Тег: privatization

From which side should Temasek be gnawed?

After publishing yesterday’s post, I encountered an interesting objection from Anton Epikhin, the lead of the channel RLN.Today. He argued that my idea of privatizing a profitable state-owned company is not the best thing that can be done to abolish the state. In short, the reasoning is as follows. People are used to a certain set of public goods provided by the state, and the state’s refusal to provide them would cause widespread outrage, and therefore the situation would be quickly rolled back. Consequently, from a purely political standpoint, it is quite difficult to strip the state of habitual functions such as the police or courts, even if it provides these services at a high cost and very low quality. However, one can try to sell citizens the idea that these services be provided by joint-stock companies where all citizens are shareholders. But a “Court” JSC is also not the most obvious idea. However, if one starts with a state investment company, then why not; this type of state ownership is certainly not essential, and the idea of transferring it to citizens would be successful. Instead of selling it at auction to private individuals, with a subsequent distribution of the proceeds among citizens, the company’s shares could be distributed equally among citizens. After the change of nominal owners, the company would continue to operate in the same mode, except that instead of paying dividends to the sole shareholder—the state—it would pay them to the new shareholders—the citizens.

I reasonably countered that it doesn’t really make a difference. After receiving the shares, people will still decide for themselves what to do with them—hold them, sell them, or buy them from others to obtain a large stake. With equal success, one could have first sold them to those interested, and then let them spend the proceeds however they wish. But no, Anton replies, there is a difference. Having seen the example of high-liquidity state assets and realized that they can be transferred to the ownership of citizens, citizens will get a taste for it and will be more likely after some time to demand that this operation be repeated with other assets, including the army and the police. But if the investment company were simply sold and the money distributed, it would be much easier to say about other state structures that “you don’t understand, this is different,” and that “this other thing” will be funded by taxes.

It still seems to me that there is no significant difference. More precisely, there is none from an economic point of view, but as for which specific decision from a psychological and political rhetoric standpoint will be easier to sell to people, and which is more likely to be followed by further steps toward the denationalization of society—that is difficult for me to say. So I am simply describing this point of view; perhaps it is indeed valid, and in that case, any Singaporeans among my readers should, of course, insist specifically on such an option for the reorganization of Temasek Holdings.

If ancap happens, how will land sales in the state take place, and to whom will the money go? To previous rulers?

Ilidzhin

I have already answered a related question in a post about the continuity of pension payments during the transition to a stateless society. There, I noted that the transition mechanism will vary depending on exactly how ancap comes about.

The most peaceful and calm way to transition to ancap, from the perspective of state functionaries, is through minarchism, which is precisely why it is attractive. As a result of liberal reforms, the state’s share in the economy shrinks, taxes decrease, state property is gradually privatized, and all of this is replaced by private institutions. Over time, only the name of the state remains, and eventually, the last newly dismissed government official, leaving the last government office rented from a private company, turns off the light. The money received from privatization during minarchist reforms is spent on the bankruptcy procedure of the state pension system, the repayment of the national debt, and so on. And if, due to favorable market conditions, some unspent money remains after privatization, it is simply distributed equally among the citizens.

If the transition to ancap occurs through the formation of extraterritorial contractual jurisdictions, then after some time the state will simply become one of such jurisdictions, losing its right to legitimate aggressive violence and its tie to a territory due to the shift to contractual relations with clients. In this case, that state property which is found unnecessary for carrying out the functions of a contractual jurisdiction will simply be sold, as non-core assets are usually sold. The privatization of the state itself will most likely happen through a shareholding mechanism: each citizen receives one share, and then some hold, some sell, and some buy up shares, thereby gaining control over the ECJ. This mechanism is prone to corruption (see voucher privatization), so it is unlikely to happen without scandals.

Finally, ancap may emerge as a result of agorist practices bleeding the state dry until it collapses on its own. But in the process of being bled dry, it will sell off those assets that still hold some value, and by the time of liquidation, all liquid state property will already be in the hands of enterprising agorists, including former government employees who privatized it into their own pockets. Those who find this unfair can simply try to do it before others. Agorist logic is harshest here: state property has already been declared ownerless property, effectively controlled by a gang of accidental heirs to the great robbers of the past. Whoever manages to seize a piece of this property non-violently is a success. Whoever manages to seize it violently is not a success, and property claims may be made against them later.

When is the tragedy of the commons a good thing?

In the script for the video about the free-rider problem and the tragedy of the commons, I emphasized how bad this is for users of a shared resource and what strategies have been developed to combat it. Now, I want to talk about a case where the tragedy of the commons is actually a good thing, and fighting it is bad.

The entire focus is on what exactly constitutes the shared resource. Imagine a rare resource such as consumer demand. Everyone has the opportunity to produce a certain good or service, sell it, and make a profit. While the market is empty, a few producers will make superprofits, and the thirst for gain will attract many other suppliers to this patch. Competition for the consumer’s attention quickly leads to a decrease in margins. To maintain profit, volumes must be increased, and this finally exhausts the shared resource. The consumer receives an enormous abundance of cheap goods, which they are ready to push in the greatest possible quantity, as long as the consumer is willing to buy. Here is a “buy one get one free” promotion, here is an installment plan, here is a sale, here is unlimited access for a fixed subscription—just buy it.

Admit it, if you put yourself in the consumer’s shoes, this phenomenon cannot help but be pleasing. But the producer, for whom this is a terrible tragedy of the commons, tries to fight it. As we know from the video, two strategies are possible here: privatization and cooperation.

Privatization means the appropriation of consumer demand in a certain industry by a specific producer—in other words, the creation of a monopoly. Other suppliers are forbidden from selling certain goods and services to consumers. That’s it; now there is no need to chase sales volumes, and superprofits can be earned with fairly modest investments in production. However, part of the profit will have to be invested in protection against competitors, and they are not idling, so these costs will tend to increase.

Cooperation means that anyone can satisfy consumer demand, but a number of restrictions are imposed upon it. This is usually expressed in strict industry standards that effectively secure the dominant position of those players who are ready to invest significant capital into production, while outsiders are filtered out. However, a lot of attention must be paid to controlling that producers do not cheat. In this regard, a recent case comes to mind with some European auto concern that faked data on the exhaust emissions of its engines to save money on complying with environmental standards. But the classic example is, of course, medieval guilds. The quality of their goods was high, production volume was low, and profits were magnificent. Only the black market eventually undermined their dominant position, and a tragedy of the commons occurred, which we know as the Industrial Revolution.

So, when you are told about the harm of competition and the benefits of cooperation, as well as the inevitability of natural monopolies, it is important to understand: these people are quite sincere and not fools at all. It’s just that you are a resource to them.

A Christmas market is a tragedy of the commons in all its glory: consumers are happy, they are lured in with all their might, and they look more than they buy

This question stumped me in an argument. Why is it necessary to privatize a state enterprise if it is profitable?

Bvl72

Let’s figure out where this enterprise came from.

First, the state could have collected taxes from citizens, spent less on citizens’ needs than was collected (or borrowed money, or printed new money) — and bought a profitable enterprise. Thus, this results in a misappropriation of funds: money was collected under the pretext of providing services to citizens, but instead was spent on running a business. Legal logic dictates the solution: sell the enterprise, divide the proceeds among the citizens — and henceforth, do not acquire enterprises at the expense of the budget.

Second, the state could have provided the state-owned company with preferences, thanks to which it prospers. For example, the state enterprise fulfills government orders, or trades duty-free, or has preferential loans, or uses insider information, or is simply a monopoly. Thus, we have unfair competition, as a result of which the competitors of the state enterprise receive less profit or even incur losses. Legal logic requires eliminating this conflict of interest and removing the referee from the field of play.

Third, the state could have bought out a loss-making private enterprise in a pre-bankruptcy state, and then the market conditions changed, and that same activity began to yield a profit. In other words, the state took a significant entrepreneurial risk, which in this particular case paid off — but how many cases were there where the purchased loss-making enterprise continued to suck money from the budget, or eventually went bankrupt! Thus, taxpayers are exposed to the risk of serious economic losses without their consent. Legal logic requires coordinating investment policy with shareholders, and if the management of an investment fund behaved this way, it would lead to their removal.

In short, any attempt by the state to engage in entrepreneurial activity one way or another violates the rights of citizens, and therefore consistent libertarian reforms must inevitably include the full privatization of state property.