I was listening a bit ago to a piece on NPR about the privatization of Ghana Telecom, which is being protested by folks who think that Vodafone isn’t paying enough. This seems to be a frequent problem when state-controlled industries are privatized — consider, for example, Russia’s oligarch problem.
Now, it may be that simple corruption, or its lemon-socialist cousin, “what’s good for General Motors is good for the country,” adequately explains this phenomenon. But I also wonder if there may be a problem of an inadequate market. It’s not easy to assemble the resources to bid on a large national company, and many of these sales have a handful of potential buyers at best.
Perhaps worse, however, is that there often seems to be no reserve price in privatization sales; the government commits to sell, and then goes looking for buyers. And as every negotiator knows, a party that has to make a deal is going to get absolutely worked over.
It also reminds me of a hypothesis I developed a while back. One hears bandied about (though less so in these post-Washington-Consensus days, largely because no one seems to want to nationalize industries anymore)(Ed. Note 2021: OK, more so in these post-post-Washington-Consensus days) the principle that nations with leftist tendencies suffer from a dearth of private investment because capital shuns the risk of nationalization. I wonder if there may be a parallel phenomenon where nations with rightist tendencies suffer from a dearth of infrastructure because the electorate shuns the risk of privatization.
This was, for example, what I thought when I heard about the high-speed rail plan proposed for California; I think it’s a good idea on the merits, but I think it’s highly likely that we would wind up spending ninety hojillion dollars on the thing and then Sacramento would sell it to private investors for eighty-five cents and a meatball hoagie.