Sunday, November 11, 2007

Privatization is not Simple

There is nothing simple about privatization as it will be difficult to not only overcome entrenched interests but also to earn the trust and participation of our people in the process. Privatization is much more than just handing a government function over to a private company. It is about creating an environment that is conducive to competition, investment and growth, and it’s that environment that will ensure that the hard work we do put in to improve our lives does not continue to go down the drain.

Our first hurdle will be to prevent crony capitalism. This occurs when private companies find favor with government officials to obtain monopolies, exclusive licenses, regulations and trade barriers that inhibit competition or the potential thereof. In this environment, private companies will simply replicate our government’s tendency towards high costs, poor customer service and lackluster quality.

Competition is the cornerstone of the private sector, which tends to make things better everyday. The letter to the Editor by “A friend of…” (Friday’s Issue 11/9/07) has the underlying argument that not enough money can be made in American Samoa to support the competition necessary to improve services, lower prices and raise wages.

“If you build it, they will come”, as a wise saying from a movie starring Kevin Costner goes. There are places in the world where few thought money could be made: Hong Kong, Dubai , Taiwan and Estonia . They’re either some rocky island with few natural resources or a desert kingdom in the middle of nowhere. But after these countries have relatively freed their economies, businesses went knocking on their doors. There must be something about freedom they find attractive, who knows?

Characteristics of a free market economy include minimal taxation, protection of property rights, enforcement of contracts, quick licensing procedures, a flexible labor force, freedom from price/wage/benefit controls and an absence of government competition. Our territory hasn’t fared too well on this list, and it would be ridiculous to expect people from abroad, let alone our own people, to want to compete in such a hostile and risky environment.

Competition is possible, and there are indications that a healthy market exists in areas once thought to be the sole domain of government. The facts that Star Kist rebuffed ASPA rate increases by planning to generate their own power and investors from Hawaii want to build a lucrative solar powered generator show market potential in electricity.

Texas has successfully deregulated their power utilities, and the market is credited for restraining prices in light of rising fuel costs. Argentina has successfully privatized their roads, and the market is credited for increasing capacity, improving quality and lowering the need for government funding. Chile has successfully privatized their "Social Security" programs, and their retirement scheme is secured while the US Social Security program threatens to bring the entire economy down with its and Medicare’s trillions of dollars in unfunded liabilities. We owe it to ourselves and future generations to look at how other countries and states were able to improve their lives through privatization.

It will not be easy, especially since many of our family and friends work in these departments. Maybe a condition of sale could be for the acquiring interest to hire and retain ASG employees for a period of time in which they could prove themselves to the company or gain the necessary skills and education necessary to be a valuable asset.

There is a right way and a wrong way to privatization. The wrong way leads to crony capitalism, and we would be no better off than if we stuck with the status quo. The right way requires that government just get out of the way and allow the people and the market to improve our lives.

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