Marketing privatisation

Print edition : July 17, 2009

THE decade of the 1990s was the heyday of privatisation. Starting with the late 1980s, the transformation of the erstwhile socialist economies into capitalist ones in Eastern Europe and later in the republics of the former Union of Soviet Socialist Republics led to a huge wave of sales of publicly owned assets, often at throwaway prices, to an emerging capitalist mafia in these countries.

Even earlier, privatisation of public sector units had been advocated and implemented in Central and South America, as part of the World Bank-International Monetary Fund (IMF) dictated structural adjustment programmes. The pioneering privatisation moves were of course those of the United Kingdom under Margaret Thatcher, who formed along with Ronald Reagan in the United States in the 1980s a formidable pair of politicians representing and articulating the neoliberal world view that governments had no business to be in business.

From its inception, privatisation has been as much about breaking the back of trade unions and the bargaining power of workers as it has ostensibly been about improving efficiency. Over the years of the current decade, the enthusiasm for privatisation has waned considerably in many parts of the world. Currently, in the wake of the massive global crisis of capitalism, there has even been a reversal of sorts, with governments in the U.S. and Western Europe buying up majority holdings not only in banks and other financial entities but also in manufacturing concerns, the U.S. auto industry being a recent example.

Successive governments in India have been pursuing policies of privatisation of public sector enterprises as part of a larger policy framework of liberalisation (massive deregulation, freeing powerful private economic entities substantially from social accountability), privatisation (meaning not only selling public sector assets to private parties but also opening up non-commercial domains, which were earlier mainly under the state or non-profit entities, to commercial exploitation, health and education being two conspicuous examples) and globalisation (opening up the national economy to relatively unrestricted flows of goods, services and capital as finance).

The book under review is not concerned with these larger issues of macroeconomic policy, but focusses primarily on the issues of labour restructuring in the process of privatisation of public sector entities in India and Sri Lanka.

One learns from the authors preface that he has already written three books on privatisation, focussing on the benefits to the enterprises and consumers, and so on. The focus of the book under review the fourth by the author on the broad theme of privatisation is on the effect that privatisation has had on labour employed in the enterprises being privatised. The book is based on the authors doctoral dissertation, a fact that becomes unhappily evident from the style of narration.

The book is divided into six chapters. The first provides a selective review of the international experience of labour restructuring that has accompanied privatisation in a number of countries. The second and third chapters deal with the experience of privatisation in Sri Lanka. The third chapter focusses on labour restructuring in this process of privatisation, using material from five Sri Lankan case studies. The fourth and fifth chapters carry out corresponding exercises in the case of India, with the analysis of labour restructuring again being based on five case studies. The sixth and final chapter brings together the conclusions that the author derives from his study and seeks to draw lessons for policymakers dealing with issues of labour restructuring in the course of privatisation of public sector enterprises.

The author recognises that all over the world privatisation has meant reduction in labour/employee strength of the enterprise that is privatised. He then makes the remarkable assertion, without bothering to produce any evidence, that it is universally accepted that public sector enterprises have surplus ranging from 30 per cent to 70 per cent of the total strength, (emphasis added throughout). It is evident that the author accepts without question the rationale put forward for privatisation by neoliberal reformers when he argues that privatisation provides the impetus of much-needed reforms in the public sector, especially in the matter of right-sizing labour strength.

The use of the politically correct term right-sizing for what he himself elsewhere admits is large-scale retrenchment of labour is revealing. The author also accepts uncritically the notion that privatisation automatically implies greater efficiency, though the term efficiency is far from being unproblematic and the author makes no attempt to explain exactly what he means by efficiency. One can only infer that he equates efficiency with improved profitability, which is clearly not necessarily valid.

While the author favours privatisation rather uncritically, he does express concern over several aspects of the processes of privatisation relating to their impact on employees and workers. However, these appear to stem more from his apprehension that unless labour problems are tackled carefully privatisation itself could be endangered rather than from a concern for the fate of the workers and employees. Thus, he concludes his study with the following observations:

Loss of employment and subsequent penurious conditions of workers of privatised enterprises, whether in Sri Lanka or India, which are already reeling under an unemployment problem, have great implications for society. If this problem continues to be ignored by governments, there is every possibility that civil unrest will follow and the very concept of privatisation rather than the method of implementation of privatisation would be blamed for this strife. That might lead to giving up of the privatisation policy altogether, which would rather be a pity.

Though it is clear that the author is an advocate of privatisation, his concern in this book is to examine the impact of privatisation processes on what is euphemistically termed labour restructuring, meaning the modes by which the labour force is reduced, in the process of privatisation, to ensure profitability for the buyer of the enterprise. The author concludes rather optimistically from his selective review of international experience in this regard that establishment of proper social security programmes, income maintenance measures, and social safety nets are becoming essential parts of the process of privatisation.

The author concludes from his five case studies of privatisation in Sri Lanka that labour must be consulted, their cooperation sought, their apprehensions allayed and follow-up action on retrenched employees taken by the government in the interest of further privatisation moves. While the author says that labour must be consulted and persuaded to go along with labour restructuring, he also concludes from his Sri Lankan case studies that procedures for reduction of labour strength should be made simpler and faster.

In the first of his two chapters on the privatisation experience in India, the author quotes at length from various policy documents to trace the evolution of policies regarding the public sector, but without any critical analysis of his own. He generally goes along with official arguments for privatisation put forward at various points in time during the late 1980s and especially the 1990s and the period of the National Democratic Alliance (NDA) government from 1999 to 2004, recounting them and accepting them at face value. The point does come through that all the governments of the 1990s from P.V. Narasimha Raos between 1991 and 1996 through the United Front governments of 1996 to 1998 and the NDA governments from 1998 to 2004 accepted privatisation as a major policy plank despite the popular opposition to privatisation clearly brought about by various opinion surveys throughout this period.

The Supreme Court of Sri Lanka on June 4 overturned the privatisation of the countrys biggest insurance firm, Sri Lanka Insurance Corporation Ltd., ordered the government to take over the business, and asked it to return the Rs.6 billion it was paid for the purchase. Here, signs of tension in front of the headquarters of the corporation in Colombo on the day the verdict came.-LAKRUWAN WANNIARACHCHI/AFP

The author admits somewhat ruefully that as yet, increased investments expected from the strategic buyers of public enterprises have not materialised. Nevertheless, he seems disappointed that the United Progressive Alliance (UPA) government has downgraded the Disinvestment Ministry into a department under the Ministry of Finance and has stopped disinvestment in profit-making PSEs, obviously due to political compulsions. He concludes that the prospects for disinvestment and privatisation appear to be very dim for India unless the political scene changes substantially. It is interesting that opposition to privatisation should be seen as political while privatisation policy is not seen as being political.

Perhaps, the author might feel encouraged that at present the political compulsions, meaning the dependence of the UPA government between 2004 and 2008 on the support of the Left parties, are no longer there and privatisation and disinvestment will soon be in full swing. He is certainly not alone in this line of thinking since there are many in the UPA government of today who strongly favour privatisation and disinvestment. The corporate sector, too, including transnational corporations, are waiting with bated breath for announcements in this regard from the government. But the world has changed since 2004. Neoliberalism faces a serious ideological crisis. It is no longer easy to manufacture consent for privatisation in most parts of the world. The mandate of the recent elections to Indias 15th Lok Sabha cannot, by any reasonable means, be read as pro-privatisation.

It is a reflection of the state of scholarship and scholarly exchange in even our premier centres of higher education that a study done at Jawaharlal Nehru University on privatisation does not even refer to scholarly work on this topic done by professors in the Centre for Economic Studies and Planning of the same university.1

The blurb to the book describes the author as one of the few bureaucrats who have entered academics after a long and brilliant stint in government. While that is neither here nor there, it is disappointing to find that someone who is described as having had a ringside view of disinvestment process in India did not examine the arguments for and against privatisation more critically and did not examine the large literature on the issue more carefully and thoroughly. Unfortunately, the writing style is also rather sloppy, and rigorous argument is often conspicuous by its absence.

Converting a doctoral thesis into a book is always a hazardous operation, but the operation would have been less hazardous if the author had taken some pains to present and analyse alternative views on the topic at hand. But the publication of the book could not have been better timed. Given the shrill calls for resumption of privatisation at full clip despite the lessons provided by the current global economic crisis, the book may find more than a few takers in the corridors of power in New Delhi.

1. Professors C.P. Chandrasekhar and Jayati Ghosh, both from Jawaharlal Nehru University, in their book The Market that Failed (LeftWord, New Delhi, 2004), provide a cogent critique of privatisation, but the book under review does not make a single reference to their work or that of other authors critical of government policies in this regard.

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