Red Tape Hot Box on Path to Privatization
The nationalization of companies and means of production took on its purest form under the communist system, but even in the capitalist world it remains common. And why not? After all, we know exactly what happened in the early 1930s in the United States, when the contemporary government thought that free market forces would solve all financial problems. Not so.
However, the large-scale interference of government in the business sector is not beneficial to the economy either. In Poland, it seems that although most of the population does not support the government, many people are afraid that privatization will equal complete loss of control over the economy. But the experience of other countries, as well as our own, proves that the government doesn't have to own banks and insurance companies in order to ensure the health of the financial sector. It suffices to have certain regulations concerning supervision, or mandatory minimum bank reserves. Our savings are just as safe in government banks like PKO BP as in private ones like Pekao SA. It would be naive to assume that the public bank will offer better credit rates or that it will lend money for higher-risk developments.
Not surprisingly, the majority of those who oppose further privatization tend to be employees of government organizations. And the average wages in the public sector are higher than in private firms-although effectiveness is lower. Such a state of affairs is possible because many government firms are subsidized from the national budget; other state organs use their monopolistic power to up the prices of their product. In Poland, there are still about 3,000 firms that are owned by the government-and about 800 of them are on the verge of bankruptcy. In comparison, only 200 firms are nationalized in the Czech Republic. The same is true for Hungary.
Privatized firms usually get better results-mainly thanks to better managerial skills. The experience of 45 years of nationalized economy and 15 years of tumultuous transformation has shown that politicians and government clerks don't make very good entrepreneurs. Nationalized firms have poor results, their human and structural resources are underutilized, and the waste rate of the raw materials is high. Moreover, the government ends up doing double-duty as both regulator of the market and owner of the firms, leading to the ratification of acts that are often unfavorable for private firms. More alarmingly, this also leads to increased corruption in the public sector. In Poland, we already have chosen the way of privatization. We might be slow, but at least we're finally heading in the right direction.
However, the large-scale interference of government in the business sector is not beneficial to the economy either. In Poland, it seems that although most of the population does not support the government, many people are afraid that privatization will equal complete loss of control over the economy. But the experience of other countries, as well as our own, proves that the government doesn't have to own banks and insurance companies in order to ensure the health of the financial sector. It suffices to have certain regulations concerning supervision, or mandatory minimum bank reserves. Our savings are just as safe in government banks like PKO BP as in private ones like Pekao SA. It would be naive to assume that the public bank will offer better credit rates or that it will lend money for higher-risk developments.
Not surprisingly, the majority of those who oppose further privatization tend to be employees of government organizations. And the average wages in the public sector are higher than in private firms-although effectiveness is lower. Such a state of affairs is possible because many government firms are subsidized from the national budget; other state organs use their monopolistic power to up the prices of their product. In Poland, there are still about 3,000 firms that are owned by the government-and about 800 of them are on the verge of bankruptcy. In comparison, only 200 firms are nationalized in the Czech Republic. The same is true for Hungary.
Privatized firms usually get better results-mainly thanks to better managerial skills. The experience of 45 years of nationalized economy and 15 years of tumultuous transformation has shown that politicians and government clerks don't make very good entrepreneurs. Nationalized firms have poor results, their human and structural resources are underutilized, and the waste rate of the raw materials is high. Moreover, the government ends up doing double-duty as both regulator of the market and owner of the firms, leading to the ratification of acts that are often unfavorable for private firms. More alarmingly, this also leads to increased corruption in the public sector. In Poland, we already have chosen the way of privatization. We might be slow, but at least we're finally heading in the right direction.
