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Updated: August 19, 2013 21:27 IST

Happy with reasonable success

  • K. Subramanian
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Privatisation has been an integral component of Structural Adjustment Programs (SAP) put through by the IMF/World Bank. In retrospect, it is amazing to see how the wave of privatisations swept across countries and continents. Data show that worldwide, between 1979 and end of 1999, more than 130 countries divested or turned over to private management/ownership of thousands of state-owned enterprises. In the countries of the former Soviet Union, it went under the rubric of “shock therapy” and state-owned enterprises were parcelled out and sold, often for a song.

Dogmatic attachment to privatisation abated by 2000. Prof. Joseph Stiglitz had raised the banner against privatisation in the late 1990s. Later experience clearly suggested that privatisation was no panacea and a more balanced view was necessary. Currently, academic consensus is that there are positive outcomes of privatisation of firms operating in competitive markets. Two decades of experience provide a deeper understanding of the complexities of implementing the policy, especially in infrastructure sectors such as electricity, railways or water and sewerage, and particularly in lower-income, less developed economies. It is assessed that if privatisation has to succeed, it has to work within a supportive institutional policy framework and the socio-political challenges that result from the policy. Unfortunately, many reform advocates, including those in India, seem to ignore these realities. The most recent experience regarding divesture of five per cent of Neyveli Lignite Corporation (NLC) is a glaring instance which led to massive labour protests and Centre-State confrontation. The protests ended with a face-saving formula, which in effect was not privatisation.

The advocates of privatisation charge that their critics have no alternatives to suggest. In many debates this TINA (there is no alternative) factor may clinch the argument. It is really not so. The present book is a scholarly attempt to meet this charge by attempting alternatives. The book helps to conceptualise and evaluate what has become an important and widespread movement for better public services in the global South. It addresses questions of what constitutes alternatives to privatisation, what makes them successful (or not), and the lessons learned for future service delivery debates.

The primary aim is to cover delivery services in three sectors: health services, water/sanitation and power. As the book says, “The analysis is backed by a comprehensive examination of alternatives in over 50 countries in Africa, Asia and Latin America.” The authors have also identified new forms of public ownership and management as opposed to the earlier Manichaean view of State versus market.


Stridency over privatisation came about over concerns about efficiency, transparency, accountability, etc. The rising tide of financialisation with efficient market hypothesis (EMH) at its heart led to dethroning the State and seeking private initiative for all services. After the great economic crisis, these concepts have lost their tenability and all services have to be evaluated by common criteria. These have been identified as: Equity, Participation, Efficiency, Quality, Accountability, Transparency, Sustainability, Solidarity, Public ethos and Transferability. Country experiences are assessed in the light of these criteria. There is no attempt to straight jacket the model.

The authors are in search of reasonable success and not ultimate victory. They provide wider base for later research and leave their conclusions on a tentative framework. By and large they celebrate the demise of neo-liberalism which has created new openings in intellectual thought on the issue of public services. They provide for trade union and social movements for transformation. There is no doubt concern for gender justice as in chapter 5. It is significant that the authors do not rule out state ownership in certain circumstances; all that they urge is to be aware of the risks (chapter 7). Honestly they admit that formal capacity for state-led services is stronger in the global North than in the South.

The three regions (Asia, Africa and Latin America) are studies with reference to their experience in providing public services. Very interesting findings have been brought forth. For instance, Latin America was successful in thwarting water privatisation. But not the power sector, which is dominated by the private sector.

On Indian power sector, there are interesting observations. (chapter 10). The author record how “with traditionally strong left-wing political parties and social movements, it makes one wonder how the ADB and the World Bank unbundling models were carried forward beginning in 1995.” He takes the view that “independent regulator has been designed mainly to meet the requirements of a privatized system.”

The third section dealing with Africa (chapters 11-13) provides an honest, if depressing, account of the situation in Africa. Africa was weakened during a century of colonial exploitation. The SAPs played further havoc. It is on such a base that the newly independent countries have to work out their programmes. On public health it is more a question of who will provide the finances and much is dependent on voluntary agencies. On water and sanitation, there are no examples of “success” in the delivery in Sub Saharan Africa that meet the research criteria. On power, the finding is that rethinking on shifting to private sector is necessary with more reliance on public and community.

A detailed account has been given on the provision of health and water services in Latin America. There have been struggles against water privatisation which brought down governments as in Bolivia. Private water contracts were cancelled in Argentina, Bolivia and Uruguay and water delivery is under public control. All the same, the authors note that water activists in Latin America recognise the limitations of public water authorities given the systematic failure of public utilities in the region to respond to the needs of the poor.

This book is a mine of scholarly material on the experience of alternatives to privatisation in Asia, Africa and Latin America. As we said earlier, it is tentative in making the conclusions and does not carry the certitudes of those who advocate privatisation a la Washington. It provides a conceptual framework for alternatives and tests them against the experience gained in many developing countries. As the authors repeatedly emphasise, they are providing a further base for research.

(K. Subramanian is a retired civil servant)

Alternatives to Privatization: Edited by David A. McDonald, Greg Ruitters; LeftWord Books, 2254/2A Shadi Khampur, New Ranjit Nagar, New Delhi-110006. Rs. 750

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