| THE ECONOMICS AND POLITICS OF PRIVATISATION (EXPLANATION AND COMMENT) BY ESKOR TOYO Paper presented at a lecture organized by the Academic Staff Union of Universities (ASUU) held at Multi-Purpose Hall, Women Centre, Filin Samji, Katsina Thursday, February 01, 2001 Introduction This paper is addressed to the world, not to Nigerians alone. It is meant to sort out truth from falsehood regarding the politics and economics of privatisation as a phenomenon in the contemporary world dating from the late 1970s. Privatisation is a complex matter because economics and politics are bound up in it. In the sections that follow we shall deal with the following issues before we conclude: salient preliminary observations; the historical background to the privatisation campaign, including false allegations about the Nigerian economy; motives for the expansion of the public sector prior to 1980; the character of the Nigerian private sector; motives for privatisation; imperialist interests in privatisation; statism and other authoritarian structures; commercialisation and alternative forms of wealth producing and distributing enterprise; and the confusion about some privatisation in transitional socialist countries. Nigerian development plans, the constitutions of the country, and pronouncements by Nigerian heads of state keep saying that the Nigerian state aims at a society where all Nigerians are treated equally, an egalitarian society, social justice and equity, a land where no one is oppressed, a country where the means of production and distribution are not concentrated in the hands of a privileged group or a few, a land where resources are used only for the common good, and a democratic republic. As for democracy, an authentic democracy can only mean to begin with a government and economy owned by the people and managed by the people for the people. Actually all these pronouncements imply a drive in the socialist and non-capitalist direction if one understands socialism and capitalism well, has a humane rather than a selfish and predatory conscience, and is honest with the people. Initial Observation To those who drum up privatisation as the royal road to so-called efficiency, there is one central answer. The slave trade was private and, judged by the capitalist criterion, it was very efficient, given the enormity of profits made from it by its practitioners. Kidnapping of free people into slavery, efficiently conducted slave capturing raids, efficiently fought slave-taking wars, and the killing of sick, feeble and freedom-loving slaves were all parts of this efficiency. To those who drum up privatisation as the master key to so-called freedom, there are two central answers. The first is that those parts of pre-colonial Nigeria where the ownership of land was vested in the community had the most free, because the most equal, citizenry. The second is that in the slave trade and the slave using system the slave traders and slave masters were quite free, but this did not apply to the slaves. Capitalism is slavery, a modern form of slavery, namely, a kind of slavery evolved to be compatible with the modern factory system. Both pre capitalist slavery and capitalism are master-servant systems. In both the master owns the means of production and the product and the servant labours full time to serve and enrich the master and is allowed only the means of surviving to serve him. The only difference between pre-capitalist and capitalist slavery is that in the former the master obtains and uses the full time labour of the slave by owning the slave as a property. In capitalist slavery the master obtains and uses the full time labour of the slave by buying the labour directly, so that he has no need to care for the slave as a person. This is more efficient profit-wise, but it is a more efficient slavery. Where capitalism is efficient, it is the same: what we have is the efficiency of slavery. Let us note that fascism and monopolistic capitalism are quite efficient by the profit criterion. They are both private property systems. The lack of freedom in both, however, has been orchestrated even by champions of bourgeois liberalism. The foregoing observations had to be made as a start because the West European and North American bourgeois i.e. speak volumes about efficiency and freedom, as if efficiency and freedom mean only what they care to mean by them, as if efficiency and freedom can be found only in and through capitalism, and as if efficiency and freedom are maximised in capitalism. Let us note that the terms 'socialism' and 'communism' originated in Western Europe, but they convey a much deeper sense of freedom than the bourgeois conception. The term "peoples' Democracy" was invented in Eastern Europe, the term 'new democracy' in China, and the term 'chajusong' in North Korea. Each of these conveys a much deeper meaning of freedom than the bourgeois image of it. Social planning as a concept originated from the socialists in Western Europe, not from the capitalists there. If one really understands social planning as conceived by socialists, it embodies a much more profound and comprehensive meaning of efficiency than the bourgeois conception of efficiency. For one thing, whereas socialist planning is science-based, the bourgeois concept of efficiency is based on a mediocre and myopic cash-profit rule of thumb. Moreover, whereas the socialist conception is humane in the sense that efficiency is to serve man, capitalist efficiency has the opposite orientation, namely, to use men only for and sacrifice them to money profit. It is thus callous, anti-human. For Nigerians there are also certain central truths to be borne in mind for a start. Apart from electricity generation, telecommunication, postal services and central banking, the Nigerian government has never barred the private sector from the rest of the Nigerian economy. The scope thus open to private enterprise is an enormous ocean. For instance, the Nigerian government has never barred anyone from producing and selling clean water, even though the government does produce and distribute some water. Although the government does make roads, it has never prevented anyone from making roads to inaccessible parts of the country and charging the users of those roads for the use. If the Nigerian economy has remained very backward all along and has stagnated since 1978, the character of the Nigerian private sector and the lack of understanding in government and private circles of what modern development is all about are the causes. Another truth that Nigerians should bear in mind for a start is that since the end of the Second World War, all the growth that the Nigerian economy has experienced has been due to government investment activity, the rise in petroleum exports, and expatriate exploitation of the petroleum boom for import-substituting industries. These industries had no long-term growth stimulating potential and even eventually dragged down the economy. Yet the petroleum boom itself is the result of government initiative in joining and associating with the Organisation of Petroleum Exporting Countries (OPEC), an organisation that the imperialists caused but hated like poison. The expatriate drummers up of import substitution whose oil boom exploiting activities helped to drag the economy eventually into stagnation and chronic indebtedness were private-sector operators. There is an all-important question that must be posed for a start. The enterprises later privatised in Nigeria were not taken from any private person. They were created to be national property belonging wholly or partially to all Nigerians, because the private sector could not start them. When they are privatised, those of them that are sold outright dare passed permanently into the hands of private predators. How many people will want to commit suicide to cure a sore? How many people will want to sell their father's house, just because it is leaking, to a carpenter so that they become labourers of the carpenter toiling to mend the house for the new owner? How many intelligent people will not seek a way of having the house mended while they retain the ownership? Another fact that must be known for a start is that state economic initiative in Nigeria was the intelligent response of Nigerian patriotic leaders to Nigeria's economic and political situation. By contrast privatisation was not only drummed up; but was also imposed by imperialism. We can all remember how long Nigerian leaders and patriotic intellectuals resisted the so-called Structural Adjustment Programme (SAP) of which privatisation was an element. The resistance went on until Ibrahim Babangida staged a coup d'etat to effect a capitulation. We can recall that the monarch of imperialist, the President of United States of America, offered to award Babangida a prize for managing the Nigerian economy to the satisfaction of the U.S.A., that is, in accordance with the global hegemonic interests of U.S. capitalism. Why did the imperialists originate SAP? Why were they so adamant? Why do they persist with a new campaign styled 'gobalisation'? We shall later take up these questions so that Nigerians may at least know where they are. Another fact which Nigerians must know for a start is that those Nigerians who helped imperialism drum up SAP for adoption and execution did so by falsifying facts about the Nigerian economy. They did so by heaping all the blame for the stagnation of the Nigerian economy on the government sector. In Nigeria as in other countries the aim of this falsehood was to sell capitalist privatisation to the country, since in each country the masses resisted capitalist privatisation. Today in Nigeria, thirteen years after the SAP trumpets drowned every other sound and eleven years after the completion of SAP, the bourgeoisie still pretend that the non-privatisation of the whole of the National Electric Power Authority and government postal services, for instance, is the reasons why the economy is in a state of coma. The impression given is that once the government runs nothing except the armed forces, the police, customs and immigration, currency printing, and the civil service, the performance of the Nigerian economy will be a wonder to behold. Finally, let us note that the slave trade and capitalism, its successor, were not Nigerian inventions. They have nothing to do with science, health knowledge, and education, which are culturally creative. Both the slave trade and capitalism were predatory systems imposed on Africa by the same greedy predators that originated and imposed SAP. The slave trade was the cradle of internal capitalism; colonialism took over; neo-colonialism has taken over since the 1960s and both SAP and globalism are phases of neocolonialism. The story that began with the slave trade continues. As selfish and predatory Africans were enthusiastic participants in the slave trade as agents of Euro-American capitalistic mercantilism, so do some Nigerians today find reasons to be agents and participants in a new form of slave trade. Historical Prelude We present below synoptically the salient developments that led to the imperialist advocacy and imposition of SAP and privatisation. 1. After the Second World War the Socialist revolution erupted in many countries. There also erupted national liberation revolutions in underdeveloped countries. In industrial capitalist countries Keynesianism defeated laissez-faire and the trade unions and state welfarism gained much strength. The consequence of all this was an emphasis on the positive economic role of the state sector resulting in a significant expansion of the state sector. 2. The experience of the Second World War, the economic and military victories of the Soviet Union, and the enormous progress made in the Soviet Union from 1920 and in China and East European socialist-oriented countries from 1948 to 1960 convinced the world of the efficacy of national economic and social planning in rapidly overcoming underdevelopment and in promoting modernisation. Therefore, all countries except the United States of America adopted a form of long-term national economic planning or programming. What this implied was the leading role of the state sector. In some countries, this leading role was consolidated by state ownership wholly or in part of some enterprises to facilitate strategic programming. 3. Concerning world trade, although trade expanded in the world, and although the General Agreement on Tariff and Trade (GATT) was meant to combat trade protectionism, protectionism continued to grow as each country sought to develop its economy or rebuild it after World War II. Besides, the International Monetary Fund (IMF) arrangements made by leading capitalist countries at the end of World War II to contain foreign exchange instability collapsed as business cycles continued in those countries. Foreign exchange instabilities thus increased protectionism. 4. Keynesian policies and military expenditure led to strong inflationary pressures in capitalist economies thus increasing the tendencies both to more active state economic management and protectionism in the vain effort to achieve stability. 5. After the Second World War the emerging Third World countries sought to build independent economies. Their efforts failed, owing to reliance on foreign long-term capital, on exports to capitalist countries, on the import of processed raw materials and components for the import-substituting industries which imperialist advice led them to build, on technological imports, and on debts to bail themselves out of foreign exchange crises. The effect of all this was to adopt in the 1970s a policy of self-reliance and an advocacy of a New International Economic Order (NIEO). Both self-reliance and NIEO were hated by imperialism. As for the policy of self-reliance, it was condemned by imperialist savants as 'autarchy'. 6. After 1975 came a deep depression in industrial capitalist countries which affected the whole of world capitalism and which capitalist countries have not been able to overcome after two decades. As for Africa, only if there is strong and prolonged growth in industrial capitalist countries permitting a prolonged export boom in Africa, a diminution of debt burdens and a reorientation of production structures towards real industrialisation will there be a prolonged economic growth in Africa. 7. However, the International Monetary Fund, the World Bank and other economic agencies dominated by imperialism interpreted the prolonged depression in the world and in Africa to be due to large government expenditure. It was alleged that this expenditure had to be drastically reduced to eliminate inflation and assist currency devaluation to achieve the ending of over valuation of the exchange rate. This would correct the tendency to imbalance between imports and exports. 8. As is known privatisation was advocated as a way of getting the economy to respond more quickly to so-called market forces and as the road to efficiency by the avoidance of waste. 9. After more than ten years of the Structural Adjustment Programme and this program's combination of currency devaluation, trade liberation, deregulation of interest rates, privatisation, public sector retrenchment and other so-called market-friendly policies, the economies in Africa and the Nigerian economy have seen no end to inflation, no export boom, no end to worsening indebtedness, and no sustained growth due specifically to these policies. Motives for Public Sector Expansion The expansion of the public sector in mature capitalist countries like Britain, France, Italy and Norway had three motives. The first was to combat depression through public expenditure. The second was welfarism aimed at containing the revolt of the working class. The third was militarism, which was part of the mission of the North Atlantic Treaty Organisation to check or roll back socialism and control the world. In less developed countries, the expansion of the state sector had several motives. The first in countries like Ghana, Guinea, Tanzania, Algeria and India was independence. The second motive was the construction of the infrastructure as a basis of development. A clear example of this is the expansion of roads and port facilities in Nigeria. The third motive is the starting of industries, which capitalists could not start. Examples of this are many in Nigeria and include air transportation, the Federal Palace Hotel in Lagos and similar state-owned hotels in Nigeria. The fourth motive was an attempt at some industrialisation. Indigenous capitalists were not in a position to start any industry requiring modern technology and substantial capital. The government pioneered the import-substitution industries often in partnership with foreign firms. The fifth motive was to limit the control of the economy by foreign firms. In Nigeria the Nigerian Enterprises Promotion Decrees aimed at this. This implied that where indigenous private enterprise was unavailable, the government could take their place if an enterprise was worth having. This was one of the motives for the government's interest in banks in Nigeria. The sixth motive was welfarist. The government's interest in education and housing in Nigeria was a welfarist one. There has also been a developmental interest in education. The seventh motive was stimulation and control. The government owned and operated many agencies like the Marketing Boards, the Nigerian Ports Authority, the Central Bank of Nigeria, and the Raw Material Research and Development Council for the stimulation and the control of development. The eighth motive was to own basic industries. There are certain branches that are not only industrial and not simply infrastructural but are also basic to industrialisation or modernisation. They are sometimes called capital good industries. In Nigeria the Federal Government between 1970 and 1980 established some of these. They are in Nigeria iron and steel, petrochemical, cement, fertilizer, foundry and petroleum refining plants. Lastly, public sector institutions and ownership may be expanded to facilitate economic planning. The reason why the Federal Government, for instance, acquired a large interest in banks was to facilitate the realisation of economic programmes. In fact, so called economic planning in Nigeria amounted to no more than setting targets on paper and leaving it to the Central Bank and the Ministries to do what they could to realise their schemes in a very unpredictable market economy. The American and allied imperialists and their Nigerian cohorts having beaten the loud drum of privatisation for twenty years, all the motives for the expansion of the state sector have been forgotten. In fact, plain falsehood and fairy tale had to be invented to sell privatisation to Nigeria. It was said that with the oil boom Nigeria abandoned agriculture and everything else. It was alleged that the oil boom put into the hands of government leaders so much money that they did not know what to do with it. It was alleged that they went "on a spending spree" and started all sorts of projects that were ill conceived and unviable. All this was fairy tale, but this matter is pursued in detail, with copious documentation, in our forth-coming book, The Economics of Structural Adjustment. All we need do here is to ask a question. If the projects were ill-conceived, frivolous and unviable, why do the would-be capitalists want such worthless things to be sold to them? Nigeria's Private Sector The private sector which the Nigerian economy had in 1960 was made up as described in this section. There was a very large peasant sector producing consumer goods and some goods for export. This peasant sector had already reached stagnant per capita production at the time of independence, so that from 1958 economic growth was fuelled by oil exports. There was a sector of urban artisans namely, carpenters, blacksmiths and like. These were very small-scale manufacturers doing mainly repair work. In this group were masons. There was a group of professionals who - like peasants and artisans - practised individually. Among these we had self-employing lawyers, doctors, pharmacists and accountants. Distribution was handled by two groups. Retail distribution was handled mainly by petty traders, although in large cities a few department stores owned by medium-sized firms existed. Wholesale distribution was handled by medium-sized firms, which was always expatriate owned. There were some Nigerian building contractors who in the main operated as sole proprietorships and partnerships, but there were also a few medium-sized construction companies like Taylor Woodrow. As to manufacturing, a few foreign companies like the Nigerian Tobacco Companies like the Nigerian Tobacco Company (a subsidiary of the British Tobacco Company) and Lever Brothers, Nigeria (a subsidiary of Lever Brothers) operated to produce a few consumer goods like soap and tobacco products. Hardly any manufacturing was done in Nigeria. There were some transport firms run by individuals. There were in banking a few indigenous banks (National Bank, African Continental Bank, etc.) with very little scope, and also two expatriate banks (Bank of British West Africa and Barclays Bank). The expatriate banks were concerned with the raw materials export and the commodity import operations of the expatriate firms in mining, agriculture, industry and trade. This private sector could do very little without government initiative. Today, after being expanded and financially enriched by the expenditure of petroleum money in the economy from 1960 to 1998, the Nigerian private sector can do nothing except wanting to use its accumulation from the petroleum revenue expenditure to take over businesses pioneered by the government for all Nigerians. The enormous agricultural, forestry, fishing and manufacturing potentials in the country do not attract the private sector. Only the easy take-over of the state sector attracts it. This brings us to the motives for privatisation. Motives for Privatisaion Privatisation is advocated allegedly for efficiency and freedom. The argument about efficiency is misplaced. There are four arguments against it. First, the efficiency argument uses the financial profitability criterion, but the enterprises were not established for profits. They were established for development purposes. Secondly, even if most of these enterprises make losses, one has to go into managerial detail to show why they make losses. Some causes of loss may be inadequate capitalisation, state intervention in price policy, undisciplined management, and inefficient employment policy. Each such cause can be remedied without the enterprise being privatised. Thirdly, it is not a rule that a state owned enterprise can never do well even by the profit criterion. The Ethiopian Airlines is publicly owned but is reputed to be one of the most efficient airlines in the world. If, then, the Nigeria Airways is not a top-flyer in profits, the fault cannot simply be government ownership. Fourthly, a state enterprise can be commercialised without being privatised. Evidence available is conclusive that enterprises in Nigeria that were even partially commercialised produced much more profit after a short time than was anticipated. This evidence is assembled in our work, The Economics of Structural Adjustment. Fifthly, apart from showing profits through inflationary mark-ups in a monopolistic economy, the privatised private sector has not shown any evidence of real efficiency. Such evidence lies only in continuous production growth. While the financial sector has been growing, the agricultural, mining and manufacturing sectors have been stagnant. Privatisation has not caused exports to grow in any measure that can even lessen the foreign debt burden. The second motive for privatisation is alleged to be freedom. It is claimed that there is more freedom for the individual in a privatised economy. Such an idea of freedom is bourgeois ideology. If a government enterprise is privatised, the workers become wage slaves in an enterprise they do not own. That is slavery, not freedom. If all workers work in an enterprise, which they participate equally with other people in owning, this is freedom from slavery. The capitalist system is precisely one in which the masters, i.e. the owners of the enterprises, are free while the workers are slaves. The real motive for capitalistic privatisation is capitalistic. The take-over of state enterprises is one of the methods of primitive capitalist accumulation. Primitive capitalist accumulation consists of all the processes by which would-be capitalists find the capital to establish capitalist enterprises and become capitalists. The method of passing already built state enterprises to capitalists is a method of making capitalists jointly or individually acquired rather than build an enterprise. Imperialist Interests in Privatisation The imperialists advocate capitalist privatisation because they work for the victory of capitalist ideology. From their point of view privatisation will create a so-called local middle-class, which is an ally of imperialism. Another aim of the imperialists is to acquire for themselves some of the enterprises to be sold or leased. One of the advantages of this to imperialism is that it is easier to dictate imperialist policies to a country the more command imperialist investors have over economic policy. Debureaucratisation An enterprise may be damaged by an operational set-up, which is excessively bureaucratic. In that case, there are several managerial solutions, including some kinds of privatisation. One solution is to commercialise the enterprise and set up a managerial framework and managerial procedures that are less bureaucratic. The enterprise remains government owned. Another solution is to hire a private managing firm to manage the enterprise. The managing firm shares in the profits, but the enterprise remains government-owned. Yet another solution is to lease the enterprise to a private operator for a long period. The enterprise in this case is not sold; it is only leased. Another solution is to adopt a joint public private ownership by admitting private capitalist investors who will be more interested in profits than government operators. Even if the enterprise is to be fully sold to the private sector, the state may sell it to a co-operative. This solution may be adopted in the case of a farm. This is not a case of capitalistic privatisation. In a socialist drive it may be used to cut down bureaucracy and give an incentive to workers on the farm if the farm is sold to them. In this case, however, the farmland or the farm equipment may be leased to them. A form of privatisation possible under a socialist economic drive is to sell or lease the enterprise to a company formed by workers. In this case, steps may be taken to limit the share holding of any one worker so that the company does not get dominated by a few persons. If a state enterprise is commercialised, one way of getting the private sector interested in it is to turn it into a company in which private sector financiers may own fixed interest bonds. It can be seen that privatisation may be a method of arriving at debureaucratisation in a transitional socialist-oriented economy. It need not always be a way of consolidating capitalism as it is in Nigeria. In the socialist drive privatisation may consist of leasing state land to co-operatives, partnerships and private families for farming. It may consist of allowing small enterprises more leeway for profit making than before by their taking over on contact distribution that was formerly done administratively. In China a host of small private enterprises exist but they cannot employ more than eight persons. This provision is made to prohibit the development of capitalist greed. From the 1970s, the People's Republic of china adopted a new form of planning to make the economy flexible. First, it limited central planning and management of enterprises only to the key strategic industries, such as iron and steel and central banking. Provincial and local governments took over much of what was formerly in central government hands to manage. Secondly, it adopted controlled distribution through the market (i.e. buying and selling) mechanism rather than through the administrative mechanism. Thirdly, it commercialised enterprises and adopted controlled profit-making competition. Fourthly, it adopted higher material incentives to workers linked to enterprise profit. Fifthly, it carried out limited privatisation mainly by allowing more leeway for small-scale private profit making. The foregoing description of events in China in the 1970s and 1980s is a description of a form of structural adjustment. It was not, however, capitalist-oriented structural adjustment. Much more of commercialisation featured in it than privatisation. Unlike Nigeria, China has experienced a sustained and impressive growth in her national income and exports since 1978. Many of the enterprises doing the exporting are owned by local governments. India also carried out some structural adjustment, but did not privatise. By contrast, of all countries in the world Nigeria carried out the widest scope of capitalistic privatisation. Yet Nigeria remains one of the least able to recover from the depression of the 1980s and one of the countries with the lowest quality of life index. Conclusion We can conclude in a few words. Even Michael Ani as Minister of Finance complained in one of his budget briefings that in spite of all the incentives given to the private sector in Nigeria, capacity utilization in industry remained low while prices went ever upward. The meaning of this, he rightly said, was that the private sector was merely squeezing consumers for profit. In spite of privatisation, deregulation and the rest of SAP, the economy is still in stagnation, inflation rages, exports have refused to boom as was expected by false prophets, and indebtedness grows worse. However, the worse the situation becomes the more the vultures of Nigeria see privatisation as the panacea. Privatisation in Nigeria is large-scale robbery - nothing more. |
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