatization. I acknowledge the protestors also have points to prove, such as the private sector‘s objective to maximize its profit at any cost and the widening of income disparities because of private sector. I shall talk about the process and defects of privatization in another occasion.
Therefore the idea of privatization is a global phenomenon and is happening in most countries in the world. It is happening because of inefficiency, delay, corruption, red tapism and nepotism in the public sector, in the interest of delivering results the people expect.
What comes to mind is a couplet written by English poet Alexander Pope. He wrote, “For forms of government let fools contest; whatever is best administered is best.” Therefore it is very clear that whether it be a democratic, authoritarian, socialist or communist government, at the end of the day if that government is not able to administer and live up to its promises, then that government will lose popularity.