Privatization nor public ownership purely in and of themselves will save the economy or curb corruption. In fact, the feeding frenzy created by privatization leads to massive corruption. In Russia, corruption has resulted from the privatization of public assets whether “bought” (typically at grossly undervalued prices) or by government officials in effect taking private control of assets still officially publically owned.
Corruption results when dishonest people take power (private or public power) and when common people feel society is not fairly organized… Nearly every state that has successfully developed has done so by incentivizing, mobilizing, and organizing the private and public sectors to create value, not just profits. Profits can be made by either destroying or creating value. The same also applies to the state. But, historically, it has only been the state which has had the power to create an environment launching value creating economic development. The idea that privatizations can achieve development on their own is dangerous, naïve, and historically without merit.
Excerpts from an article entitled “Privatizations and Failures in Russia’s Economy” by JEFFREY SOMMERS, associate professor of political economy at the University of Wisconsin-Milwaukee, and is visiting faculty at the Stockholm School of Economics in Riga.