Wednesday, April 17, 2024

Privatise, but regulate


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If we imagine for a moment the old schoolyard tug-o-war, but this time with one team wearing T-shirts emblazoned with a “State Control” logo and the other with “Privatisation”, we have a workable visual metaphor for the major problem we are faced with at this time in our economic history.
The first thing you realise is the inherent negatives we have assigned to each term, depending on where we come down in terms of economic philosophy.
State control suggests unnecessary government intervention in the marketplace, inefficiency, possible corruption and a bloated workforce kept on for political reasons. Privatisation suggests big business pulling the economic levers, calling the shots and generally holding the country to ransom for the sake of their profit margins.
You can also see both of these concepts in a more positive light, that is, the light which shone on our young nation as it tried to get out from under the grip of a few “oligarchic” and monopolistic private enterprises which did indeed more or less “run things” and which gave private enterprise a pretty bad name for a long time.
If you read Peter Morgan’s excellent but mainly anecdotal biography of Errol Barrow, you get a better sense of what I mean here: Mr Barrow saw Barbados as a collection of villages, with its small economy essentially run by Barbados Shipping & Trading Co. Ltd and the other sugar interests. To gain the “commanding heights” of the economy, his Government would have to build and invest in the often unprofitable enterprise which the private sector was unwilling to take on.
But Mr Barrow also learned from the Banks Breweries launch and used the same model to set up the Pine Hill Dairy. We need a lot more of that sort of public-private sector partnership today to take the pressure off the Government, which every year spends hundred of millions of dollars it does not have on “Transfers & Subsidies”.
These days, total deposits in commercial banks are in the region of $7 billion. It is this large deposit base that the Barbados Labour Party (BLP) was referring to at its forum a few weeks ago: how to unleash some of that rather dormant capital by encouraging people to invest in shares of public enterprises, thereby reducing Government’s investment and raising new capital from the public for expansion, instead of relying on taxes and borrowing.
This form of privatisation appears to be the most politically marketable from the Bees’ point of view, as it curbs the sting somewhat of privatisation being seen as a takeover of “our” state-controlled enterprises such as the Transport Board and Caribbean Broadcasting Corporation (CBC) by “foreigners” – once again, the stereotype – who would no doubt use them to beat the populace into submission.
But getting the average Bajan to invest in private companies is not easy, and has not had much of a consistent history of success. Recent moves to make it easier for “small business” to go public through initial public offerings has been a non-starter, as the criteria are too hard to accomplish.
Even when they generally favour some sort of privatisation, local politicians still want to keep their hands on the levers of state enterprise. In his column last week, BLP spokesman Clyde Mascoll talked about the Barbados National Oil Co. Ltd now earning too much money, saying it should be used more to reflect Government policy. That is, politicians telling a state-controlled organisation how much money it should or should not make by setting prices, as they do now, in Bay Street.
Imagine if we had taken this route with the electricity company a hundred years ago, what sort of government-controlled policies would be working their way through electricity provision? I shudder to think, because it would be a political football, I am sure. Or political nightmare.
The trend, which began in the heyday of the BLP’s tenure last time around, when the leadership was at its most energetic and creative, was to pass a comprehensive package of laws which set up the Fair Trading Commission (FTC), modernised the telecommunications market and set initial benchmarks for consumers, so that Government could take the politicians out of the operational control of key enterprises and make them available to the marketplace, local and foreign, with control being maintained at a correct distance via policy. Regulation and day-to-day oversight would be handled by the FTC.
The idea was (if I remember it right) to do a similar thing with the Barbados Broadcasting Authority, perhaps putting it under the FTC, but giving it its own headway to manage broadcasting through permits, licences, regulations and punishments for infringements. That way, we could sell off CBC. And take politicians out of the business of awarding radio and TV licences.
A similar authority could be set up to oversee the ports, so that private investment could be sought for the airport and seaport, while ensuring security, safety and a good piece of the bottom line when the profits come, as they would.
But after making such a promising start, the BLP slowed its march toward privatisation, missing many of the targets it had announced, such as putting the Barbados Water Authority under the FTC, selling off CBC and perhaps a few others.
The present administration does not seem to believe in the privatisation concept much, but is so strapped for cash that it follows the very harmful precedent set by the Bees as they retreated from their “privatise and regulate” moment in the sun and instead embraced those dark and forbidding versions of privatisation that go by the name of BOLTs (Buy, Operate, Lease, Transfer).
Under those contracts, you pretend that you still own something but you pay the private sector millions in interest and principal for the privilege, so that you can hold out to the electorate that the government controls the “commanding heights” of the economy through actual ownership.
Holding on to these government-run departments and statutory corporations at a time when they cost more than ever to run, and are bleeding the economy to death, is foolhardy.
With the Bees said to be far ahead in the polls for retaking the Government, I can understand why they have decided not to talk about privatisation right now, as the they feel the Dems would only use it to sow fear among the public. But I cannot see any way forward for this country’s economy unless we use strong incentives for privatisation coupled with meaningful regulation so that Government can get its operational costs down and allow new investment to come in.
• Pat Hoyos is a publisher and business writer.


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