Countdown to Christmas
17 - Privatization
- While the transition of state-owned assets to private ownership has been a cherished practice of liberal democratic reform and led to unparalleled economic growth and progress, the term privatization has become somewhat tainted in recent years. Here is a brief reminder of the core arguments why private ownership trumps state-run systems:
- incentives & efficiency: While managers and entrepreneurs have to respond to shareholders and the pressures of market forces, state-owned businesses have less cost pressure (i.e. can always supplement operations by adding tax money), ought to focus less on product development, and operate based on political desirability instead of market fitness.
- fairness & competition: Nationalized industries tend to be monopolies as the state is not only operating a business but at the same time also acts as the chief regulator of that market. Fair competition between players can only be established through deregulation and privatization.
- reducing political power & interference: While rent-seeking exists also in private markets, public companies are more prone to be used for political ends than private enterprises—as anyone from a more autocratic country can attest.
“BUT WHO WILL BUILD THE ROADS?” I guess we all know this situation. The smartest person in the room just debunked your whole political theory and the century-long intellectual tradition of liberalism by pointing out the obvious: There are certain services that only the government can provide. That’s frustrating. But don’t worry. Just play the “Like what?” game (“security” “oh, so private security companies don’t keep your favorite mall safe?” etc., etc.) until your intellectually dishonest opponent will arrive at the conclusion that even the roads can be built by private individuals. And with this LEGO Starter Kit, your new friend can start building already…