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BINARY ECONOMIC MODES FOR THE PRIVATIZATION OF PUBLIC ASSETS - page 7 / 14

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  • Privatization and Economic Growth

Underlying the move to privatize public assets appears to be a basic belief that government owned and managed enterprises are inherently less efficient than private enterprises. While there is a great deal of evidence to suggest that this is true, there does not appear to be a significant alternative push to increase the efficiency of government enterprises, except in those cases where the body politic has defined the enterprise as a uniquely governmental function. And this definition is becoming increasingly narrow over time.

Consequently, privatization of public assets appears to stem from a desire to bring market disciplines to bear on enterprises that were once sheltered by government ownership. This desire may stem from an increasing realization that international trade and commerce raises the living standards of those nations and peoples who participate fully in the international economy. However, a country or an enterprise cannot participate fully in the international economy without being fully competitive. The increasing efficiency that comes from market disciplines ensures that enterprises will either be competitive in the international economy, or will fail to survive, permitting the allocation of resources to other, more productive activities.

Thus, a basic thrust of privatization appears to be the promotion of economic growth. It is this objective which will be thwarted to a great extent if the privatizing governments fail to link up the privatized capital with those who will use the earnings from that capital for consumption. If that capital goes primarily to those who reinvest rather than consume the income from the capital, total activity in the economy will be less than otherwise possible and economic growth will suffer as a result.

Binary Economic Modes of Privatizing Public Assets

There are a range of binary economic models which are applicable to the privatization of public assets. Some of these models are in effective use today and have a considerable track record. Others are conceptual and await the action of a creative government or agency to test their usefulness. Among the binary economic tools available for the broadening of capital ownership are the Mutual Stock Ownership Corporation, the Consumer Stock Ownership Corporation, the General Stock Ownership Corporation, the Individual Capital Ownership Plan, the Residential Capital Ownership Plan, the Commercial Capital Ownership Plan and the Public Capital Ownership Plan (Kelso & Kelso, 1982). In this paper I will make only passing reference to Employee Stock Ownership Plans as a means of privatizing public assets as others have dealt extensively with their use in this context (Binns, 1995; Kelso & Kelso, 1986). Rather, this paper will focus on two of the less well known options for privatization using binary economic principles, Consumer Stock Ownership Plans (CSOPs) and General Stock Ownership Plans (GSOPs).

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