Recently, I was interviewed on Quebec City’s Radio X regarding the economic future of Greece. An important part of the interview focused on privatization and how it could help Greece. Let us look at some of the assets that Greece is currently privatizing currently :
- Hellenic Post (minority stake)
- Public Gas Company (minority stake)
- Concessions over ports and airports
- A casino (minority stake)
- Water suppliers
- Banks (yes, they own banks which will be partially privatized)
In of itself, privatization is no panacea to a public debt problem. Let’s think about it for a second : you are selling an asset to get rid of a liability. You may do such a thing, but your net worth will not be affected in any ways.
Hence when you privatize, you might want to look at something else. According to the OECD (as quoted in this paper), Greece has one of the most regulated economy in Europe and has a higher degree of state-owned corporations as a share of GDP. As the OECD reports again, SOEs (State owned entreprises) in Greece accounted for a higher share of employment than it did for its share of GDP, which might indicate a productivity problem. Hence the idea of privatizing. You are betting that the assets would be made more productive through private ownership and by new incentives provided by competitors (if the crown corporation was a monopoly).
I understand that evaluating the Greek productivity in SOEs challenge is problematic, but this is not the key of this comment but rather that privatization ought to be done in order to liberate the forces of entrepreneurship and instill more discipline in corporation so that they grow more productive, increase in value and reduce prices for consumers.
The proceeds of privatization in this case are only a “happy by-product” of the adopted policy. Considering that corporations like Hellenic Railways are pilling up losses at the pace of 3 million euros a day, privatizing in order to make the economy more open to competitive might just be a policy that could help Greece.