Shrink government? Privatize? Take a deep breath and rethink

Marlen V. Ronquillo

Marlen V. Ronquillo

The Greek tragedy of contemporary times is about an economic meltdown that is also dragging the whole Eurozone into the precipice. That the morass in Greece may break up this great effort at regional integration is still a palpable fear across the Eurozone.

This proud and ancient republic is now the synonym of a cursed country that cannot even manage its own affairs, a pariah of sorts.

Greece has an unemployment rate that is worse than the US during the Great Depression. Without the leeway of having its own currency and its soaring borrowing cost, the immediate future for Greece is something between total collapse and Grexit—the short cut for Greece existing in shame from the Eurozone.

The leader who presided over the initial efforts to bail out Greece from its woes attended the TED conference held in Scotland in June. Former Prime Minister George Papandreou, whose own father and grandfather were once prime ministers of Greece, delivered his mea culpa on what went wrong. Did he blame government incompetence and waste for the tragedy that has befallen this ancient republic? No.

Instead, Papandreou said that that a bigger, more aggressive government (public investment wise) could have stemmed the bleeding in Greece. He said that his decision to go with the“ the orthodoxy of austerity“ was one of the reasons Greece is in such a mess. He blamed himself for having gone along with the prescription of a downsized government that the European plutocrats had prescribed for Greece.

The second major assault on the plutocrats who usually rule the TED conferences came from a university professor, Mariana Mazzucato, an economics professor at the University of Sussex. Mazzucato passionately argued that the public sector a.k.a. the government has been behind the most important and risky innovations of modern times. From the Internet to the “cool revolutionary thing in your iPhone,” said Mazzucato , came from the innovation work from the state.

Most of the cutting age technologies in the world that have energized markets came from government and not from the private sector, said Mazzucato. The impression that the public sector is a tangled world of inefficiency, corruption and waste belong the worst of groupthink. In short, Mazzucato said that the government is cool and creative, and much of the work of the private sector, even those moguls who organize the TED, are just minor rip-offs of the things and innovations done via the heavy lifting of government.

A public sector aka government of corruption, inefficiency and waste is now the favorite theme of pundits in the current Philippine context. It is, according to the pundits, a Kafkaesque world of corrupted labyrinths and by-ways, all strewn with the entrenched seeds of corruption. And this must be cut down to size. Abolish the Pork! Privatize ports, airports, tertiary hospitals and viable state institutions.

The corruption aspect is true. This is true here and even in the most sophisticated democracies with a high regard for civic virtues. As it was true in Alaska as earmarks of the late Senator Ted Stevens funded all those original “bridges to nowhere.” That was true in the case of the former California congressman and fighter pilot, who was the inspiration for the movie “Top Gun” who was caught using his congressional powers to get grease money from defense contractors.

Show me a democracy that is free of flaws and corruption and I will show you Utopia. Sleaze and democracy are oftentimes spoken in the same breath.

But is there something worse and more wasteful and more inefficient than work being done by government? Yes there is. That is work parceled out and contracted out to the private sector. Despite the popular belief that the private sector is efficient, and its work is done with integrity, the grand experiment in the world’s richest democracy showed the ugly side of private sector work.

The post 9/11 efforts was a grand opportunity for the Bush administration to pursue its grand plan of privatization. From the multi-billion dollar contracts to rehabilitate Iraq, to the lookout for possible terrorists at the US airports, the Bush administration decided that the private sector was the better contractor, not government.

What followed were major budget overruns, major work slippages, waste done by the private contractors on an unprecedented scale. Iraq is in a big mess right now partly because of the draconian failings of the private sector that carried out the reconstruction work there. The level of inefficiency and waste was such that even the most avid supporters of the Iraq war questioned the decision to privatize the reconstruction work in Iraq and security work at the US airports.

The Bush plan to privatize SSS was aborted by the failed and costly experiment of assigning to private contractors much of the reconstruction work in Iraq.

There is no empirical evidence that says government, in developed economies and emerging ones, is bad and private sector is good. And that a downsized government, cut down to the size envisioned in the wet dreams of political libertarians, will be a liberating, progressive policy.

Privatization cannot be a cure-all to the deficiencies of dysfunctional state institutions. As a one of the pillars of the Washington Consensus that was the policy rage in the 80s, there is no real hard metrics to prove that it has helped emerging economies get into the tiger status .

Privatization and less government are easy to advocate. In a media milieu in which the government gets the pummeling everyday, it is like preaching to the choir. The truth is the real innovations and bold solutions that changed society for the better, the epical ones, came from the much criticized government. The better policy should be this: change the men and women that soil the public institutions but lay off government.


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