To Privatise or Not?-That Is the Question: The Neo-Liberalism Philosophy Embraced So Enthusiastically by Advanced Economies after World War II and Entailing the Privatisation of State-Owned Utilities, Came a Cropper during the Financial Crisis. Is Privatisation Now a Bad Word? Richard Seymour Discusses

By Seymour, Richard | African Business, June 2011 | Go to article overview

To Privatise or Not?-That Is the Question: The Neo-Liberalism Philosophy Embraced So Enthusiastically by Advanced Economies after World War II and Entailing the Privatisation of State-Owned Utilities, Came a Cropper during the Financial Crisis. Is Privatisation Now a Bad Word? Richard Seymour Discusses


Seymour, Richard, African Business


There are a number of reasons for the average African to look to the wealthier north and envy its more advanced state of development, while bemoaning the fact that Africa is, in some ways, decades behind most of the world's economies.

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That fact does, however, afford Africa's policy makers the opportunity to learn from the successes and failures of others. What were once brave new social and economic experiments in Europe and North America are now matters to be looked back on with the benefit of hindsight.

The economic system adopted after World War II was so successful at changing the world that it began to falter in the new environment of its own creation. Debate raged about what best to replace it with and what became known as neo-liberalism set the agenda for the next several decades.

Championed especially by Ronald Reagan, then the US president and the then British prime minister, Margaret Thatcher, this deregulated, free market solution has been, since the 1970s, the one which some of those within it prospered by and which those outside of it had to contend with.

Neo-liberalism was driven in Britain by privatisation of state utilities such as gas, steel and telecoms, the idea being that when exposed to market forces, these giants, thought to be unwieldy and inefficient, would have to become leaner and more competitive.

The global banking crisis in 2008 that started in the US showed what deregulation can result in. The market does not always correct itself. Its hidden hand, that was supposed to direct it more effectively than government ministers, tended to do what any hidden hand would do: get up to mischief.

For Africans, the effects of privatisation policies have not always been easy to take. If a privatised public transport service in a European country cuts unprofitable services and raises prices, the people there can, as an alternative, drive; but when the same happens in rural Africa, all that is left for people to do is walk many miles to school and work. And when private health care and education becomes too expensive for everyone except the wealthiest, the state alternative is often poor, if it exists at all.

Among the most high-profile failures the critics of privatisation point to is Ghana's attempt to introduce private enterprise to its water supply. Poor management, disorganisation, confusion and controversy from the beginning have beset the World Bank-backed plan. Most damningly, many areas are either unable to afford the rising cost of water or else have no access to it at all.

'Continentalisation' of Africa

That is not to say that privatisation cannot do what it is supposed to do, and privatisation is a cornerstone policy for a number of African governments in their drives for poverty reduction. Policy makers with broad vision are looking beyond wealth creation and toward a more naturally integrated continent, brought about by privatisation, that more contrived means of cross-border relations have not always successfully delivered.

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Nationalistic policies, it is thought, will give way to greater international exchanges of capital as barriers to trade are relaxed or dismantled, thus forcing acceptance of the notion that international relations can no longer be seen as a zero-sum game, where one side can win and another lose.

Instead, a 'continentalisation' of Africa's economies may well create the situation where it is in each other's best interests that everyone prospers. Moreover, with necessity being the mother of invention, the improvement of Africa's financial sector, which would need to process these transactions quickly and reliably, is also likely to be facilitated.

In principle, successful privatisation of a public utility ought to reduce costs for the government, attract foreign investment, make the delivery of services more effective and competitive and encourage entrepreneurship. …

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To Privatise or Not?-That Is the Question: The Neo-Liberalism Philosophy Embraced So Enthusiastically by Advanced Economies after World War II and Entailing the Privatisation of State-Owned Utilities, Came a Cropper during the Financial Crisis. Is Privatisation Now a Bad Word? Richard Seymour Discusses
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