Privatizatizing Water: Another World Bank Disaster

[molly bloom]

Originally posted by Imran Siddiqui
Duncan, look at basically the entirety of Africa. They promise things, but that just sucks their country down further.

Ah, but Imran, the Devil is in the details... and your answer skilfully avoids giving any.

How many countries in Africa were used as pawns by both sides in the Cold War, with their economies and peoples suffering as a result? The Horn of Africa (Ethiopia, Somalia, Eritrea) is a case in point, and one could also think of Angola, Mozambique, Namibia, Zaire, Sudan, and several other cases where either the West or the Soviet Union propped up military regimes whose interests were lining the junta members' pockets, exporting oil and diamonds and tropical hardwoods, and overseeing child mortality rates and the burgeoning of epidemics that would make the efforts of the four horsemen of the apocalypse seem inconsequential.

A similarly grotesque theatre of the absurd was played out in Central America, the Caribbean and countries in South America- one wonders how a reeking, festering sore such as Haiti could exist on the arse of the 'richest, most powerful' nation on the earth. But then, the United States has a lengthy history of interfering in its neighbours' home and foreign affairs- in Haiti's case, back to Thomas Jefferson's day.

[Az]

Duncan, look at basically the entirety of Africa. They promise things, but that just sucks their country down further.

if one could be given enough power one could make Africa a place worthy of living. But one has to have the will, as well as the power.

[Berzerker]

Molly & Duncan -

Please list these third world countries running 'quasi-socialist' welfare programmes. I would be interested to see which ones you mention.

I didn't say they run welfare programs, I said they have quasi-socialist programs designed to subsidise services (like water). These countries borrow money to provide the subsidies masking the real cost of the service, then complain about the debt they've built up. If privatisation was so evil, why would these governments need help providing the services? Because governments create the problem and leftists blame the marketplace for exposing the real cost of these services formally subsidised by government.

It's similar to living in a town with a military base nearby with the base representing a massive government subsidy to the town taken from other towns. When that base gets shut down, the town's economy takes a BIG hit. But the town's economy prior to the shut down was illusory and the shock of removing the subsidy restores reality. Would you blame the marketplace/privatisation for the effects of removing the base?

[Oerdin]

Originally posted by Azazel

I wasn't aware of that.
Still, this has nothing to do with water.

Pay attention to recent articles from places like Ghana. Rioting broke out because the IMF forced the government to cut off subsidies on things like gasoline so the price of gas rose from a rediculus $0.30 per gallon to the market price of $2 per gallon. The poor were up set by the price increases (naturally), however, but the government can't continue wasting money in this fashion.

The subsidies are distorting the economic reality and lead to over consumption of expensive items which the people really can't afford. The IMF is not being "evil" when it requires countries to change the bad policies which lead them to bankruptcy as a condition of recieving yet more loans. To not force a change in policy is just to throw good money after bad.

[Berzerker]

Duncan -

It's the same way with social welfare. Just throwing a little bit of money at the problem isn't going to do anything to make the problem go away. It takes large investments.

Is it just a coincidence that out of wedlock births have skyrocketed as these social welfare programs became prevalent?

[Oerdin]

Here's an excellent case of what socialist policies do to poor countries:

Until the few years or so Venezuela was another country which had super high subsidies on gasoline; gas was so cheap that many blackmarketeers made money by buying subsidized gas in Venezuela and then resellling it in nearby Columbia for a tidy profit. That's all well and good but once the government ran into financial troubles they came running to the IMF for help.

The IMF required the subsidies to end, so the government could cut spending and end its deficits, setting off a serious of protests at the time. Out of anger with the end to the subsidies they elected a leftist President (who just happened to have a history of plotting military coupes) who promised to restore the subsidies, eliminate the deficit, and find jobs for everyone.

They only way he could find money to pay for his social welfare programs was to impose crushing taxes which have ruined the country's economy and most of the privite sector has gone out of business due to high taxes and a plunging economy. Chavez needed some way to lower the sky high unemployment rate so how does he do it? He forces the, already over staffed and under proforming state owned industries, to begin hiring just about everyone who walks through the door. As a result there are people who don't do any work who are now recieving a pay check from the government owned companies (like the state owned oil company); naturally this causes the companies to lose money.

Eventually the state owned industries are going to have to be privitized because no one is able to lose money for ever. Privitizing them is the best way to remove the unwanted government interference and let the companies conform to market realities.

[Oerdin]

BTW anyone who wants to read an excellent, if some what dated, account of various African countries then they should read "The Africans" by David Lamb. Lamb lived in Africa and worked as a BBC reporter in Africa for 25 years. The book covers more then 20 different countries and examines the politics, wars, economics, and what not of each country in both colonial and post-colonial times.

He goes into great detail about how several of these countries had their economies absolutely mismanaged by dictators in exactly the same way I described. Lamb is very objective he just tells what policies where in place in each country and what happened as a result then he let's people make up their own mind.

[Adam Smith]

For a good example take a look at Air Afrique, an airline run by a consortium of West African countires. At one time something like 60 percent of this "company's" passengers were flying for free, including many government officials. Employees made huge salaries, and then augmented those salaries by taking bribes to hand out free tickets. This was a poster child for privitization if there ever was one.

[Oerdin]

What about the way Socialists in the Labour party single handedly killed half of the British manfucturing sector in the 1970's by nationalizing most heavy industry. The nationized companies were always under capitalized and the top jobs went to political appointees instead of people with actual experience or training in the industry. British Leyland is a text book case of why companies should be privitized instead of government owened; every abuse imaginable was pushed onto that company and so when the socialists ran it into the ground nearly the entire British auto industry was destroyed.

[molly bloom]

Originally posted by Oerdin
What about the way Socialists in the Labour party single handedly killed half of the British manfucturing sector in the 1970's by nationalizing most heavy industry. The nationized companies were always under capitalized and the top jobs went to political appointees instead of people with actual experience or training in the industry. British Leyland is a text book case of why companies should be privitized instead of government owened; every abuse imaginable was pushed onto that company and so when the socialists ran it into the ground nearly the entire British auto industry was destroyed.

Umm... the Thatcher governments were actually more successful at destroying British industry than Labour governments. Which heavy industry were you thinking of that was nationalized in the 1970s, and on what dates?

'In July 1945, Labor came into power totally committed to nationalization and determined to conquer the "commanding heights" of the economy, having borrowed the term from Lenin by the mid-1930s. In their quest for control of the commanding heights after World War II, the Laborites nationalized the fragmented coal industry, which provided 90 percent of Britain's energy at the time. They did the same to iron
and steel, railroads, utilities, and international telecommunications. There was some precedent for this even in the British system; after all, it was Winston Churchill (not notably a socialist-ed.) himself who, as first lord of the Admiralty in 1911, had purchased a controlling government stake in what became British Petroleum in order to ensure oil supply for
the Royal Navy. Churchill's rationale had been security, military power, and the Anglo-German naval race.'

from:

http://www.pbs.org/wgbh/commandinghe.../ess_labor.pdf

Still, one gets the impression that pork barrelling is okay when Conservatives do it, and the appointment of political friends and stooges to industries and state departments is okay when Conservatives do it, but woe betide pinko commie socialists doing it- then its a bad thing.

There's still scant detail here about specific African countries- and certainly none about leading financial sponges and debtors such as Mobutu's Zaire- a country and regime propped up by the U.S.A. and the C.I.A., despite human rights abuses, blatant nepotism and corruption and a virtually non-existent infrastructure- and all done without a taint of that nasty socialism.

[Oerdin]

Molly: I can only say that you are sorely in need of rereading history books because you evidientally missed major themes the first time around. The Socialist Labour government forced the nationalization of entire industries under the claim that they would end "wasteful competetion" and create "naturalk monopolies". The problem wasa that from automobiles to planes to steel to coal the monopolies they formed became bloated and were unable to compete in the international market place.

At first this could be hidden from the world by using subsidies but eventually the economy became so bad that the socialists forced nationally owned comapnies to hire tens of thousands of unneeded works as a way of lowering the sky high unemployment rate the socialist's incompetence had created. the socialists also put political appointicies in charge of companies instead of people who had experience managing the industries in question. This incompetence destroyed much of British industry. If the socialists hadn't brought the matter fateful conclusion then Britian would likely still be the major manufacturer it was in the 1960's.+

Everything which happened in Britain was ten times worse in Africa becaue the Africa states didn't have the industrial capacity to sustain their socialist intensions. Since the policies were enough to bankrupt first world states like Britain then they were certainly more then enough to bankrupt 3rd the world **** holes found throught out Arfica.

[Oerdin]

Were did all the lefties go? One minute they're shouting how evil capitalism is and saying industries should be nationalized and as soon as people show up to debate them they up and vanish.

Come on lefties let's talk about nationalizations and privitivations.

[TheStinger]

The natinalisation of major international industries (cars, ships, steel etc) was a disaster, this was due to lack of investment.The government couldn't borrow to fund pensions, so British Leyalnd certainly couldn't to invest in new models. The unions certainly didn't help. IIRC the workforce at 1 car plant walked out on strike because their tea break was altered(not the length just when they coud take it).

The privatisation of some industores was very succesful, they cocked up Leyland though. they broke it up and sold it to an arms manufacture.

It worked partialy with water, it brought in investment but made milionaires in a few years of people previously employed by the state.

Rail and the air traffic control system were done badly for ideological reasons. The rail companies wern't allowed to put up prices enough and the network needed so much catch up investment that it became unviable.

[Oerdin]

Don't get me wrong. Large scale nationalizations do help to take a bunch of companies that are to small to survive and can create one large company with the economies of scale to survive. The problem is without free market competetion these companies become bloated and the politicians can never seem to stop themselves from meddling.

[TheStinger]

There is nothing wrong with the state being the major or only share holder, its just the government should not get involved and if thats the case then why bother

[Master Zen]

The government can also promote and/or create industries which are non-existant yet considered "strategic". This was done in Korea for good effect.

I'm all for this type of government intervention. The problem in many countries (like in Mexico) is that the government protected industries for TOO long until they became inefficient.

Soultion:

1) create industry

2) protect it (subsidies, tax, cuotas, etc.) until it matures and has good market share

3) stop protecting it, so it can go on its own

4) repeat process with different industry.

There you have it, effective government intervention in the economy! Long live democratic-socialism

[Master Zen]

Oerdin:

3rd world ****-holes???

They wouldn't be ****-holes partly if western colonial countries didn't screw them up for almost a century! Say what you say, but countries like Britain and France share MUCH of the blame for having left Africa the way it is.

[Oerdin]

Originally posted by Master Zen
The government can also promote and/or create industries which are non-existant yet considered "strategic". This was done in Korea for good effect.

As far as I know all of the major Chabol were never government controled by the government. A few subunits of bankrupt companies were temporarially administered by the creditors and the government for a brief period until the bankruptcy was resolved but that's hardly the same thing as nationalizing an industry.

[Oerdin]

Originally posted by Master Zen
Oerdin:

3rd world ****-holes???

They wouldn't be ****-holes partly if western colonial countries didn't screw them up for almost a century! Say what you say, but countries like Britain and France share MUCH of the blame for having left Africa the way it is.

There has been alot of work done by historians concerning the effects of colonialism and the reality is a mixed bag. In nearly every case the country at the end of colonialism was better off then prior to colonialism in that infatructure was improved (ports, roads, railroads, electricity, etc), they had an educated elite class, most of them had modern militaries, many of them benifeted from having standardized legal systems, and the economy was certainly better developed then prior to colonial times.

Sure there were problems with borders spliting different ethnic groups and the colonial powers used their colonies for raw materials but by and large it has been a half century of total mismanagement by the African political elites which has resulted in Africa being the ****-hole that it is.

[Lawrence of Arabia]

Soultion:

1) create industry

2) protect it (subsidies, tax, cuotas, etc.) until it matures and has good market share

3) stop protecting it, so it can go on its own

4) repeat process with different industry.

There you have it, effective government intervention in the economy! Long live democratic-socialism

They tried this in India with their car industry. They created the company, then protected it for 10 years, then 20, then 30, and it never got the economies of scale required to survive. IN the 50s, 60s, and 70s, Import substitution was the big thing, but protected industries never become efficient because there is no incentive.

[Oerdin]

You can also ask the Chinese and Russians how well their state owned industries turned out. They've been dieing since the day they were born and many of them have pushed the state to the edge of bankruptcy by living subsidy to mouth as it were.

[Lawrence of Arabia]

Free markets are the road to success for many third world countries.

[Oerdin]

Sadly many countries had to dragged through a half century of socialist misery before they figured that out. fortunately, once countries in Asia and Latin America started to figure out that socialism, protectionism, and statism wasn't going to cut the mustard they switched to capitalist democracies and there economies and standards of living have never been better. Like countries such as Korea, Maylasia, and Taiwan their going to need a half century of consistent good government policy and hard work before they'll catch up with the rest of the world but they'll do it if they stay focused. Even Afria could due it if they'd stop being seduced by the easy lies of socialism.

[Lawrence of Arabia]

Socialism is so popular because people think that they must protect their own people over others, even if it costs millions. To clean up this process will take some pain, but in the end, everyone will be better off.

[Berzerker]

Another case: Japan. We might think Japan is capitalistic, but in reality, they aren't. The government takes from productive sectors and gives to unproductive sectors as part of an overall policy, but all it does is divert resources from efficient companies to more inefficient companies. Might help explain why Japan has been in the doldrums for so long...

[Lawrence of Arabia]

Not only that, all of their consumers are getting royaly ripped off. Trade makes everyone better off.

[DanS]

Korea does a lot of government-sponsored incubation with tech companies, although I don't believe that they are government-owned.

Interestingly, they might sponsor a number of different small companies serving only one market.

Anyway, protection and long-term subsidies are unneccesary and counter-productive.

[Lawrence of Arabia]

Instead of subsidizing, they should tax the substitute.

[Oerdin]

You can't charge a tax on one competetor and not the other. That's hardly fair.

[Berzerker]

You can't charge a tax on one competetor and not the other. That's hardly fair.

And counter-productive, the tax will serve as a subsidy to the favored business and punitive to the competitor.
And we know what often happens to the subsidised, bloated complacency.

LoA -

Not only that, all of their consumers are getting royaly ripped off. Trade makes everyone better off.

Isn't interesting that it appears the reluctance of France, Germany, and Russia to an invasion of Iraq is the trade deals these countries have made with Iraq? I've long thought that increased trade reduces the potential for war.