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Privatization: The Old, Old Fashioned Way

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06/08/2006

USA Today notes in an article today that "States and local governments across the USA are preparing to cash in valuable public assets for one-time windfalls that could reap tens of billions of dollars." Though there is talk in the article of "operations that private enterprise might operate better" one wonders if this is any sort of victory for free markets. This suggests not:

Investment banker Carol Rein of UBS Securities says foreign investors like government assets in this country because similar investment opportunities in Europe and Australia have been successful. Assets such as toll roads and water systems are attractive to investors because they have little competition and generate steady revenue.

This puts me in mind of an old practice that kings had for raising money. They would sell the rights to a monopoly in a certain trade or even sell an official position. As Rodney Stark writes in The Victory of Reason:

...all of the colonial administrative positions [in the Spanish Americas] were sold by the King of Spain!... The number of official positions sold in the colonies greatly proliferated under Philip II as he attempted, unsuccessfully, to avert repeated bankrupties... most positions were purchased as investments to be made back from the many opportunities to sell influence and services.

Now, the article does not explicitly state that these "privatizations" include the sale of legal monopolies to private parties. But I'll bet you the right to charge tolls on the Golden Gate Bridge that they do.

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