World Bank changing its mind about privatization?

4:48 AM EDT Wednesday, Aug. 6, 2003

Now they tell us

By MADELAINE DROHAN
From Wednesday's Globe and Mail

Finally, someone has come to their senses at the World Bank and admitted that letting the private sector run things does not always produce better results than leaving them in public hands.

For an organization that has spent two decades pushing privatization with something akin to religious zeal, this amounts to a crisis of faith.

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The World Bank report concludes that selling a water or electricity system to the private sector does not solve the essential problem -- which is how to pay for such systems in the first place.

In both the developed and developing world, companies are losing their appetite to buy government assets. Privatization in rich countries peaked in 1998, when it reached $100-billion. In Canada, the peak was in 1995, when the equivalent of $4-billion (U.S.) of government assets was sold.

Why are these sales dropping? The easy sales have long since been made. The stock market is in the doldrums, making it difficult to raise funds. And there have been some bad experiences such as Air Canada, now teetering on the brink, and British Airways, also in dire shape. There are others.

Most alarming for the advocates of privatization are the de facto renationalizations taking place. The government of New Zealand, for example, rescued its privatized airline, Air New Zealand, last year by buying back 80 per cent of the faltering carrier. In Britain, the government was forced to put Railtrack, which owns the railway tracks, under administration after the private sector proved it couldn't run a railway profitably. It had been in private hands for only four years.

While the era of mass privatizations, best symbolized by Margaret Thatcher of Britain, may have run its course, no one is suggesting we are entering a new age of public ownership. What the experience to date does teach us is that there are limits to what the private sector can and should do. Not every public service should be a candidate for private ownership.

This is an important message for federal, provincial and municipal governments contemplating what to do with their remaining assets. What they have left are the tough ones to sell to the private sector. Before they arrange another sale, they should contemplate the lessons highlighted by the World Bank report.

http://www.globeandmail.com/servlet/story/RTGAM.20030806.codrohan06/BNStory/International/

As I keep telling my kids, there are always chores that need to be done that nobody really wants to do very much. Some of them you can assign to the person who objects the least (like throwing out the dead critters the cat leaves on the doormat), but mostly you just have to spread them out as evenly as possible and have everyone do their fair share.

It's the same thing in the larger world, except that jobs there tend to be claimed on the basis of profitability rather than enjoyability. There are simply certain tasks -- like running sewage treatment plants -- that no self-respecting corporation is going to want to do. And if they do take them on, they tend to try to make a profit in unscrupulous ways -- by hiking the rates for water beyond the point where the poor can afford it, or by selling polluted sludge for farmers to spread on their fields.

So, much as in a family, the only way to handle these jobs is for everyone to pony up a little money and let the government handle them. There is no other sane alternative.

It gets my hopes up.

I don't see any need to privatize water or electricity.

Instead, I would like to see prices for water and electricity set at the point where supply and demand are equal to each other.

Any time there is a long term shortage of water or electricity, it's because the price is too low.

Allowing the price to rise will accomplish two things:

First, higher prices will encourage voluntary conservation. Thus, there's no need to ask people to "please conserve," and there's no need to pass laws to limit people's use of these things. Setting the price high enough will encourage all the conservation that could ever be needed.

Secondly, higher prices means that providers can afford to build more infrastructure, such as power plants, transmission lines, water treatment plants, desalination plants, pipes, and aquaducts.

None of this requires privatization.

1) If water is priced in accordance to demand, than the poor may not be able to afford water that they need to live.

2) Supply and demand ignores the volatility of supply, as well as how essential it is. Life itself is dependent on its availability. Where water supplies are short, such as in a drought, just how reasonable is it to let the wealthy fill their pools and water their laws, even as the people got thirsty.

Give these two vary basic realities. Water must remain in privet hands, and can not be treated as just a product. As it was said in California, "If electricity is just another commodity, than oxygen is just another gas." This is the only way to insure that it is made available to all persons, and in times of short supply, prices do not spike and water is not wasted.

First, higher prices will encourage voluntary conservation. Thus, there's no need to ask people to "please conserve," and there's no need to pass laws to limit people's use of these things. Setting the price high enough will encourage all the conservation that could ever be needed.

Secondly, higher prices means that providers can afford to build more infrastructure, such as power plants, transmission lines, water treatment plants, desalination plants, pipes, and aquaducts.

None of this requires privatization.

But what is the point of a public utility, if they are expected to follow the same market principules as corperations? The results are the same.

I guess it wasn't. This is good news.

When we were trying to get the world bank to forgive debt, and they relented, we thought that was a victory for our side. Only to find out they were only forgiving just enough debt, to keep the countries from going into default. Some countries were receiving bail outs, but it was companies like Enron who had first dibs at this money to recoup their investment, leaving the nation as impoverished as it was before.

The world bank is probably changing its mind on privatization because there is little left to privities. They may now want to "sell back" public systems, for a price of course. Even if this price is a fraction of its original value, keep in mind that the privatization process simply had nations giving away their public resources and infrastructure for free.

This may or may not be the case. But I just about bet they still have a 5th ace up their sleeve.