Ramnath, in his second point here, repeats the usual argument that “Ownership doesnt matter as much as competition” refering to privatization of PSUs. The argument is that if PSUs were forced to compete in a free market, then it wouldn’t matter that they are publicly owned.
Sorry, but I don’t buy that argument. To compete in a free market, the company should want to succeed. A company is not a person, so when one says that a “company should want” something, he is treating a complicated web of desires as the wish of a single entity. The company official in charge of competing gets orders from his boss, who in turn gets targets set by his boss, and this chain goes on till the CEO, who in turn is given directions by the board, and the board gets its priorities from whoever appointed it.
In a private company, the board is appointed by the shareholders and to the extent that the price of shares depends on the performance of the company, the actions of the low-level official are conducive to the company’s competing in a free-market economy. Not perfectly, I must admit. The fact that this chain is complicated ensures that the incentives get misaligned, which is why bigger companies often get outwitted by nimbler small companies.
But in a public companies, the board is appointed by the bureaucrat who is appointed by the minister who is appointed by the Prime Minister who is responsible to the Lok Sabha whose members are elected by us. Now if you honestly think that we who are concerned about waste of public money can manipulate this intricate system of levers to influence the behaviour of that official, I have a bridge to sell you. It goes from Mumbai to Dubai right over the Arabian Sea.
Of course, that is not exactly what Ramnath is thinking. He is thinking that if the government has the “political will”, it can set for its PSUs the same priorities that a private company’s shareholders set for their board. But really, the government does not have a “political will” independent of its constituents. Do you ever think that a government will ever put profits above the interest of its employees? Government employees have a union can go on strike now, while profits made will benefit a lot of people who simply cannot match the organization of the unions. Whom do you think the government will lean towards?
The ultimate weapon that keeps a private company on tenterhooks is survival. There are private companies that are as mismanaged as public companies, but that doesn’t last long. They either shut down, get bought over, or gird up their loins when faced with impending doom. Ramnath holds out the fond hope that the Left parties may even join us if we call for transparency, reduction in red tape and corruption. I don’t know why. Does he really think that the Left will support us if we demand a cut in labour force, or, God forbid, a closure of the company because it is too inefficient to succeed? As to the argument that it will fight corruption, I’d like to introduce him to Mr. Sharad Rao, the head of Mumbai Municipal employees union, who recently called for a strike after octroi employees were arrested for corruption. In fact, he is the one responsible for continuation of octroi in Mumbai. His ostensible complaint is that if octroi is abolished, his union employees will lose their jobs, but he insists on this argument even after he was given ironclad assurances that not a single employee will be fired. The only possible conclusion, I’m afraid, is that his concern is not for their jobs, but for their bribes.