The New World Order on Privatization – Part I


Today we’re gonna expose against the New World Order by the opposition party to promote the sensitivity of politically linked to Privatization on Malaysia Airlines and many other GLC sectors. In this Part I episode; we’re educating our readers of the negative impact of Privatization that may lead to a National Bankruptcy even before year 2020.

This urge to publish The Effects of Privatization on Human Capital was a called from our anonymous reader. So follow us to catch this most interesting story of the hidden agenda by the New World Order instructed upon the opposition party.

The effects on Privatization

Privatization will be the biggest dogfight of the next ten years. In mid-1980s, the governments and citizens recognized the drawbacks of government control of enterprises. Rather than focusing on the business aspects; many governments-controlled corporations had become grazing ground; for political appointees or vote winners through job allocations. As a result; many government-owned enterprises excelled in losing money and governments are increasingly recognizing that it is possible to reduce the cost of governing by changing their role and involvement in the economy.

Therefore; countries the world over; have launched a massive and ambitious privatization programs or process of productive and other activities previously considered state enterprises or public services to improve their efficiency; free up resources for social services and mobilize capital for expansion and modernization.

The International Monetary Fund (IMF) has been pushing client countries toward privatization. Therefore in developing countries privatization has been spurred since the IMF and the World Bank started to make their assistance conditional on it (Kikeri, 1997; Perotti, 2004; Borner 2004).

Privatization is critical and politically sensitive government activity that has led to fundamental shifts in the relationship between the private and public sectors of the jurisdictions of many countries (Prizzia, 2005). A change in ownership changes the structure of information; incentives and control; affecting operating decisions and thus economic performance.

Privatization; by limiting the state’s ability to redirect the enterprises’ activities in ways that promote short-term political objectives; enhances economic efficiency. Within the basic welfare services; privatization has been used to refer to an increase in the individual’s responsibility for his or her own welfare. This arises from the state’s attempt to delineate more explicitly its commitment to citizens’ welfare and may also reflect citizens’ own demands for alternative services.

Privatization and transition are most likely to maximize social and employment benefits and minimize social and employment costs if those are explicit goals narrated that in terms of returns on assets; the main topic of analysis has been the effect of privatization on employment levels and returns to labor.

In this regard researchers have conducted several studies to evaluate the benefits and drawbacks of privatization. Following are few researches wherein different aspects of privatization causing benefits and harms have been studied. This study is dedicated to find out the negative and positive aspects of privatization on employees.

Privatization encompasses the many ways in which the private sector assumes functions that were previously carried out by the government. According to Pamacheche et al. (2007), privatization is supposed to be undertaken to re-deploy assets from the public to the private sector, where the assets are expected to be used more efficiently. Pamacheche et al. expressed that depending on the form it takes privatization can be defined in several ways. They quoted a definition of privatization by the World Bank as;

“A transaction or transactions utilizing one or more of the methods resulting in either the sale to private parties of a controlling interest in the share capital of a public enterprise or of a substantial part of its assets” or “the transfer to private parties of operational control of a public enterprise or a substantial part of its assets”

According to ILO (2001); privatization is the transfer from the public to the private sector of assets in terms of ownership; management; finance or control. In its narrowest sense it is the sale of public assets to the private sector; but it has also been linked to a reduced regulatory role of government; linked to policies of liberalization and deregulation.

Materials and Methods research article has been developed on descriptive secondary information obtained from research literature about effects of privatization on employees.

By analyzing many research reports; it gave an opinion that privatization’s economy-wide effects on the government budget growth; employment and investment are less established. However, privatization caste negative impacts on public as revealed by some research studies.

Nancy and Nellis (2003) reported negative impacts of privatization by stating that at the heart of popular criticism is a perception that privatization is fundamentally unfair in both concept and implementation: it is seen as harming the poor; the disenfranchised; the workers and even the middle class; throwing people out of good jobs into unemployment; raising prices for essential services; giving away national treasures and all this to the benefit of the local elite, agile or corrupt politicians and foreign corporations and investors.

Prizzia, (2005), in a paper titled “An International Perspective of Privatization and Women Workers”; asserted negative impacts. According to his example, privatization of a water system in Bolivia and an energy system in Thailand increased unemployment and decreased consumer welfare in both countries; resulting in the sudden rise of prices that culminated in a series of mass protests.

About Japan Cato (2008) expressed that the studies on mixed oligopolies revealed that in an industry that is sufficiently competitive privatization improves welfare.

Effects on employees are insecurity or loss of jobs; changes in working environment, stress due to insecurity of job; wage cuts etc.

But Kikeri, (1997) is of the view that in contrary to popular belief; workers often have gained from privatization as new investments and dynamic expansion have resulted in new job creation at both the enterprise and sector levels and as productivity improvements have led to better terms and conditions of service. Martin (n.d.) concluded that countries with no recent experience of unemployment were suddenly exposed to the shock of redundancy and job insecurity.

The study on labor effects of privatization of public services in New York State found that local government privatization have some harmful effects on workers. Few local employers had adjustment policies to protect affected employees and disproportionate negative impacts were found on women and minorities.

It was stated that often protected from competition and subsidized by their public owners; public economic enterprises (state enterprises) in many developing countries employ too many people, so that cost of hidden unemployment is one of their most important problems; often they pay them wages and benefits that are higher than their private sector counterparts and are governed by rigid labor contracts and by privatization;  their cost can be eliminated. It was further narrated that in steel; railways; and energy enterprises; over-staffing often have led to employment reductions before privatization as governments prepare the companies for sale and after as privatized companies continue to shed labor.

Rozana (2000) studied Worker Redundancy (theoretically; a worker is redundant if his marginal productivity is below the received wage) and discussed handling the problem of surplus labor its extent; issues and preparation. Rozana expressed that worker redundancy has been common in Sri Lankan SOEs; which were largely overstaffed because employment had been given under political patronage to fulfilling the state’s objective of reducing unemployment. Recruitment was easiest in the semi-skilled and unskilled tiers and thus; not surprisingly; surplus labor was most common in the grades of laborers; minor staff; clerical and other allied grades rather than at the management and executive grades and grades requiring skilled labor.

Birdsall and Nellis (2002) asserted that public enterprises were overstaffed often severely so; that in preparing (or as a substitute) for privatization; public enterprise employment numbers have declined; sometimes greatly; and that these declines generally continued post-privatization though in a minority of the studied cases employment numbers improved post-sale. Situation was and still is same in other countries where state or public sector owns the organization and governance is not good.

This over-staffing is one of the reasons of failure of organizations in state ownership other reasons are lack of interest and selfishness as expressed by Rozana (2000) that profit motive was not the main drive in the public enterprise; implementing efficient corporate management and productivity enhancement techniques were not high on the SOE agenda.

On privatization extra workers are to be laid off so the greatest organized source of opposition to privatization comes from employee unions but that unions may not always oppose privatization; particularly in cases where public units are allowed to compete with private firms to provide services.

An Anonymous researcher asserted that politically the most difficult and feared impact of privatization is employee layoffs. The fear is justified because many public enterprises are greatly overstaffed; as they are often used as instruments of job creation.

On privatization; employees feel job insecurity and have fear losing their jobs. Fear can pass to other employees and trigger a chain reaction that ultimately leads to the widespread fear in employees; of losing their jobs which causes increased job stress.

Genuine researchers are of the view that at the heart of popular criticism is a perception that privatization is fundamentally unfair in both concept and implementation: it is seen as harming the poor; the disenfranchised; the workers and even the middle class; throwing people out of good jobs into poor ones or unemployment. It is clear that public enterprises were overstaffed often severely so; that in preparing for privatization; public enterprise employment numbers declined, sometimes greatly and that these declines generally continued post-privatization. Overall; the evidence indicates that more people have lost jobs than gained them through privatization.

Reading of the evidence spread on Privatization; it expressed that more people have lost jobs than gained them through privatization. Birdsall and Nellis commented complementing that now the important question of what kind of jobs people find after dismissal from public enterprises is just beginning to receive attention. The fear of job losses is the stumbling block to privatization. Where the government‘s power base is in urban centers, trade unions make employment the number one issue in the privatization deal.

The fear of job losses is also the stumbling block in the negotiation with workers’ union where the employer usually would re-strategies towards Union as Union Busters via a formation of another union to busting the workers’ union thus creating a hindrance in the process of negotiation as the case for “The International Brotherhood of Teamsters” that “refused” to negotiate in 2011 with a group of its own union organizers who voted to form a union called the Federation of Agents and International Representatives (FAIR); to negotiate with their employer – the Teamsters.

On 29 August 2012, after being found guilty of unlawfully union busting their own employees’ union, the Teamsters (IBT) posted a notice “pursuant to a settlement agreement approved by a regional director of the Obama Administration’s National Labor Relations Board NLRB,” that they will stop union busting. The notice assures Teamster employees that they will no longer be prevented from exercising their rights. The furtherance deal of negotiation were successfully struck without further disruption.

Will be continued and please stayed tune to our next post.🙂

4 thoughts on “The New World Order on Privatization – Part I

  1. Through 2008, privatization has raised $12.9 billion, enough to bridge 2.6 percent of the Indian fiscal deficit per year. Privatization has increased productivity and efficiency, but there have also been significant employment losses, especially in the case of asset sale1 privatization. As privatization can unshackle the productive potential of state enterprises, the government should pursue it, as planned. However, to derive optimum benefits, the government should customize the method of sale to the size and profitability of the enterprise being divested.

  2. Through 2008, privatization has raised $12.9 billion, enough to bridge 2.6 percent of the Indian fiscal deficit per year. Privatization has increased productivity and efficiency, but there have also been significant employment losses, especially in the case of asset sale1 privatization. As privatization can unshackle the productive potential of state enterprises, the government should pursue it, as planned. However, to derive optimum benefits, the government should customize the method of sale to the size and profitability of the enterprise being divested.

  3. 1) Capturing the confidence of labour: Government should endeavor to win over labour’s acceptance of privatization by giving them ownership of shares in the enterprises. Workers could be allocated a percentage of the shareholding at a special discounted price. There is need for good follow up on privatized enterprises, there is need to keep a record of accurate figures on pre- and post- privatization employment levels including statistics to show whether employment is declining or increasing to calm the fear of labour unions. Other statistics should includes how much of capable and qualified labour will be absorbed by the buyers, etc. labour on the other hand must also realize that many of the jobs also might have been cost anyway by retrenchment, since government could not keep subsidizing crises- ridden public enterprises indefinitely; the only exercise that could be guaranteed is constant lay off.

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