Thursday, July 18, 2019

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(Insert name of country) incorporated

Thursday, October 13, 2011

If a country can privatize its ports, highways and telecom services, why can’t it privatize itself?

A country may call itself a democracy, although gangsters control the electoral system, courts, and armed forces, and most citizens are free only to live poor and die young.
In reality, this is nothing more than a failed system, which should be replaced by something better.
In the case of a country, which has been run by gangsters for a long time, the only change likely to do much good is a radical one.
One approach involves a committee of concerned citizens, which expels the thugs in charge (all of which implies that citizens can create a committee popular and powerful enough to kick out the people, who own most of the guns, but for the sake of argument let’s assume it happens).
At this point, the committee recognizes that inviting other nationals to run the country is risky.
This is partly because the culture of corruption has infected too many people, and partly because in poor countries with – inevitably – low capital formation, the economy is mainly run by family groups, who tend to do business on the basis of relationships, not merit.
As a result, the concerned citizens decide that the best solution involves selling the country to professional foreign managers.
Assuming the minimum cost of the assets is appropriate, the new managers would need to operate them honestly and intelligently, in order to get a reasonable return on their investment (stealing taxes from poor people would not likely do the job).
A big benefit of this plan is that management would immediately inject new money into the country, and that it would do it in the most democratic way possible, by making a cash gift directly to the citizens.
In this model, the committee would auction the country to the highest bidder, with a reserve bid of one times revenue (defined as the amount of taxes the government collects each year).
As part of the process, the concerned citizens’ committee would explain that privatization only applies to public resources, and that the winner will respect the existing system of civil and commercial rights.
The outside-management approach gets complicated in proportion to a nation’s size.
A manageable model could involves a country, which has a population of 10 million and annual tax revenues of $2 billion.
In this case (and assuming a price of one times revenue), the winning bidder would pay each family of five $1,000, which – depending on the country – could very well be the equivalent of a full year’s income.
The winner would respect the existing system of civil and commercial rights and – most important – would promise to double the national average living standard within ten years.
The winner would then go about improving the economy, which should be easy.
Smart, honest people can make sure that a country’s physical assets – roads, airports, national parks, and so on – work smoothly.
Since the country is poor, labor is cheap.
Since workers have hope, they will be motivated.
Improving infrastructure and making people smarter implies additional costs – but not necessarily a lot.
For only $10 million a year, management could import 50 outstanding math, science, computer and language instructors, who every two years could produce 1,000 future teachers, who would in turn make 20,000 young people smarter than they ever thought possible.
A program of planting flowers and cleaning garbage would cost almost nothing, while producing big increases in the value of tourism attractions.
With serious managers running the country, other businesses would confidently invest in it.
At the end of each ten-year period, the assets would again be auctioned off to the highest bidder – including could buy their assets back.
(Insert name of country here) Incorporated.
It may be a crazy idea.
But in many failed states, the supposedly sane ideas haven’t worked.

Fred Blaser
Republica Media Group