Privatization: The Big Joke That Isn't Funny

The privatization of public goods and services turns basic human needs into products to buy and sell. That's more than a joke, it's an insult, it's a perversion. It generally benefits only a privileged group of businesspeople and their companies while increasing inequality and undermining the common good.

Various studies have identified the 'benefits' of privatization as profitability and productivity, efficiency, wider share ownership and good investment returns. These are business benefits. More balanced studies consider the effects on average people, who have paid into a long-established societal support system for their schools and emergency services, water and transportation systems, and eventually health care and retirement benefits. These studies have concluded that:

• Privatization has generated large profits for new owners but these have not been shared with the general public.

• The potential benefits of privatization are often outweighed by high contracting costs and opportunism.

• Most privatization programs appear to have worsened the distribution of assets and income, at least in the short run.

While privatization may lead to efficiencies in producing goods, it is generally only true under conditions of competition and regulation. The New Jersey Privatization Task Force asserted that "States that have had the most success in privatization created a permanent, centralized entity to manage both privatization and related policies aimed at increasing government efficiency."

In the U.S. and around the world, privatization has simply not worked in industries that provide essential public goods and services:

Indigenization law in Zimbabwe

Published on Jul 29, 2012 : Indigenization law makes native Zimbabweans shareholders of foreign companies.

Spain bans short-selling of market shares.

Temporary measure by stock market watchdog CNMV is prompted by volatility in country's and European markets.

Spain's stock market regulator has temporarily banned short-selling of shares owing to volatility in Spanish and European markets.

CNMV said on Monday that the ban would remain in place for three months, adding that Italy had taken similar steps.

In a short sale, investors sell stock that they do not own, betting that they can buy it back at a lower price. The investor seeks a profit by betting that the price of certain shares will fall.

Short-selling of shares has been blamed for driving down markets during the financial crisis.

The move came as the financial pressure on the recession-hit country reached a level that saw other European countries need a financial bailout.

The yield on Spain's benchmark 10-year bond spiked 0.23 percentage points to 7.46 per cent, well above the 7.0 per cent danger level for long-term funding.

Any yield over 6.0 per cent is widely seen as unsustainable for long-term funds, with 7.0 per cent the level at which Greece, Ireland and Portugal had to ask for outside help from the EU and the International Monetary Fund.

Gini Coefficient : the measurement of Income Inequality

The question is how can we measure Income Inequality? Fortunately it can be measured with a statistical approach known as the Gini Coefficient.The Gini Coefficient was developed by a statistician named Corrado Gini, and it is a measure of the income distribution of the population in a country. It range between 0 and 1 with 0 being in perfect equal and 1 being highly unequal. It helped define the gap between the rich and poor nations. The income distribution of a nation can also be represented graphically with the Lorenz curve below.

The upward sloping 45 degrees sloping line represents the equal distribution of wealth. An example will be the intersection point of the 20% of the income distributed and the 20% of the population. On the y-axis (vertical) you have the income distribution as expressed in decimals and on the x-axis you have the wealth of the nation. The area that is shaded in red represents the ‘area of inequality’ in income distribution. So the flatter the Lorenz curve the bigger will be the 'area of inequality' and hence income distribution.

An example of unequal distribution is where the 11% of income intersects with the 40% of the population on the Lorenz curve. This shows that 11% of the income is distributed to 40% of the population.

How Malaysia compared to the rest?

Anyway as of 2009 Malaysia is ranked 102 out of 136 countries surveyed by the CIA for the most unequal income distribution. The following is the income distribution of different ethnic in Malaysia and also its Gini coefficient from 1995 till 2009.

Column1	Column2	Column3
GINI Coefficient Of Malaysia
Etnicity	2004	2009
Bumiputra	0.452	0.44
Chinese	0.446	0.425
Indian	0.425	0.424
Others	0.462	0.495
MALAYSIA	0.462	0.441

Source : Economic Planning Unit 2009

The performance of Malaysia’s Gini Coefficient from 1995 – 2009

Source : Department of Statistics Malaysia

According to World Bank, Malaysia was one of the few East Asian countries that reverse its income inequalities over the past decades but unfortunately reverses its direction since the 1990s. In other words policies drafted by policy makers since then are not effective.

This may be due to the bias policies that are drafted to the benefit of the ‘Bumiputra’ community while neglecting others and also the emergence of a new ‘ruling class’ that are make up of political cronies. This new group are given special treatments and are encouraged by the ‘powers to be’ to gobble up much of the nations strategic and big businesses in order to make up what they called the ’30 percent Bumiputra quota’.

Needless to say the end result is the re-emergence of the old Colonial type of ‘Rent Seeking’, businesses where being the monopoly or duopoly is the order of the day. As we know being in a position to monopolize any sector of the economy will only resulted in being contented. No incentive for being innovative and competitive made this conglomerates being redundant and badly managed and in the end left to decay.

Good examples include MAS, PERWAJA STEEL, PROTON and Bank Bumiputra just to name a few.

Extract from :

Neo Capitalism is about, Socialization of Private debts:

Shaking Spain: 'Take away people's food & homes - expect violence'

Published on Jul 20, 2012 by RussiaToday : Police have used rubber bullets and tear gas to disperse angry protesters thronging the streets of Spain. Dozens of people were injured and a number of activists detained during the latest nationwide anti-austerity demonstrations. In a major show of strength, hundreds of thousands have been taking part in the protests. People marched in 80 cities across the country to protest against more suffocating austerity which is to come. That's after the German Parliament gave the green light to the 100-billion Euro bailout for the country's battered banks. The EU's finance ministers are now expected to approve the conditions for the financial lifeline to Madrid. Carlos Delclos, a sociologist at Pompeu Fabra University, believes the situation in Spain is only going to go from bad to worse.

A Capabilities Gap: The Emergence of a 'Two-Speed West'

Published on Jul 19, 2012 by ForaTv : Thomas J. Wright, Fellow at the Brookings Institution, warns about the danger of an economic capabilities gap with the emergence of a "two-speed West". Wright argues that recession will endure, and poor EU spending choices will have dramatic consequences.

150 years history America Productivity Versus Real Wages.

Uploaded by gevidn on May 28, 2010:
Prof Rick Wolff - talks about 150 years of American Experience, Productivity, real wages & consumption.