Law of Privatization: Sooner or Later You Will

June 7th, 2011

Sooner or later you will.  Either to avoid collapse (UK 1980s, Sweden 1990s) or to survive after the collapse (Greece 2011). I’ll be visiting Athens shortly and expect to get tangled up in protests over the economic crisis. So far 1,000 protests have broken out, most recently over government plans to privatize businesses, including telecommunications. Now, if you believe in free speech, why would you want the government to control telecom? Greece’s economy is collapsing. Stores – both private and publicly run – are shutting their doors. And because Greece uses the Euro, it can’t devalue the defunct drachma and help exports.

To pay back debts and escape utter bankruptcy, Greece is looking to sell about $75 billion of assets. It’s about time. Put simply, too many Greeks work for the government; only 45% work in the private sector. How could those 45% ever produce enough wealth to pay enough taxes to support everyone else? It’s a dangerous, top-heavy structure, an inverted pyramid scheme. Ironic, to think about architectural metaphors since we hail the Parthenon for its perfect, “golden ratios” (Fibonacci).

Occasionally, countries are brave enough to privatize before a collapse. In the 1990s and 2000’s, Sweden narrowly escaped economic annihilation and set free schools, as well as the social security system. In the 1980s, Margaret Thatcher unleashed the British economy, which had been the “sick man of Europe” for decades. Far better to take on these tasks before a Greek-like collapse. In my book, Lasting Lessons from the Corner Office, I argue “it’s better for a business to make itself obsolete rather than to wait and let your competitors to do it for you.” That’s how government leaders need to think.

Finally, I’ll share the best line about public/private matters, which I offer in New Ideas from Dead Economists. Winston Churchill runs into Labour Leader Clement Atlee in the men’s room at the House of Commons. Atlee enters first and takes up a standing position. Churchill enters a moment later on the same mission and, seeing his opponent, stands all the way at the other end of the row. “Feeling standoffish today, are we Winston?” the Labour leader asked. “That’s right,” barked Churchill. “Why, every time you see something big, you want to nationalize it!”

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jeff

June 14, 2011 at 7:02 am | Permalink

sigh.