The Tribune - Spectrum

, March 17, 2002

Happy amalgam of public and private sectors
Randeep Wadehra

Privatisation and Public — Private Partnerships
by E.S. Savas. Affiliated East — West Press Pvt. Ltd, N. Delhi PP: XV + 368 Rs 175/-

AFTER Independence, we chose mixed economy as developmental model. The public sector was prominent — not only in core industries but also as an engine for all-round economic development. The private sector played second fiddle — struggling for its survival, caught in the crippling tangle of rules, regulations, restrictions and restraints. Worse, the term ‘profit’ remained a dirty word for almost five decades of our post-Independence economic thinking.

The miracle wrought by private enterprise in the economies of the so-called ‘Asian Tigers’ opened our eyes to new possibilities. Privatisation became the new mantra for socio-economic nirvana. Yet, Savas admits that one cannot wholly write off the role of public sector organisations in a society. In fact, there ought to be a happy amalgam or an ideal mix of private and public sectors.

Savas, who teaches at Baruch College, City University of New York, says, "Dissatisfaction and recurrent problems with government activities invite privatisation as a possible remedy for the problems... Indicators of poor performance are much the same for both government and government-owned enterprises (GOEs), and it is these symptoms that lead to the demand for privatisation or other far-reaching structural reforms". He goes on to say that agencies, activities, enterprises, and assets that exhibit any of the following characteristics are potential candidates for privatisation:


Inefficiency, overstaffing, and low productivity, poor quality of goods and services; continuing losses and rising debts of for-profit government enterprises; lack of managerial skills or sufficient managerial authority; unresponsiveness to the public; undermaintenance of facilities and equipment; insufficient funds for needed capital investments; excessive vertical integration; obsolete practices or products, and little marketing capability; multiple and conflicting goals; misguided and irrelevant agency missions; underutilised and underperforming assets; illegal practices; and theft and corruption.

Family values and religion are emerging as powerful forces in the United States, and, underscoring their importance, it has been noted that the traditional family-centered societies of Asia by and large have avoided the social problems that bedevil Americans, particularly in inner cities. The trend is unmistakably away from government and toward the other institutions — in a word, privatisation.

But what is privatisation? Savas defines the term as, "...relying more on the private institutions of society and less on government to satisfy people’s needs". It reduces the role of government by increasing the role of other institutions of society in producing goods and services and in owning property. He goes on to say that in general, both public and private sectors play important roles,and it is increasingly common to refer to "public-private partnerships" which is a less contentious term than "privatisation". He does not agree with those who denounce privatisation as an act of regression to a Darwinian state where only the fittest survive.

Private non-government agencies offer more to the homeless poor than the government-run shelters for the destitute. In chapter 6 of the book, he gives strong evidence that privatisation, properly carried out, generally leads to large increases in efficiency while maintaining and even improving the level and quality of public services.

Savas avers that five forces have propelled the privatisation movement, viz, pragmatic, economic, philosophical, commercial, and populist. The goal of the pragmatist is better government, in the sense of a more cost-effective one. Economic affluence reduces people’s dependence on government and increases their acceptance of privatised approaches. The goal of those who approach the matter philosophically — some would say ideologically — is less government, one that plays a smaller role vis-a-vis private institutions; this is the Jeffersonian view — government that governs least governs best. The goal of commercial interests is to get more business by having more of government’s spending directed towards them. And the goal of the populists is to achieve a better society by empowering people so that they can satisfy their common needs, while diminishing the power of large public and private bureaucracies.

This book is divided into three parts. Part one consists of a background discussion that examines the growth of government, the reasons for that growth, and its harmful consequences. Part two examines the theory of privatisation while part three holds forth on its practice. Though written for conditions obtaining in the United States, I am sure that we can benefit by reading this time, as there are many similarities between the economic scenarios presented by the author and current realities in our economy.

Let us not forget that the concept of partnership between public and private sectors is not new to us. Our leaders had wisely chalked out a programme for having a mixed economy for India. Where they erred, perhaps, was in giving too little importance to the private sector’s role.

Hopefully, we shall not commit another folly by swimming to the other end of the economic spectrum by wiping out the public sector altogether and giving unbridled freedom to privately-owned industrial monoliths. This book is worth a read.

* * *

Attack on Parliament

by K. Bhushan and G. Katyal. APH Publishing Corpn., New Delhi. Pages: V+215. Price: Rs. 495/.

A stunned nation watched armed desperados invading the Parliament’s premises and gunning down unarmed guards who valiantly defended the entry to the sanctum sanctorum of democratic India. The armed guards reacted and shot dead the terrorists. Katyal and Bhushan narrate thus, "...a white Ambassador driving towards the main Parliament building from the Parliament Street entrance, its red light flashing. The Parliament sticker on the Ambassador (DL3CJ 1527) was later found to have anti-Vajpayee and Advani abuse scribbled on it. The car was waved through the gate and went straight across the main gate towards the Vijay Chowk end. The militants swung the car sharply to the right at the bend in front of gate 12, but found their way blocked by a clutch of cars belonging to the Vice-President’s cavalcade".

It’s movements provoked suspicions and the Parliament Security Officer J.P. Yadav raised an alarm. He was killed and so was Kamlesh Kumari of the CRPF but not before the rest of the security forces were alerted. This happened on the wintry morn of December 13, 2001 — at around 11.45 a.m. Then followed the usual trading of charges between the Opposition and the ruling party — one calling the attack a security failure and the other termed it a success of the security system.

At the international level, the accusing finger unerringly pointed at our neighbour.

Terrorism has been posing a daunting challenge to our polity for more than five decades. The oldest is the Naga insurgency. Subsequently, we have had Naxalites, Mizos, Bodos, Khalistanis and of course now the ISI-sponsored Jehadis. Despite the perils, our democracy has flourished and has gained respect in the comity of nations for its principled functioning.

The authors have done a good job of putting known facts in the form of a book. It could have done with some more diligent proofreading though.

* * *

US National Missile Defense Strategy

by Dr MP Srivastava. Gyan Publishing House, N. Delhi. Pages: 339. Price: Rs. 590/-.

When the Cold War was at its zenith, President Ronald Reagan of the USA had unveiled the ‘Star Wars’. This was to be a comprehensive space-based anti-missile defense network — that would intercept and shoot down ICBMs and other missiles fired by the enemy targeting the United States. However, the costs were considered prohibitive and the program was more or less shelved in due course.

Now, says Dr Srivastava, President Bush’s administration has revived the Star Wars theme by embarking on the National Missile Defense (NMD) programme to protect the United States and the Allies from any possible nuclear attack from the rival nuclear powers, especially the "Rogue States" that have enough nuclear strike capabilities to blackmail the United States or its allies.

Here, a mention is often made of North Korea’s missile development programme and its proliferation to Pakistan — with China’s blessings. This fuelled Pakistan’s ambitions to become an Islamic nuclear power, that was capable of wielding clout not only with the Arabian sultanates but also the Central Asian Republics. This would, undoubtedly, have affected India’s strategic interests in these regions. United States, too, would have been placed in a none too happy position if the Islamic Bomb concept had caught the imagination of elements hostile to its interests in West Asia as well as in other parts of the world.

In July 1998, Donald Rumsfeld, who was the Defense Secretary then too, had predicted that nations seeking to develop long-range ballistic missiles might be able to achieve that objective within five years of deciding to do so. The United States might have little or no warning about the testing or deployment of such missiles. The same year, at the end of August, North Korea flight-tested or deployment of such missiles. The same year, at the end of August, North Korea flight-tested a three-staged ballistic missile. The Clinton Administration reacted to these developments by allocating funds for Future Years Defense Plan for the deployment of National Missile Defense system. The Administration identified several factors that prompted the NMD decision.

These included not only the immediate threat to United States, but also an assessment of the maturity of the technology in the hands of hostile powers and feasibility of deploying an effective defense system. The ABM teaty was coming in the way of launching the NMD and the Bush Administration has more or less abrogated it, much to the Russians’ chagrin, and has allocated one billion dollars to make NMD effective.

Whether these developments would rein in the so-called rogue states is a moot point. What needs to be considered is whether such massive rearming by the United States augurs well for the civilised world.

If you are a defense analyst you might like to read this volume.