Is there a case for privatization?

Discussion in 'Economy & Infrastructure' started by pmaitra, Feb 16, 2014.

  1. pmaitra

    pmaitra Moderator Moderator

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    There has been a chorus of arguments in favour of privatization, to end corruption. However, recent reports indicate that even private companies are willing to engage in corruption. The dishonesty of a few private companies brings malice to the entire nation. Yet, what benefit does privatization bring?

    Is there a case for privatization?

    We are all aware the quality of work done by some of our state owned enterprises, whether it is CLW, DLW, ISRO, or DRDO, that is unmatched by the private sector. On the other hand, we have had numerous private companies, some getting attention for the wrong reasons.

    Here is one article that indicates the reasons why privatization will not end corruption:
    This is not the first time this happened. Private companies have been carrying on with their corrupt practices for a very long time.

    TCS to pay $30 million to settle employee class action suit in US

    [HR][/HR]

    @Bangalorean, how would you defend privatization with results like this?
     
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  3. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    Privatization would depends on the sectors. There is no general solution.

    But there is another angle to all these stories as well. Trade has been decentralized but now US and other nations are coming up with increased regulations to offset the trade gains of developing countries achieved through no discrimination clauses of WTO. It is called technical barriers to trade:WTO | Technical Barriers to Trade

    Check the graph on page 12: http://www.ustr.gov/sites/default/files/2013 TBT.pdf
    The number of such notifications is on an increase after trade liberalization.
     
  4. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    One way to bring such malpractices under control is to slap them with heavy fine once caught. It is much easier for govt. to do random checks rather than develop a world class industry.

    ISRO, DRDO are good institutions but there are also private players like SpaceX which have accomplished much more in much less time. There is no competition between public and private enterprises when it comes to efficiency(on average).
     
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  5. Known_Unknown

    Known_Unknown Devil's Advocate Stars and Ambassadors

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    Both government and private enterprises have their good and bad points.

    1. Private enterprises when allowed to become too big and powerful can control the government through proxy and destroy the whole nation for the profit of their shareholders.

    2. Government enterprises on the other hand can become large, bloated terribly inefficient bureaucracies which suck wealth out of the economy and provide poor quality services.

    The best approach is to have a mix of public and private enterprises depending on sectors like @Sakal Gharelu Ustad said.

    The above analysis of course does not take globalization into context. What happens when you manage to regulate and keep your private enterprises small enough that they do not destroy the nation for their greed, but who now have to compete with a foreign MNC which is not similarly regulated in its own home country? There is pressure on governments to allow home grown companies to compete with foreign MNC's on their own soil, hence governments resort to creating special rules that favour local industry as much as possible. This could be by reducing regulation for domestic players or enhancing barriers for foreign players in whatever way they can while still adhering to the letter of WTO rules.

    This approach results in the ballooning of the size and power of private enterprises which again leads to problem #1, i.e. destruction of the nation for greed, rise in inequality, disrespect for human rights and subordination of all values for the sake of efficiency, i.e. money.

    In a couple of centuries, the world will be one gigantic fascist paradise where freedoms are crushed and everything and everyone will bow to a small aristocratic ruling class that will exploit and strip the planet of all its resources. Oh, and this is not even taking the ridiculous system of fractional banking into account, which will speed up the apocalypse from a few centuries to a few decades somewhat like paying a negative compound interest rate. :sucide:

    We are already doomed and riding straight to hell :scared2:....might as well enjoy the ride while it lasts. :drunk2:
     
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  6. pmaitra

    pmaitra Moderator Moderator

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    Agree with most part, but Space X was shepherded into the business by NASA. Space X is an example of why government owned companies are better than private companies.
     
  7. Jagdish58

    Jagdish58 Regular Member

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    Every thing in world has pros & cons , If India has strong inland defence sector combination of both Private & Public sector we can avoid dependence on other coutried eg: Bofors , LCA engine . Many major programs came to halt due to sanction or scam

    Yes indian companies might and will engage in scams , because in country is model in such a way to get any contract we have to pay under table . But govt comes up strong policy like cutting of subsidy in projects & black list of business both local & oversees etc then things might get under control but completely avoiding scam is not possible in any country in world

    IN USA lockheed , boeing etc spend more in form of bribe to get contracts:hail:
     
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  8. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    @pmaitra, good job cherrypicking a couple of government companies which have done "good work", and ignoring the thousands of substandard ones.

    And if someone tells me that DRDO is a model to look up to for "good work", I feel like banging my head. :frusty:

    If we had the government sector working on pharma and drugs, we wouldn't even have been able to get anything manufactured, let alone export.

    At least when more private companies and more competition, we have something being done. Manufacture happens, export happens. Errant practices need to be clamped down upon, like in this case. Simple.

    Certain arms of the public sector such as SBI, have begun to come to speed with the times and are working well only after the entry of private banks and liberalization. Otherwise we would have still been in the 1980s w.r,t. banking services in India.
     
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  9. feathers

    feathers Tihar Jail Banned

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    Privatization was done to increase production, services and more employment in all the sectors and in fact it has changed many things on the ground for the people. You are right that when private companies are caught in corruption huge fines can be imposed on them and i think already such mechanism is placed and in case of Government organizations also there are strict rules for corrupt officials.
     
  10. pmaitra

    pmaitra Moderator Moderator

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    Still adamant in defending the indefensible?

    Name one private Indian company that comes half as close to DRDO in high tech products.

    The opening post clearly indicates what you deliberately avoided. Increased volumes of dud drugs produced to show high profit.

    The only sensible part of your post.
     
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  11. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    It is a fact that PSUs are by and large, sluggish, terrible in service, and hopeless cases. You cannot cherrypick ISRO and claim that as a victory for PSUs in general. For every successful PSU that you name, I can name ten failures.

    How can they, when DRDO operates in a monopoly? What a question!! :frusty: "High-tech products", my foot!! DRDO is the perfect example of sloppy and useless PSUs, which is just a drain on the economy without substantial return. It is like asking in 1980, "show me one bank that comes close to SBI". It is like asking, "why did Reliance fuel stations fail?". Yeah, don't pass fuel subsidy to private players, give the subsidy benefit only to PSUs, and wonder why private companies aren't able to make a mark. :frusty:


    Individual cases of corruption need to be punished through strong regulatory mechanisms. Infosys was sued for H1B misuse, and for racism once. Now you will open a thread and offer it up as "proof" of how we should not encourage private software companies, and how the government does a great job, and what a big "blow to privatization" this "revelation" is. :rofl:
     
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  12. pmaitra

    pmaitra Moderator Moderator

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    Sluggish yes, just like the privately owned Hindustan Motors. Or highly incompetent ones, like Kingfisher Airlines, along with many private payers that came and went.

    You still haven't named a single company that comes half as close to DRDO in high tech products, and instead you, ironically, are cherrypicking on DRDO's failures. I get it, you don't have a case.



    So we all have to have an external agency to monitor the functioning of companies, private or public. I don't disagree with that. Neither do I oppose creating new private enterprises.

    Now, answer my question, what is the case for privatization? Do you know what privatization means?
     
  13. Known_Unknown

    Known_Unknown Devil's Advocate Stars and Ambassadors

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    Yea, right!! :rofl:

    You do not understand the interplay of industry, politics and the nation's economy, especially in a globalized world. Please take a look at where the US is heading due to unbridled privatization and capitalism. It is a semi-fascist state. Unfortunately due to the collapse of the USSR, the whole world is moving towards a global fascist, totalitarian system and as individuals there is little we can do to prevent that outcome, but at the very least, we should do our part in slowing down the inevitable by fighting for transparency and accountability to the public at large as much as we can.
     
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  14. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    If private companies like Kingfisher don't do well, they will slowly wither away. If public companies don't do well, they keep sucking blood, leeching off public money, and are force-fed. Air India comes to mind.

    Why the silly DRDO question again? Do you know what monopoly means? DRDO operates in a monopoly. DRDO is a failure in spite of being a monopoly.

    What exactly do you mean by "privatization"? If you are talking about privatization of PSUs, then frankly, long-term loss-making PSUs need to be privatized. Those that are doing reasonably well can be left alone. We cannot prop up dysfunctional PSUs just for the heck of it, bending down to union demands.

    Anyway, if that was the "privatization" you were speaking about, this thread is hardly an example suitable to the discussion. This thread is just about some company that was doing something bad. Why are you bringing in subjects like "privatization of PSUs" and mixing it with this discussion?
     
  15. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    And @pmaitra thanked this post too. :frusty:

    Yeah, the US is "semi-fascist", the world will soon become completely fascist, and the good old USSR was a shining paragon of virtue, for the whole world to emulate. I salute you.

    Unrelated to this, weren't you the guy who was praising Rahul Gandhi's "acumen" and "leadership capability" some months back?
     
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  16. pmaitra

    pmaitra Moderator Moderator

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    Red means strongly disagree, or completely wrong. Green means agree. Blue means debatable.

    If you recall me mentioning earlier, IISCO was a long term loss making company that went to BIFR. Everyone blamed the unions (the whipping boy). Of course, those idiots were proven wrong when all of a sudden Iraq War started, and IISCO not only paid off its debts, but also went into profit. So this proves that most of these pro-privatization "experts" have no idea what they are talking about.

    DRDO is not a monopoly (it might operate in one), in the sense it does not have exclusive permission to develop items. No one is stopping Tata or Mahindra to develop tanks, for example. There is no government ban on private companies developing things DRDO does. Private companies simply refuse to do it. Only recently have some of them started to make forays. Check out the DefExpo thread. So, if private companies are unwilling to pose a competition to DRDO, whose fault is it? It proves my point exactly. Private companies cannot deliver the high tech goods that the DRDO has already delivered. Happy to be proven wrong in the future. As of now, my point stands.

    You also seem too be stuck up with DRDO. Is that the only company I mentioned? Why is CLW producing world class locomotives, but the private automobile companies still producing mediocre vehicles, while both have access to foreign collaboration? Any answer?

    Privatization means, well, privatization. I am not an inventor of the term. I assumed you knew it, since you responded to the thread. Now it appears you responded before understanding my question. Read on:
    Link: Privatization - Wikipedia, the free encyclopedia
     
  17. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    Statement about tanks is naive at best. It doesn't work that way - simply expect Tata to "develop tanks" and then try to sell it. DRDO has a monopoly on defense equipment manufacture. The system and the regulations are that way. IA goes to DRDO with a requirement, and DRDO mucks it up, taking decades for the most minor of stuff.

    I am "stuck with DRDO" because that was the only company you mentioned apart from ISRO. No, you did not mention any other companies. Read your own posts.

    CLW is another example of monopoly. Tata, Mahindra, etc. produce good vehicles, what makes you say they produce "mediocre" vehicles? Still in the 1990s?
     
  18. pmaitra

    pmaitra Moderator Moderator

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    I know what I wrote, and I read them again to confirm. It is your turn. Read my posts again.
     
  19. pmaitra

    pmaitra Moderator Moderator

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    @Bangalorean, assuming you have read my posts, are you getting a warm and fuzzy feeling now? :)
     
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  20. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    Yeah yeah, it doesn't change the fact that all the companies you did mention work in a monopoly though. SBI changed with the times, due to the advancement of the ICICIs and Citibanks. Will DRDO ever change in our lifetime? Unlikely. Unless you bring in private participation and expose them to competition.
     
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  21. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    @pmaitra @Bangalorean

    Are we looking at right sample of companies to conclude whether private enterprises can develop advanced technologies? Right now you are debating using Indian companies as an example.

    Go to the global scale and you would see huge contribution of private enterprises in most cutting edge technologies. India is yet to move up the value chain in manufacturing, so it is not justified to debate the accomplishments of PSUs vs private players when the latter only got a free hand to operate 2 decades ago(and not yet for many sectors). There is a reason why USSR lost so badly to US in the long run even though they showcased shining technological advancements for a while. And the reason is private enterprise!
     
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