Big Business : Some Myths Busted

By Shekhar

As the title suggests. this is a book in which  the author presents a large amount of data and lots of authentic documents like research papers and  study reports in order to expose a few lies and bust a few myths about large private companies propagated by powerful institutions and agencies. These agencies and institutions include corporate media too, and they act like mouthpieces of establishments that preach neoliberal ideology.  All the facts and figures furnished here are sourced from some of the most reputed organisations, institutions and experts.

• Language: English
• Publisher: Shekhar
• Release date: Jun 5, 2023
• ISBN: 9798215137024

Book preview

Shekhar Bhattacharya

Introduction

The ideologues of the dominant economic system of our world – the so-called neoliberal capitalist system – project the  large private companies /as the only capable organisations that  can 'lead' mankind  to a Utopia of everlasting growth and well-being for all.  The large corporations, this neoliberal  narrative maintains, are the most efficient organisations under the Sun who can produce and provide all sorts of goods and services at the highest quality, Therefore, say the mighty preachers of this creed, governments everywhere should go for large-scale privatisation in all sectors of the economy.  They assert that privatisation  leads to  high employment,  and by handing over all the key sectors to the private players, the government and the economy would achieve substantial cost savings.

As a self-enrolled student of social and political sciences,  I did my own research to  find  if such tall claims as made  by the 'neoliberalists' are backed by facts and figures.  This book contains the findings of that study.

I have also added a chapter which describes some of the activities at which big business excels.

Italicised text has been used where passages are quoted verbatim from source materials.

The terms 'Big  Private Corporations' (BPC), Big Business and Private Sector has been used interchangeably to indicate large private companies. 

CHAPTER I - The Efficiency Myth

The conventional view serves to protect us from the painful job of thinking. ― John Kenneth Galbraith

For many decades, the putative  'experts' in business chambers, corporate media and their peers in governments  have been preaching  that  large private sector companies (henceforth called Big Private Companies – BPC) are inherently more efficient, they are  better, and are more modern  than other kinds of organisations, and therefore, their experts recommend, governments should privatise the public sector in order to improve  'economic performance'.  This propaganda  has been quite successful too;  people at large have generally come to  believe that the public sector is inept, inefficient and corrupt, and should be replaced by the private sector.  We shall try in this chapter to find if there is any truth in this widely-held belief. 

In 2015, the United Nations Development Programme (UNDP) published a paper Is the Private Sector more efficient? A cautionary tale analysing all existing global studies on comparative efficiencies of public and private sectors with a view to assist in achieving the UN Sustainable Development Goals (SDGs) rolled out 2015 for the next 15 years.

It captured the substance and nature of the debate in its entirety, better than any known study. Its  important conclusion was :  no model of ownership - public, private or mixed - is intrinsically more efficient than the other.

A World Bank report -  "The Effects of Privatization and Ownership in Transition Economies - concludes Privatisation per se does not guarantee improved performance."

A study done by PSIRU (Public Services International Research Unit) -  titled PUBLIC AND PRIVATE SECTOR EFFICIENCY - is the largest study of the efficiency of privatized companies looked at all European companies privatized during 1980-2009. It compared their performance with companies that remained public and with their own past performance as public companies.  I quote a few passages from  a briefing released by PSIRU below :

It is often assumed that privatisation or PPPs will result in greater levels of

technical efficiency. That is, the private sector can always deliver a given level

of service with less input costs than the public sector. Politicians, media, aca-

demics and consultants frequently refer to ‘private sector efficiency’. This as-

sumption is often shared even by critics of privatisation.

But there is now extensive experience of all forms of privatisation, and re-

searchers have published many studies of the empirical evidence on compara-

tive technical efficiency. The results are remarkably consistent across all sec-

tors and all forms of privatisation and outsourcing: there is no empirical

evidence that the private sector is intrinsically more efficient. The same results

emerge consistently from sectors and services which are subject to outsourc-

ing, such as waste management, and in sectors privatised by sale, such as telecoms. 

Evidence from developing countries points to the same conclusion. A global review of water, electricity, rail and telecoms by the World Bank in 2005 concluded :

"The econometric evidence on the relevance of ownership suggests that in general, there is no statistically significant difference between the efficiency performance of public and private operators ......For utilities, it seems that in general ownership often does not matter as much as sometimes argued. Most cross-country papers on utilities find no statistically significant difference in efficiency scores between public and private providers." (Estache et al 2005).

The  above study showed in many cases, the privatized companies performed worse than those that remained public and continued to do so for up to 10 years after privatization.

Stiglitz et al published a cross-study in 2011 comparing how change in ownership from public to private changed their performance, Ownership change, institutional development, and performance. It found no conclusive proof of private sector superiority.

It pointed out that a basic insight is that institutional quality matters more than ownership. It held that profitability (measure of efficiency) post-ownership change was most directly tied to protection of private investors against expropriation and better enforcement of contractual rights. It also highlighted that more likely, such ownership change happened in case of public enterprises that perform well, biasing traditional tests of performance effects of privatisation".

Stiglitz wrote elsewhere that the theoretical case for such change "at best, is weak or non-existent". In the foreword to a book on neoliberalism, he wrote how a few individuals grabbed previously state-owned resources for a pittance and become millionaires - or billionaires

He added, "Russia became a country (after the fall of communism towards the end of 1980s) marked by great inequality,