Limited Utility Services Stifle Economic Prosperity

J. Yanqui Zaza

The Perspective
Atlanta, Georgia
April 5, 2005


Rumors emanating from Liberia indicate that certain parties are attempting to revive Charles Taylor’s privatization plan. This idea to turn over the control of utility companies, for example electricity, from government to private owners might create more problems than it solves. As evidenced in South Africa (The Dominion, Canadian Newspaper, 2004) and countries in South America (Op-Ed, NY Times, 3/18/05) Liberia’s efforts to privatize services would not only abort efforts to extend utility services to rural towns. It would also widen inequality, stiffen harsh economic conditions, and, or increase the rate of death in rural towns. This is true because capitalists are damn greedy” according to former US President, the late Herber Hoover, and would not operate in rural towns where profits are minimal, and slow to be realized.

Long ago, as it is now, governments around the world upheld the rationale that certain activities (education, religion, library, charitable organizations) should be exempt from taxation if majority of the population benefits from the teaching or moral values; governments should invest in services (light, water and sewer, highways, bridges, etc.) that impede the well being of society if not provided. Those who uphold this thinking say that citizens enjoy their government’s efforts if it provides the environment conducive for them to prosper. They argue that services such as electricity, water, transportation, etc. in modern times have become necessities of life, and are not luxuries.

The U.S. Government embraces and implements this idea that a government should provide an environment conducive for its citizens to prosper. So it gives incentives to employers, subsidizes corporations (Sugar Industry and Farm Industry), bails out mismanaged corporations (Chrysler, 1980’s and Capital Asset Management, 1990’s), or provides funds for research for commercial use such as the Internet-worldwide web and medical drugs. In addition to giving out corporate welfare, it funds and operates Amtrak, a government controlled transport system. President George Bush, for example, allocated $1.2 billion dollars within the 2006 budget for Amtrak. Following the footprints of the Federal Government, New York City also implements this philosophy. It owns and manages subways trains and buses (Metropolitan Transport Authority) that serve millions of people daily. Concurrently, the City, in conjunction with the States of New York and New Jersey, owns and manages three airports (John F. Kennedy, Newark Liberty International and LaGuardia). These airports handle over 80 million air passengers, over 1.1 million aircraft movements, and over 2.5 million tons of cargo annually.

By the way, why is it that investors shy away from funding long-range ventures such as George Washington Bridge, Holland Tunnel all in New York City, or Electricity, and Water and Sewer all in Liberia? Profit. Investors don’t realize the kind of quick and huge profits from investing in Amtrak, electricity, water and sewer. In fact some investors lobby their governments to invest in those long-range projects as part of incentives for doing business. They argue, rightly so, that a government, in addition to minimal profits, receives indirect benefits such as the opportunity to spur economic activities across the country.

In 2001, the then Minister of Planning and Economic Affairs, Mrs. Amelia Ward said that, “the government has embarked on privatizing public corporations and has already liberalized the telecommunication sector as evidenced by the establishment of at least three private telecommunications companies…” Many Liberians, apparently fed up with the level of corruption and inefficiency, had accepted the idea of privatization as a remedy to corruption. More so, the likes of Emmanuel Shaws, Beoni Urey, and Gus Kouwenhoven began beating the drum for less government activities. Very often conservative think tanks champion the views that capitalists are honest and less greedy, contrary to reports on corporate corruption and mismanagement.

Many European countries weighing the problems of privatization versus problems of state control have sided with the idea that government should control services that are necessary for survival. More so the once pronounced universal views that privatization, deregulations, less government role would yield prosperity have been losing steam. In fact, countries in South America that privatized utility services have experienced increase in inequality, sluggish economic growth, and economic crisis. The new owners of formerly government-controlled entities were not only inefficient, but provided mediocre services at higher prices. Off-course, unprofitable rural towns didn’t get services since investors dictated regulatory policies by giving bribes and kickbacks to state regulators.

Is corrupt limited to government entities? No. Is there any doubt that capitalists are too “damn greedy,” which is the most relevant motive for corruption? If there is, please read the nonstop reports on corrupt activities of chief executives of corporations. Chief executives at many corporations are now being indicted, in prison, or are under investigation for corruption. Worst, board of directors of corporations, those who hire and fire chief executives, are also reported to be corrupt, according to a Report. A Group of Academics at the Baruch College in New York City conducted studies of major corporations from 1992 through 2002 and concluded that board of directors were corrupt.

Liberians should view the war of minimizing corruption in its proper perspective, and should consider the benefits in investing in quality education, transportation, utility services. As it has been reported in Europe, South America, Russia, and elsewhere, privatization is not a panacea to corruption, rather an ingredient for more corruption.

The war on corruption is winnable once we (all Liberians) begin to reject corruption from anywhere and from anyone, be it a friend, or be it a spouse. On the other hand we shall lose the war on corruption even if we privatize revenue-generating ministries, including the Finance Ministry as long as we continue to cherry-pick, chastise our opponents while we praise our friends for the same acts.