Title: Is Privatisation Inevitable in South Africa? Select Secutiry Implications
Abstract: Professor in Economics and Director of the Bureau for Economic Policy and Analysis University of Pretoria ABSTRACT The world has seen a major shift in economic thought on the optimal role for government in the economy, with the emergence of new insights concerning the appropriate mix of market and government activities. Most important, markets and governments are regarded to be complementary and the state is essential for putting into place the appropriate institutional foundation for markets. Privatisation offers an opportunity for competitive, private providers in the traditionally public domain, mainly due to the substantial impact thereof on the debt service payments, with which the economy is burdened. Hence it is argued that the privatisation of the major entities identified, should bring significant additional macro-economic benefits, including a large reduction in debt service cost. This could have conducive security and law and order implications for South Africa. 1. INTRODUCTION Worldwide there has been a major shift in economic thought on the optimal role for government in the economy, with new insights that are emerging as to the appropriate mix of market and government activities. (1) Most important, markets and governments are regarded to be complementary and the state is essential for putting into place the appropriate institutional foundation for markets. Whereas the 1960s and 1970s were characterised by increased levels of government intervention, the situation has since changed to smaller but more efficient interaction with the other major role players -- especially the business sector. In this regard, privatisation offers an opportunity for competitive, private providers in the traditionally public domain. (2) The impact thereof on the debt service payments, with which the economy is burdened, is quite substantial. In this article it is argued that the privatisation of the major entities identified, should bring significant additional macro-economic benefits, including a lar ge reduction in debt service cost. Such savings could be reallocated towards those (typically collective) public functions such as the enforcement of law and order, thereby creating a stable society conducive to foreign investment. 2. A NEWLY DEFINED ROLE FOR GOVERNMENT IN THE ECONOMY During the 20th century the size and scope of government have expanded enormously, particularly in the industrial countries. The post-World War II confidence in governments has led to demands for governments to do more. Industrial economics expanded the welfare state and most of the developing world embraced state-dominated development strategies. The result was a tremendous expansion in the size and reach of government worldwide. It was generally assumed that good advisers and technical experts would formulate good policies which good governments would implement for the good of society. State-led intervention emphasised market failures and accorded the state a central role in correcting them. But government actions have also produced some very poor outcomes. Even where governments have done well in the past, financial and other realities have shown that in most cases and especially in the developing countries, they have found it difficult to adapt to the demands of a globalising world economy. The new concerns and questions about the state's role are numerous and varied, but four recent developments have given them particular impetus. (3) -- The collapse of command-and-control economies in the former Soviet Union and Central and Eastern Europe; -- the fiscal crisis of the welfare state in most of the established industrial countries; -- the important role of the state in the miracle economies of East Asia; and -- the collapse of states and the increase in humanitarian emergencies in several parts of the world. The global integration of economies and the spread of democracy have narrowed the scope for arbitrary and capricious behaviour. …
Publication Year: 2000
Publication Date: 2000-11-01
Language: en
Type: article
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