Co-oprivatizationCo-oprivatization

Generating Choices Between State Enterprise & Corporate Privatization

Generating Choices Between State Enterprise & Corporate Privatization

Joffre BalceJoffre Balce

Reviewing the OptionsReviewing the Options

State EnterpriseState Enterprise State’s Entrepreneurial

Role to provide public goods: i.e., that which everyone wants but no one wants to invest in or provide

Assume natural monopolies of economic activities whose capital investment is too large or not feasible for private initiatives

State’s Entrepreneurial Role to provide public goods: i.e., that which everyone wants but no one wants to invest in or provide

Assume natural monopolies of economic activities whose capital investment is too large or not feasible for private initiatives

Corporate PrivatizationCorporate Privatization The transfer of ownership,

governance & management of a public enterprise into corporate hands

This transfer is total or partial sub-contract or joint venture share issue or asset sale immediate or gradual By negotiation, auction or

negotiated auction

The transfer of ownership, governance & management of a public enterprise into corporate hands

This transfer is total or partial sub-contract or joint venture share issue or asset sale immediate or gradual By negotiation, auction or

negotiated auction

Pros & Cons of State Enterprise

Pros & Cons of State Enterprise

Transparency, Responsibility & Accountability: Control, Oversight, Checks & Balances

Social Goals over Entrepreneurial Profits

Social Equity over Market Segmentation

Transparency, Responsibility & Accountability: Control, Oversight, Checks & Balances

Social Goals over Entrepreneurial Profits

Social Equity over Market Segmentation

Inefficient Performance to Investor & Public Due to Civil Service Security of Tenure

Prone to Political Pressure: Populist or Partisan

Primary Agent Risk: Politicians & Bureaucrats

Inefficient Performance to Investor & Public Due to Civil Service Security of Tenure

Prone to Political Pressure: Populist or Partisan

Primary Agent Risk: Politicians & Bureaucrats

Pros & Cons of Corporate Privatization

Pros & Cons of Corporate Privatization

Performance Driven by Shareholder Accountability

Profit Incentive Driven Research & Development

Relieved Pressure on Non-Patronizing Taxpayers

Performance Driven by Shareholder Accountability

Profit Incentive Driven Research & Development

Relieved Pressure on Non-Patronizing Taxpayers

Primacy of Shareholder Accountability

Primary Agent Risk: Management & Directors

Social Inequity from Market Segmentation

Primacy of Shareholder Accountability

Primary Agent Risk: Management & Directors

Social Inequity from Market Segmentation

Unresolved Economic Dilemmas

Unresolved Economic Dilemmas

Consumers/Patrons want the best quality for the lowest price

Investors/Providers want to charge the highest price at the lowest cost

Civil Rights & the Exploitation of Information Asymmetry Are at Risk in Both Options

Neither Raise Financial Market Efficiency:Government as Risk-Free BorrowerStrategic Enterprises Are Prone to Bail Outs

Consumers/Patrons want the best quality for the lowest price

Investors/Providers want to charge the highest price at the lowest cost

Civil Rights & the Exploitation of Information Asymmetry Are at Risk in Both Options

Neither Raise Financial Market Efficiency:Government as Risk-Free BorrowerStrategic Enterprises Are Prone to Bail Outs

What Is A Co-op?What Is A Co-op?

A social response of a group, community or society to respond to their socioeconomic needs that neither current market conditions nor the government is able to provide in a manner that raises their quality of life to their satisfaction through the formation of a jointly owned & autonomously governed private enterprise

Owners are the consumers & workers of the enterprise & continue to provide capital: Consumers through the price they pay for

patronage & workers though shares of stock incorporated in their compensation

A social response of a group, community or society to respond to their socioeconomic needs that neither current market conditions nor the government is able to provide in a manner that raises their quality of life to their satisfaction through the formation of a jointly owned & autonomously governed private enterprise

Owners are the consumers & workers of the enterprise & continue to provide capital: Consumers through the price they pay for

patronage & workers though shares of stock incorporated in their compensation

Co-op PrinciplesCo-op Principles

Openness & Voluntarism No one is coerced or

discriminated Democratic Control

One member, one vote; limited single ownership & directors’ tenure

Member Economic Participation Consumers, workers &

members in general are entitled to rebates, dividends & compensation, respectively

Autonomy & Independence Members/stakeholders

are accountable to each other

Openness & Voluntarism No one is coerced or

discriminated Democratic Control

One member, one vote; limited single ownership & directors’ tenure

Member Economic Participation Consumers, workers &

members in general are entitled to rebates, dividends & compensation, respectively

Autonomy & Independence Members/stakeholders

are accountable to each other

Education, Information & Communication Members are informed &

educated on the economics of their enterprise, the market & good governance

Mutual Cooperation Among Co-ops Co-ops strive for mutual

synergy via joint ventures & other co-op means

Concern for Community Co-ops & their

communities are in economic symbiosis

Education, Information & Communication Members are informed &

educated on the economics of their enterprise, the market & good governance

Mutual Cooperation Among Co-ops Co-ops strive for mutual

synergy via joint ventures & other co-op means

Concern for Community Co-ops & their

communities are in economic symbiosis

Co-op Privatization isCo-op Privatization is

Converting the State Enterprise into a Co-op Owned & Governed By Its Very Stakeholders

It is a step beyond the “voucher privatization” exercised in the Eastern Bloc Countries many of which were regarded as failures where the public “owns” the enterprise but politicians & bureaucrats govern & manage the enterprise still.

Government negotiates a graduated buy-out based on current economic market conditions so as not to contribute to a deficit.

Converting the State Enterprise into a Co-op Owned & Governed By Its Very Stakeholders

It is a step beyond the “voucher privatization” exercised in the Eastern Bloc Countries many of which were regarded as failures where the public “owns” the enterprise but politicians & bureaucrats govern & manage the enterprise still.

Government negotiates a graduated buy-out based on current economic market conditions so as not to contribute to a deficit.

Pros & Cons of Co-oprivatizationPros & Cons of

Co-oprivatization Market Compulsion

to Resolve Economic Dilemmas

Relieves the economic burden of state enterprise on taxpayers

Better education & representation in governance

Market Compulsion to Resolve Economic Dilemmas

Relieves the economic burden of state enterprise on taxpayers

Better education & representation in governance

Limited Access to Financial Markets

Tendencies to Hubris & Parochialism

Resistance from the Vested Interests in the Status Quo

Proneness to Temptation to De-Mutualise for Capital Gains

Limited Access to Financial Markets

Tendencies to Hubris & Parochialism

Resistance from the Vested Interests in the Status Quo

Proneness to Temptation to De-Mutualise for Capital Gains