Promoting Privatization

After discrediting state-owned enterprises, privatization advocates successfully pushed a broad reform agenda under the rubric of privatization from the 1980s, with the support of the Washington-based international financial institutions.

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Mar 12 2019 (IPS)

Privatization has been central to the ‘neo-liberal’ counter-revolution from the 1970s against government economic interventions associated with Roosevelt and Keynes as well as post-colonial state-led economic development.

Many developing countries were forced to accept privatization policies as a condition for credit or loan support from the World Bank and other international financial institutions, especially after the fiscal and debt crises of the early 1980s. Other countries voluntarily embraced privatization, often on the pretext of fiscal and debt constraints, in their efforts to mimic new Anglo-American criteria of economic progress.

Jomo Kwame Sundaram

Demonizing SOEs
Globally, inflation was attributed to excessive government intervention, public sector expansion and state-owned enterprise (SOE) inefficiency. It was claimed, with uneven and dubious evidence, that SOEs were inherently likely to be inefficient, corrupt, subject to abuse, and so on.

In the 1970s, the motives of many involved in the preceding public sector expansion – enabled by high commodity prices and earnings as well as low real interest rates due to easy credit, with the need to ‘recycle petro-dollars’ (invest revenues from petroleum exports) – were developmental and noble.

Regardless of their original rationale or intent, many SOEs become problematic and often inefficient. Yet, privatization is not, and has never been a universal panacea for the myriad problems faced by SOEs.

Only more pragmatic and appropriate approaches — recognizing their origins, roles, functioning, impacts and problems — can realistically expect to address and overcome the burdens they have come to impose on many developing economies.

Various meanings
Privatization usually refers to a change of ownership from public to private hands. Over recent decades, the term has been used more loosely. For example, it may only involve minority private ownership after the corporatization of an SOE, and the sale of a minority share of its stock, or even a majority share with control remaining in state hands by various means such as the use of a ‘golden share’.

It sometimes also refers to contracting out services previously undertaken solely by the government. The definition may include cases where private enterprises are awarded licenses to participate in activities previously reserved for the public sector.

Strictly speaking, however, privatization involves the transfer of at least a majority share of and a controlling interest in a public enterprise or SOE and its assets, or an entity (such as a government department, a statutory body or a government company) previously controlled and typically at least majority-owned by the government, either directly or indirectly.

Mainstreaming privatization
Following the oil price shocks of the mid- and late 1970s, inflation spread through much of the world. US President Jimmy Carter appointed Paul Volcker as Chairman of the US Federal Reserve in 1980. The US Fed sharply raised interest rates to stem inflation, which precipitated the fiscal and debt crises of the early 1980s in many parts of the world, especially in Latin America, Africa and Eastern Europe.

The unexpected sovereign debt crises forced many countries to seek emergency financial support from the International Monetary Fund (IMF) and the World Bank (WB), both headquartered in Washington, DC. The IMF provided emergency credit facilities requiring (price) stabilization programmes to bring down inflation, typically blamed on ‘deficit financing’ due to ‘macroeconomic populism’.

Generally, the WB worked closely to provide medium- and long-term credit to these governments on condition that they adopted structural adjustment programmes (SAPs). The SAPs generally prescribed economic globalization (especially of international trade and finance), national (or domestic) deregulation and privatization.

Since then, these international financial institutions have been more powerful in relation to developing countries than ever before. Soon, privatization became a standard requirement of SAPs. Thus, many governments of developing countries were forced to privatize by the SAPs’ loan conditions.

Many other governments voluntarily adopted such policies which became standard pillars of the emerging ‘Washington Consensus’ associated with the WB, the IMF and the US policy consensus of the 1980s. Privatization in developing countries was preceded by the political ‘counter-revolution’ associated with the rise and election of Margaret Thatcher as the Prime Minister of the United Kingdom and Ronald Reagan as the President of the United States of America.

Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

UN Pays Homage to Staffers Who Died in Plane Crash

The Ethiopian Airlines plane was carrying 149 passengers and eight crew members, from 35 countries, when it took a nose dive six minutes after leaving the airport in Addis Ababa. Credit: Alec Wilson/CC by 2.0

By Thalif Deen
UNITED NATIONS, Mar 12 2019 (IPS)

The United Nations headquarters is in mourning – and the UN flag is at half mast.

The deaths of 21 UN staffers March 10, on board an Ethiopian Airlines flight in Addis Ababa, is one of the biggest tragedies in the extended UN family—with a flashback to the deaths of 22 people, mostly UN staffers, who lost their lives in the Canal Hotel bombing in the Iraqi capital of Baghdad in August 2003.

The tragedy on Sunday had a wider impact because the UN staffers—enroute from Addis Ababa to Nairobi for the Fourth UN Environment Assembly March 11-15—were from 12 UN agencies and peacekeeping missions, plus representatives of civil society organizations (CSOs).

In the annals of UN tragedies, Dag Hammarskjöld of Sweden, the second Secretary-General of the United Nations (1953-1961), paid the ultimate price for peace when he died in a mysterious plane crash back in September 1961, which still remains unresolved after 58 long years.

Addressing delegates, UN Secretary-General Antonio Guterres said; “A global tragedy has hit close to home—and the United Nations is united in grief.”

Extending his deepest condolences to the families and loved ones of all the victims, to the government and people of Ethiopia, and all those affected by the disaster, he said: “Our colleagues were women and men—junior professionals and seasoned officials—hailing from all corners of the globe and with a wide array of expertise.”

They all had one thing in common, he said, “a spirit to serve the people of the world and to make it a better place for us all”.

A breakdown of the number of staffers from each of the agencies and peacekeeping missions, includes the Food and Agriculture Organization(1), the International Telecommunications Union (2), the Office of the UN High Commissioner for Refugees (3), the World Food Programme (7), UN Assistance Mission in Somalia  (1), the UN Development Programme (1),  the International Organization of Migration (1), the International Labour Organization (1), UN Office of the Coordinator for Humanitarian Affairs (1), the UN Educational Scientific and Cultural Organization (1), UN Support Office for the African Union Mission in Somalia  (1) and the World Meteorological Organization (1).

In a statement released Monday, the World Food Programme, which accounted for the largest number of deaths, said it is in mourning for seven WFP staff members who lost their lives.

“ As we confront this terrible loss, we reflect that all these WFP colleagues were willing to travel and work far from their homes and loved ones to help make the world a better place to live in. That was their calling, as it is for the rest of the WFP family.”

  • Ekta Adhikari (28) from Nepal, whose duty station was Addis Ababa
  • Maria Pilar Buzzetti (30) from Italy, duty station Rome
  • Virginia Chimenti (26) from Italy, duty station Rome
  • Harina Hafitz (59) from Indonesia, duty station Rome
  • Zhen-Zhen Huang (46) from China, duty station Rome
  • Michael Ryan (39) from Ireland, duty station Rome
  • Djordje Vdovic (53) from Serbia, duty station Bangkok, on assignment to Rome

The WFP said: “We also mourn the loss of our colleagues at other United Nations agencies and all of those who died in the crash. Among them was Victor Tsang, a former employee of WFP who moved to the UN Environment Programme (UNEP). We ask that everyone keep those who lost loved ones in their thoughts and prayers.”

FAO Director General José Graziano da Silva said: “My heartfelt condolences and sympathies to the bereaved families of the #Ethiopian Airlines #ET302 plane crash”

Among the victims, he said, were UN staff members including one from FAO. “We are working to get in touch with family members and assist them in this time of tremendous pain”

The Ethiopian Airlines Boeing 737 Max 8 plane was carrying 149 passengers and eight crew members, from 35 countries, when it took a nose dive six minutes after leaving the airport in Addis Ababa.

At last count, the passengers, included 32 Kenyan citizens, 18 from Canada, nine from Ethiopia, eight from Italy, China and the US, and seven from the UK and France.

Ian Richards, President of the 60,000-strong Coordinating Committee of International Staff Unions and Associations (CCISUA), told IPS: “Our colleagues are devastated by the loss of life in yesterday’s plane crash.”

He said many knew the victims or were familiar with their work.

“With every hour that passes we are learning more about the amazing things they were doing to make this world a better place, whether working on the environment, migration, humanitarian or other areas, and we won’t forget this.”

“Naturally our thoughts are with their families at this time and we will work with administration to make sure they get all the assistance they need,” Richards added.

At the opening of the UN assembly in Nairobi, delegates paid their respects with a moment of silence, according to press reports from the Kenyan capital.

Siim Kiisler, the Estonian environment minister, said: “We have lost fellow delegates, interpreters and UN staff.” “I express my condolences to those who lost loved ones in the crash.”

Inger Andersen, the incoming UN environment chief, said the organisation was “devastated”.

Among those who died were delegates from the African Diaspora Youth Forum in Europe, the US-based Save the Children and the Norway-based Association of Arctic Expedition Cruise Operators.

Karanja Quindos, a retired teacher from Bahati, in Kenya’s Nakuru County, lost his wife Anne Wangui, his daughter Caroline Nduta, and his three grandchildren; Ryan Njoroge, 7, Kellie Paul, 4, and nine-month-old Ruby Paul.

Also on the flight was Isabella Beryl Achie, from Homabay county about 300 kilometres west of Nairobi. She had been travelling home from Egypt where had recently facilitated a seminar. 

Meanwhile, the Kenyan and Ethiopian governments are planning to fly family members of the victims to Addis Ababa as plans to identify their remains get underway. In a joint press statement, Kenya’s Transport Cabinet Secretary James Macharia and Ethiopian Airlines’ Kenya country manager Yilma Goshu said that the government has reached out to the families of 25 of the 32 Kenyans who perished in the Sunday morning crash.

Ethiopian Airlines also announced on Monday that the black box of the ill-fated flight had been recovered as efforts to piece together clues as to what may have happened to the plane begin.

The writer can be contacted at thalifdeen@ips.org

  • Additional reporting by Benson Rioba in Nairobi