What is Privatization?

The Indian Prime Minister retorting against the noisy opposition in the Parliament and making a strong pitch for the privatization drive of his government in the latest budget said,

Wealth creators are also important for the country, only then wealth can be distributed. How can wealth reach the poor, how can jobs be created, the PM asked.

If the public sector is important, so is the participation of private enterprise. Should members of the IAS alone be tasked with everything? Have we entrusted the IAS with running fertiliser factories and chemical enterprises? Then they are supposed to fly planes as well. What type of capability have we acquired by handing over the country to babus. Babus belong to us and so do the youth. The more opportunity we give to our youth, the more he will benefit.

By and large I agree with what the Prime Minister is saying about the importance of private sector. But then the most important thing here is, whether he is also walking his talk with concrete actions? Remember what people say is not important, what they do is important. Rhetoric is one thing but concrete action is another. To check this we have to first understand the true meaning of privatization and so private property and then we have to see the policy actions of his government for this said privatization to check whether they match the true meaning of private property and privatization or not.

In the legal parlance private means individual ownership rights and individual ownership rights mean an individual can dispose of his property by whatever means he sees fit without violating others’ similar property rights. In the science of jurisprudence we call this allodial rights. The property over which an individual has ownership rights cannot be violated by anybody else. Not even by the government. He is the supreme owner of that property. There is no other overlord over him. If the government is somehow, in a direct or in an indirect way, controlling or regulating the property then that property is not private property and so consequently any process involving positive government action is not privatization.

In India everything is either directly controlled or regulated by the government. Even the companies that are going to come into existence after this privatization drive (sic) will be ultimately controlled and regulated by the government. And when the time comes the government will reserve the right to nationalize these private companies in the name of public welfare or national security or any other such reasons. In short, Government is the ultimate owner of everything in India. And when government is the owner of everything, there is no private property and so no privatization of anything. This is socialism pure and simple where the state ultimately is the owner of everything.

And the most important thing here is that the government simply cannot do privatization because it does not own any of the public property to begin with. The property that they are selling to some of the private individuals does not belong to them because they did not bring into existence or buy that property by using their own economic means earned income. The true owner of all these public sector companies are the taxpayers of India whose money was used to bring these PSUs in to existence and to run them since all these years. The taxpaying public is the real property owner of this public property. Prime Minister and all other politicians,  bureaucrats, diplomats and other such state officials are themselves getting their salary from the revenues (sic) collected from the taxpayers. None of the state officials are taxpayers. They all are tax consumers. And so what is not theirs, they cannot sell or give to others!

Looking at the above reality, if the prime minister is serious about doing real privatization then instead of handing over these PSUs that he does not own to few selected individuals in India, he should return them to the taxpayers who are the real owners of these PSUs and all other public property of India. Taxpayers can then decide what to do with their property. They can form a joint stock company on their own or they can sell their stake to some other company who will be bidding, with many other competitors, for the ownership in the open market. And those companies can be anyone and not just few selected individuals. After handing over the ownership rights to the taxpayers, the government must exit the economy and society instead of controlling and regulating everything. That will be true privatization. The share of the government must roll back and shrink to zero for true privatization to take place. Against this, government expenditure in India keeps on rising no matter which party government comes to power.

Unless and until this happens, Indians must know that whatever the government is doing is not privatization. In the name of privatization, the same old socialism is going on. And as long as socialism is going to continue in India, sadly India cannot progress. Indians need to understand that socialism is not the right means for achieving their needs. Theory and history both are very clear about this fact. Socialism cannot give us the growth and development that most Indians seek.