Privatisation is no panacea

We have witnessed two inverse processes in the economic policies of several countries over the past 50 years, both of which were hailed as a remedy for the economic problems at a particular time: nationalisation and privatisation.

With nationalisation or socialisation, the community, at least nominally, begins to own that which previously belonged only to a few private individuals or was a family concern; it is therefore a sort of expansion movement. On the other hand, with privatisation the movement seems to contract, allowing fewer people to have a say in the running of an enterprise or concern.

The concept of privatisation is not always explained or applied in the same way. But it would not be too far from truth to say that it is the opposite of nationalisation. If one concept is adequately understood, it will be easier to get an idea of the other by contrasting them. However, neither can be considered as an "unmixed blessing" and it would, perhaps, be more accurate to call them both "a necessary evil".

The policy of nationalisation in the 20th century was one of the main reforms of socialisation. In Britain, just after the Second World War, Clement Atlee's Labour government nationalised industries such as gas, electricity plants and railways. In other European countries and elsewhere some economists and social analysts were quick to see and speak in favour of socialisation and nationalisation. Others, however, were more wary, pointing out the negative aspects of the same process and expressing more than a few reservations. Bureaucracy, stagnation and falling standards became synonymous with nationalisation in the 1970s.

Privatisation, which has been regarded favourably by neo-liberal economists, may be roughly defined as "the process of transferring state-owned assets and services from the public sector to the private sector". One of the most well-known examples is the economic policies introduced by Margaret Thatcher's Conservative government in Britain in the 1980s. Of all the changes that Thatcherism brought with it, privatisation has been, perhaps, the most durable and successful, spreading far beyond the UK to other western democracies, the developing countries and eastern Europe.

In our country, examples of privatisation are not very numerous; the postal service, HSBC and the much discussed Malta International Airport were big steps in that direction. In my view, the government could also profitably allow a large portion of its arable land to enter into the hands of farmers' cooperatives.

In almost every case where commercial enterprises have been removed from government control, the result has been greater competition, efficiency, enterprise, and technological innovation and lower prices for the consumer. These are just a few advantages of privatisation.

However, mistakes have been made in various countries where this system was introduced. For example, in Britain privatisation often led to the over-enrichment of managers - the so-called "fat cats" - and there was also an insensitivity to the effects on the workforce. Unemployment soared as companies shed jobs, with all the negative social consequences that such an upheaval brings with it. In some other countries, privatisation increased the level of corruption. Closer to home, one of the complaints I have often heard is that the postal service, at least in Gozo, cannot be said to have improved or become more efficient as a result of privatisation.

It is generally agreed that certain sectors - such as defence, health and education - should remain in the government's hands and this should not change. And where privatisation does occur, conditions should be stipulated by the public authorities so as to safeguard the rights of employees and avoid a steep increase in the prices of produce or services provided by the private enterprise. Due care, in particular, should be taken to discourage the formation of new monopolies.

Surely, privatisation alone cannot do miracles and is not the sole answer to the economic difficulties which some governments are currently encountering. But if the whole process is wisely handled, then it can, at least, alleviate the enormous financial burden which has become the nightmare of some administrations, including this one.