Double Talk

Now exactly why Ms Sahadeo feels that divesting eight State companies in 13 years is a signal accomplishment is beyond us. But her boast gets even more hollow given that the administration she serves plans to set up 15 new State enterprises, which will bring the total of State companies to 94 or so. Yet her own rationale shows exactly why this is a bad idea. Ms Sahadeo admits that, in 1992, the 87 State enterprises and five public utilities were, in her words, "a severe drain on the public purse." But she ties this with the argument the divestment strategy is not "a failure of Government, but a necessary and complementary part of the process." This only demonstrates the ability of politicians to hold two or more contradictory ideas simultaneously.

The irrefutable fact is that the governments have never been able to run State companies efficiently. In the heyday of the oil boom, when the PNM regime sought to take control of "the commanding heights of the economy," incompetence, inefficiency, and corruption were the order of the day. This is almost a law of economics. The State is rarely, if ever, able to conduct businesses profitably. There are several reasons for this. One is the centralised bureaucracy, which makes it difficult for State companies to respond quickly to market forces. Another is a lack of motivation by executives and workers, due to key appointment being the result of political connections and because of dependence on the Treasury to bail the company out of financial trouble. Indeed, even when a State company enjoys monopoly status, as do WASA and TTEC, they find profits elusive. And yet, when these companies are sold to private interests, or when private companies are given the reins of management, the same State enterprises begin to generate significant returns.

So Ms Sahadeo’s assertion that an active Government investment strategy is necessary to "correct certain market failures" is the most hollow statement of all. There are good arguments for the Government to invest in areas like health, education, and infrastructure. There may even be good arguments for the Government to retain control of the provision of water and electricity and certain media. But there really are no good arguments for the Government to be involved in business enterprises, and there are several good arguments against.

For one thing, such involvement tends to distort the market economy, by pitting the immense resources of the State against private enterprise. This means that a State enterprise which is losing money can actually drive a profitable private company out of business. What more commonly happens, however, is that the private sector does not respond to certain market demands. The provision of low-cost housing, for example, is not lucrative because the Government has decided to do this — and is doing so with the usual inefficiency and suspect practices.

Yet there is a symbiosis between the State and the market. Good government — which, most importantly, means upholding the rule of law and transparency — supports a market economy, which in turn provides prosperity and freedom for more citizens than the State can through handouts. But a Government which divests so reluctantly, and which sets up new State enterprises while doing so, will find it difficult to appreciate this argument. Perhaps Ms Sahadeo can use her position to show them the worth of it.