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Privatization - Beyond Capitalism

by John Yu

What is a government? What makes something publicly-owned and something privately-owned? What is the difference between abolishing government control and allowing each person to rise as his or her own sovereign government?

Privatization is the name given to the transfer of a business from government control to non-government control. The World Bank and International Monetary Fund are two of the most vocal supporters of privatization. The nominal purpose of privatization is to improve the efficiency of government-run businesses - that is, to allow the economy to reap more gain for the amount of effort expended. To achieve efficiency, they argue that government-run monopolies have little incentive to improve their services and thus should be broken up to create competition. A secondary purpose of privatization is as a source of funds for a government's fiscal policy.

The usual method of privatization advocated by the World Bank and IMF is to sell off the businesses to various capitalists. The problem with this approach is that of representation. Governments, even dictatorships, claim to represent their citizens (regardless of whether they do in reality or not). The businesses controlled by these governments at least nominally represent the nation's citizens. Capitalist-run businesses make no such claim - they freely admit to not attempting to represent anyone but their shareholders. They rely on a market economy to ensure that consumers (at least the ones who have the most spending money) are represented in their privatized world. Workers, however, have lost their representation - except alone or in the form of trade unions.

The question of efficiency begs the question, "Efficient for whom?" Who reaps the most gain and who expends the most effort? In the capitalist-run business, with an undemocratic system of pay determination, the clear winner is with the capitalist - much gain, no effort. For the employees who do not hold many (or any) shares, the result of capitalist privatization is just the reverse of efficiency - the results of their effort is concentrated in the hands of financiers.

One alternative is to allow sovereignty to rest with the employees of these companies. In this case, new competition and alternative businesses can still exist, however the distribution of revenue is determined by whatever system the employees agree on (who better to determine how much individual contributions are valued than those working most closely with the results). Efficiency for workers results from the elimination of profits being paid to capitalists. In addition, the transparency required for employee participation in the running of these businesses opens them up to greater consumer scrutiny.

However (a World Bank or IMF economist might object) if these state-run businesses are no longer being sold but merely taken over by their employees, the government loses the money it could have used for fiscal spending. They would instead advocate the selling of these business to foreign investors, so that the government would not only gain money, but money in the form of foreign exchange. The problem with this argument is that it is only a short- term gain. Who would sell a farm for five years' worth of produce, unless they didn't expect to live for more than five years (or didn't expect to be held responsible for their actions after five years)? The handing over of control of these businesses to foreign hands opens up the country to exploitation by those who have little stake in the nation other than as a source of profit. While there may be a new source foreign exchange in the short-term, the long-term effect is the loss of the wealth of the nation as foreign capitalists take profit overseas. Again, a more secure alternative would be for control of these businesses to remain locally with the employees.

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Last updated: April 13, 2001

Comments from thisisby.us
by mudgeon
on Nov. 07, 2007 at 10:52pm
0 Votes

The difficulty with this whole line of argument is that it starts with the premise that "the government" or "the people" in general own anything. They don't. Particular people own particular things.

by seeya
on Nov. 08, 2007 at 12:44am
2 Votes

Ownership laws can be anything - laws are just agreements between people living in a society. If they agree that "the government" or "the people" or "the invisible unicorns" own something, then that's exactly what happens.

by mpaskel
on Nov. 08, 2007 at 06:05am
3 Votes

I thought privitization was the transfer of government activity to private hands.

Privatizing the war in Iraq has resulted in Blackwater run amuck, halibuton stealing and war profiteering, and servile congressional oversite of the most corrupt administration in U.S. history.

by mudgeon
on Nov. 08, 2007 at 11:09am
0 Votes

seeya - there are things that exist prior to any agreements between people; things those agreements have to accord with in order to exist. Private property, for example: a dog has his bone, or bowl; try to take it, and you bleed. A person things too: mate, children, home, etc. Try to take them and you bleed. This is one of the first things that limits our "agreements"; there are many, many others, all the way up the line, as high as you want to go. Agreements accommodate nature, not the other way around.

by seeya
on Nov. 08, 2007 at 12:38pm
2 Votes

mpaskel: Yes, you're right. I wanted to draw a distinction between the traditional method of privatization and that of giving control democratically over to those doing the work.

mudgeon: There have been all kinds of laws in history, some good, some not so good. Laws have as their basis that they make some form of social interaction easier. If people discover a new way to organize socially that is better for everyone involved, there's nothing to prevent them from rearranging their social agreements.

But you seem to be under the mistaken assumption that I'm against private property. I have no problem with a person deciding what to do with the clothes he wears or the home he lives in. The only difference is the tools he uses for his job. Anarchists believe the person who does the work should be the one who has control over the tools. Capitalists believe the control should instead be given to someone who doesn't actually use the tools, but just has nominal "ownership" of the company. Anarchists are in fact more in favor of private property than capitalists are - they would give the property over to the many, rather than concentrate control in the hands of the few.

by mudgeon
on Nov. 08, 2007 at 12:44pm
1 Vote

The trouble is that the anarchists, in your example, have nothing to give. They didn't make the tools, buy them, nor in any way bring them to the human party. How are they going to earn them, and so have them, in order to be able to give them?

by seeya
on Nov. 08, 2007 at 12:49pm
1 Vote

You seem to think anarchists are just going to ask nicely, or offer to trade for the tools. Anarchists believe those doing the work should be given priority over those who have nominal "ownership" of the company, so they would just encourage the employees of every company to simply assume ownership of the company, and ignore the previous owners.

After they've established democratic control over the companies, then they go about business as usual, producing and trading. The people doing the work hasn't changed - the only difference is how those doing the work will split up the revenue from their work - democratically rather than listening to the company's dictator.

by mudgeon
on Nov. 08, 2007 at 02:24pm
1 Vote

So they just rob the shit out of whoever has everything now, take it for themselves, call it "democracy" and restart the game? How's that different from any other theft? The labels?

by seeya
on Nov. 08, 2007 at 02:30pm
1 Vote

Apparently you're not reading very carefully. They assume democratic control of the companies they already work in. They take control of the tools they already use. They're not taking control of anything they weren't already using.

Sure, you can call it theft if you want to. I could also call exploitation theft. Anarchists believe the profit left over after paying all the costs of running the company should go to the employees - if it's just going to the boss, that's theft.

by mudgeon
on Nov. 08, 2007 at 02:53pm
0 Votes

By this logic, I can agree to chauffeur a man, then appropriate the limo because I was using it. And yeah, that's "theft" - why eumphemise it? But the real difficulty with behavior like this is that it destroys the web of promises-made, promises-kept upon which ALL wealth is predicated, and reliably impoverishes every country in which it's ever been tried. Castro in Cuba, Mugabe in Zimbabwe, now Morales in Bolivia - it's a pity what it does to the populace. Lucky they have our country to flee to, eh?

by seeya
on Nov. 08, 2007 at 03:05pm
2 Votes

Well, both the driver and the passenger are using the car aren't they? If the limo belonged to a limo company, and the passenger was only renting it, then indeed anarchists would support the drivers assuming ownership of the limos.

Do you think there really is democracy in the workplace in Cuba?

The closest I've found recently is in Argentina, in response to financial collapse there. Though, it's still not what anarcho-syndicalists would call a successful revolution, there are elements of it there, though employees have yet to win formal recognition of all the factory occupations. You can read about some of it here.

by mudgeon
on Nov. 08, 2007 at 03:31pm
0 Votes

I'd rather hear about it from you, at your convenience. Thank you for the dialog today, and I look forward to reading you in the future.

by jlarsen
on Mar. 12, 2008 at 05:58pm
1 Vote

"If a dog has a bone and you attempt to take it from him - you bleed."

If a worker is using a tool and you attempt to take it from him, you bleed.

I'm not saying I agree with seeya, or anarchism. But it does seem unfair when a CEO who admittedly has a more stressful job than a regular employee, and may in fact work 60-70 hours a week when a regular employee only works 40, and yet the CEO makes 600-1000 times as much as the employee, despite shares of stock in the company declining in value... though I partook in a debate on the side defending CEO pay... and won.

Where did the dog get the bone to begin with? Unless he removed it from himself, then he "stole" it from somewhere, possibly.

I can see where this whole discussion could end up being a "which came first, the chicken or the egg?" kind of discussion.

Every American corporation, if you track it back far enough, owes it's existence to the THEFT of land from the Native American. The Red Man clearly owned the only bone there is (on this continent) and it was clearly taken from him.