The government can claim with justification that it has tested the waters of privatisation. But the waters have since been, and continue to be, remarkably tepid.

To privatise is to render private. It amounts to removing the State from production and to drawing in the perimeters of the State. It gives a new dimension to the role of the government in these islands. As such it changes Malta’s economic contours.

In a sense, privatisation is a controversial policy. Its supporters and critics base their cases on ideological, political and economic arguments.

Those in favour claim that privatisation enhances individual freedom, encourages and improves efficiency, makes industry more responsible to the demands of the customer, decreases the public debt and forces management to face market realities.

Shareholder democracy

It is, in theory, capable of creating a shareholder democracy, by giving a large number of small shareholders a stake in the country’s economic performance. It equates to a recognition that the market measures, and responds to, the choices of consumers more accurately than the political process – and it does so more cheaply and efficiently, and with greater satisfaction to the beneficiaries, than its counterpart can achieve in the public sector.

Opponents paint a sinister picture and offer a gloomy prognosis. They assert that privatisation is, more often than not, beholden to the elevation of private greed over the public interest. They claim that the sale of valuable assets in order to finance tax cuts, and the conversion of public monopolies into private ones, without adequate safeguards for consumers and workers alike, is short-sighted.

In specific situations, there is merit in all these observations.

The late Harold Macmillan, who was as Conservative as Margaret Thatcher, dismissed privatisation in two short aristocratic sentences: “First of all the Georgian silver goes, and then all the nice furniture that used to be in the salon” he said. “Then the Canalettos go,” he added.

Pawnshop politics

More outspoken critics have argued that privatisation amounts to “privatisation” – the stripping of public assets for the enrichment of a handful of speculators – and is tantamount to pawnshop politics, involving a massive transfer of wealth from the taxpayer to a small number of individuals.

These are, of course, vivid caricatures. Whatever the critics say, the case for radical reform and restructuring is pressing if the Maltese economy is to survive, first by rolling back its structural deficit and by remedying its massive debt burden and, secondly, by becoming fit enough to operate in a world of relentless and unforgiving competition.

Major objectives

The major objectives of privatisation in this context could be summarized as follows:

* to reduce the involvement of government in decision-making in the running of productive and service utilities.

* to allow industries to raise funds from the capital market through commercial channels and without government guarantee

* to raise revenue and reduce the borrowing requirement of the public sector

* to promote wide share ownership and, in particular, to encourage the share-ownership of workers in their enterprises.

* to increase competition and efficiency

* to unleash an enterprise culture

* to replace public ownership and financial control by a more effective system of economic regulation thereby ensuring that the benefits of increased efficiency will be passed on to the consumers.

Entrenched within these objectives are important safeguards that deserve highlighting as well as ample public discussion.

Privatisation could not be imposed from above without the consent or, at least, the co-operation of all the participants. It is not enough to publish white papers and to draw up guidelines. Structured discussion between the social partners and the consideration of special interests of consumers are essential to success.

Care has to be taken to make sure that public assets are not sold cheaply and that proceeds are not dissipated in the form of “negative capital expenditure”.

The constructive side of privatisation should draw its strength from the practical view that the State must not extend itself and assume roles incompatible with an inefficient and free society.

Democratic basis

It should be so designed to shift the focus of decision-making to private organisations and individuals, thereby providing a more democratic basis for society and for the allocation of resources.

All this notwithstanding, the State would still have a decisive role to play.

It is not the existence of the State that is in question, but its function. The State must exist to define and enforce the law, to monitor the market, and to see that the rules of the game are observed, to discourage restraint of trade and scotch the forces of monopoly.

Without the overriding power of the State, civil government and the market are in jeopardy.

Above all, the government has an obligation to protect consumer interests by providing a regulatory structure.

It is well and good to promote an understanding of the pros and cons relating to the principle of privatisation.

Test questions

The test of understanding lies in the realities of implementation.

Who has profited from the sale of the family silver?

Has the wealth so disposed of changed hands between Maltese interests, or has it been taken over by foreign interests, with all that this implies?

Has privatisation contributed to the build-up of a Maltese share-owning democracy, or has it missed a singular opportunity?

Has privatisation yielded side-benefits e.g. in the form of share-ownership by the workers in former State enterprises?

Has Malta lost its grip on strategic sectors of the economy due to its privatisation initiatives?

Has privatisation yielded benefits to Maltese consumers?

The proof of the pudding lies in the answer to these and similar questions.

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