Abstract: This article once more discusses political reform.
Various reform paths point into surprisingly simular directions,
i.e. privatization. This is partly due to the simularity of technological
and economic changes taking place around the world.
Nevertheless, one can argue about the order and pace of changes.
As an example, should a more active competition policy preceed such
privatization? Unfortunately, most
politicians only see a rather narrow road towards privatization,
typically moving two steps forward and one step back on that road,
without much interest for alternative pathways.
A.The narrow Path
Technological and economic developments around the world take place in
surprisingly similar patterns. Examples are urban developments such as
suburban shopping centres, which are boosted by the fact that more people
go shopping by car. Computers are changing the way banks operate around
the world in quite simular ways. Change is both predictable and inevitable.
However, many sectors in society are effectively controlled by a single entity, i.e.
a government departement or corporation, or a private monopoly. These
monopolies do not allow for multiple developments to take place along
parallel paths. These monopolies also have substantial political clout,
typically influencing politicians to preserve their monopolies.
Furthermore, the short-term nature of politics further narrows the
road towards reform. Politicans are motivated more by a selfish desire of
personal political survival than by interest in longer-term implications of
their policies. Politicians are seldom visionaries. Due to the need to
win the next election, which never is more than a few years away, politicians
are only interested in short-term effects. Political parties are hesitant
to draft long-term policies, they are hesitant to express long-term
directions. Politicians want to gain power. They are generally not in favor
of change. If change is inevitable, politicians prefer to imitate policies
that have already been implemented abroad, over policies that seem to be
As a result, politicians move on a reform path that is rather narrow.
They may move one step forward and two steps back, but the direction
is both predictable and inevitable.
B. Political Reform
Political reform takes place with predictable steps, whatever
country one happens to focus on. There may be different political
parties active in a given country, but there is a surprising simularity
between the policies each of them implements.
A few decades ago, there was a wide difference between various political
ideologies. Communists and capitalists were in a state of cold war with
another, reflecting the cold war between the USA and the Soviet Union.
Today, protectionism is still popular, especially among the conservative
left and the conservative right. Both communists and right-wing nationalists
still call for more government control over financial markets.
But most political parties nowadays realize the negative impact of
populists measures such as government intervention in financial markets.
A few years ago, well-known speculator Soros took the UK to the cleaners for
insisting to fix the exchange rate of the pound sterling. Since that time,
most politicians have learned their lesson, including 'recalcitrants' such
as Malaysia's Head of State.
Political reform has become rather predictable. Privatization is inevitable,
protectionism is dead! Politicians can only argue in favor of faster or
slower reform on these issues. Associated issues are equally predictable.
Excessive printing of money as a way to raise funds for the government, is
now widely rejected for its inflationary impact. Floating exchange rates
are inevitable. The liquidity of international capital makes that countries
have to compete for capital by offering ever more attractive conditions.
Globalization of trade forces all countries to lower taxes. The need to
attract international investment forces all countries to stop discriminating
against foreign companies and individuals with money to invest. Foreign
visitors are such an important source of foreign currency that every
country has to lower barriers such as visa requirements.
All the above is rather straightforward in politics. The direction is inevitable,
the argument is merely about the pace of reform. But there are issues that
invoke a differentiation of pathways. One such issue is the priority of
C. The Situation in Russia
In the light of above developments, it is clear that this month's
developments in Russia are a step back in the wrong direction.
Therefore, Quintessence gladly publishes the Open
Letter to President Yeltsin, an initiative by the Freemarketeers of
Nevertheless, Quintessence stresses that there are different paths of reform,
neither of which should be selected as the one and only rightful path.
The Freemarketeers of Australia represent one approach, they argue in favor
of swift privatisation. In line with Libertarians, they reject any
government intervention, except perhaps in areas such as national defence
and law and order.
However, another approach argues that the problems in Russia are largely
caused by the monopolization of society resulting from the many years of
communist rule. In this approach, it makes sense to enact strict antitrust
and cartel legislation, before any large-scale privatization of government
assets is to take place. In this approach, active competition policy
has priority over policies of out-sourcing, corporatization and privatization.
This political approach argues that it is easier to split up organizations
while they still are firmly under government control, either as government departments
or as fully government-owned corporations. Once such an organization has been
privatized, it is much harder to convince the chief executive to
cooperate with such a split-up.
Given the predictable impact of globalization and technological change,
and given the wealth of economic evidence against public ownership,
it makes sense that organizations in sectors such as energy,
transport, communications and finance will increasingly be
privatized. Privatization is both inevitable and recommendable policy.
Unfortunately, few countries have been able to abolish monopolies in
such sectors. The result is that privatization has merely transformed
government-owned monopolies into private monopolies. Competition policy
only seems to become politically relevant in mainstream politics after
privatization has taken place.
One can argue that it is more difficult to abolish monopolies once they
have been privatized. The unfortunate trend is that politians may see the
immediate benefits of privatization, especially the financial benefits,
but that they typically overlook the monopoly issue.
Quintessence urges some discussion of long-term developments and their
impact on society, in order to develop political reform with more substance
than the haphazard approach of most politicans.
An interesting reference model for cultural change is DonParagon's
Vision of the Future. Quintessence is looking forward to further
discussions of the longer-term directions of political reform.