Why give away State assets?

To put some finer points mentioned during the interview with Fabio Zanini in Folha de S. Paulo two weeks ago. The point is that the gains from privatization are not about short-term revenues since it is likely they will be wasted (perhaps stolen) by incompetent or avaricious political actors. And of course, political actors are likely to dither and delay, waiting for the “right” price or waiting to make arrangements with politically-connected cronies.

The point of privatization is to activate “dead” capital by changing incentives so those that control or use the assets do so in a more efficient manner. And to do so as quickly as possible.

In fact, if State assets were given away to a random Brazilian housewife, she would do no worse & be less likely to cheat her stakeholders (family) or shareholders than if those assets are left in State hands.

When privatizing State assets, government agencies would have to pay market rent out of their operating budgets for their offices, etc. This would make it likely for them to engage in a mass exodus to cheaper & less commodious spaces, with the added advantage of improving traffic conditions in CBD. It turns out that many government services can be and are now done online, so moving them away from city centers is no big loss.

In turn, some of the most valuable real estate of every capital and city would be used more efficiently by making it available to the private sector.

Besides efficiency gains, returning State assets to the “productive class” of workers & entrepreneurs (i.e., the Masses) would lead to greater “social” justice. As it is, it is both moral & “just to remove assets from the control of the “ruling class” of political leaders, bureaucrats & their cronies.

How to give away State assets? During the transition of the former-USSR & other of its satellite countries, citizens received shares in state-owned enterprises. Another more ambitious idea involves giving away all State assets including real estate, buildings, etc. To do this, each asset would be allocated based on a lottery with every citizen having the possibility of receiving at least one asset. After the first State asset is given away on primetime TV, it is likely to be impossible to stop the process.

In turn, this would allow the emergence of a new class of brokers and agents to contract with the new owners to assist them in renting out or selling assets acquired from the lottery.

These are my main points and arguments for a comprehensive privatization.

Christopher Lingle earned a doctorate in economics from the University of Georgia in 1977. Since then, he has been employed at universities in Africa, Asia, Europe, Latin America and USA. Currently, he is Visiting Professor of Economics in the Escuela de Negocios at Universidad Francisco Marroquín in Guatemala (since 1998), Visiting Professor in Mackenzie Presbyterian University Adjunct Scholar at the Centre for Independent Studies (Sydney), Research Scholar at the Centre for Civil Society (New Delhi), International Political Economic Advisor for the Asian Institute for Diplomacy and International Affairs (AIDIA – Kathmandu), Member of the Academic Advisory Council of the Globalization Institute (Brussels) & Senior Fellow, Advocata (Colombo, Sri Lanka).