Perspective: The Privatization Revolution
JANUARY 01, 1986
John Naisbitt’s new book on ten trends shaping our future, The Year Ahead: 1986, identifies a very old idea whose time has come: “In the year ahead, the reprivatization of America will become a swollen tide of private industry rushing in to fill the gaps left by federal government budget cuts, local governments’ inability to finance basic public services, and consumer demand for quality service and greater accountability.”
In fact, from Great Britain to Brazil, and including a great many third world countries, a privatization revolution is forcing the return of nationalized industries to the private sector. This is not an example of a change of heart on the part of government policy makers, merely the inexorable lesson of economic law: government interventionism doesn’t work.
Privatization may presage an explosion of entrepreneurial effort and the kind of economic growth the world needs. Governments may not abolish enough of the regulations that strangle commerce. But there is an apparent world-wide shift toward the market process. As one senior development consultant put it, “governments sometimes do the right thing, but only after they’ve exhausted all the alternatives.”
Capitalism Wins Again
The Soviet Communist Party has had to deal with reality once again. For the third time in its history, it is preparing a new program on the goals and strategies of the Party. Between the lines, capitalism comes out a winner.
Each of the two previous Soviet programs since 1903 has become progressively less optimistic of the final overthrow of capitalism. Now the current draft to the third program criticizes capitalism because it “is constantly maneuvering to adjust itself to the changing situation.”
That is precisely the point! While planners make promises they cannot keep, the free market produces. While communism and socialism move from one failed plan to another, capitalism adjusts to the changing needs and desires of consumers. While all forms of interventionism try to control everything, the market permits “anything that’s peaceful.” Communism, indeed any form of totalitarianism, is doomed to failure because it cannot cope with change. Only freedom and a market society encourages diversity, freedom, and economic progress.
Discovering Property Rights
Bill Landreth, the teenage author of Out of the Inner Circle, gives us a glimpse of how property rights natu rally evolve in society. He tells the story of a group of brilliant computer “hackers” who anonymously discover each other, expand their own knowledge of computer systems, and find their way into highly secret and private computer systems.
Admittedly, much of what the Inner Circle hackers did was quite wrong (breaking into other people’s computer systems, for example). At the same time, Landreth gives a fascinating account of how they developed “an unwritten code of ethics that became a philosophy holding the Inner Circle together.” Landreth concludes, “We had many good reasons to follow these basic rules. But the most important . . . had to do with the basic principle of respecting other people’s property and information.”
These bright young men discovered on their own something they probably would never have stumbled across in school: clearly defined property rights are essential for a moral society to operate.
We have invented a new victimless crime that is sparking a groundswell of opposition—driving without a seatbelt. A number of people are convinced that seatbelts save lives, and they presumably would buckle up whether or not the law required it. But others are impressed by the occasional accident in which an unbuckled person survives by being thrown clear.
The issue is not, of course, whether statistics prove that seatbelts reduce accidents. The issue is the right of in dividuals to evaluate risks for themselves. Is it a proper function of government to forcibly decide such issues for us? For a growing number of people, mandatory seatbelt laws are the equivalent of Prohibition in the twenties. And we all know what a success that was.
Thirty Years Ago
In the February 1956 Freeman, we ran an article by Ludwig von Mises on “Facts About the ‘Industrial Revolution’.” He showed how “The Lais-sez-faire ideology and its offshoot, the ‘Industrial Revolution’ blasted the ideological and institutional barriers to progress and welfare.” What Mises wrote then is still sadly true: “There are millions and millions of people for whom there is no secure place left in the traditional economic setting, The fate of these wretched masses can be improved only by industrialization. What they need most is entrepreneurs and capitalists.”
Editor: Charles H. Hamilton
Publisher: Paul L. Poirot
Managing Editor: Beth A. Hoffman
Book Review Editor: Edmund A. Opitz
Contributing Editors: Robert G. Anderson
Howard Baetjer Jr.
Bettina Bien Greaves
Gregory F. Rehmke
Joan Kennedy Taylor
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Copyright © 1986 by The Foundation for Economic Education, Inc. Printed in U.S.A. Permission is granted to reprint any article in this issue, except “The Constraints on Helping,” provided appropriate credit is given and two copies of the reprinted material are sent to The Foundation.
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Cover illustration by Gustave Doré from London: A Pilgrimage by Gustave Doré and Blanchard Jerrold. Used with permission of Dover Publications, Inc.