Tuesday, August 11, 2015

Greece: Cash revenue maximizing privatization of public services, creates very onerous mortgages

The saddest part with the oncoming privatizations of public services in Greece, is that these will most certainly be awarded on the basis of who pays the most, usually a function of governments agreeing on very high tariffs; and not on the basis of who can best help Greece build up its competitiveness… like for instance based on who offer the lowest tariffs.

As one from South-America (Venezuela) I have seen this tragic mistake being done over and over again, only in order to please the short-term interests of governments and creditors.

I guarantee you that all cash-revenue-maximizing-privatizations of public services, create very onerous mortgages, which when these are impossible to serve by the citizens, create all kind of dangers and problems.

Here is an extract from an Op-Ed I wrote in 1997, titled “Hidden taxation through privatization” and that can help explain my point.

“In 1991, when Israel awarded concessions to cellular telephone companies, the criteria for these tender awards was the selection of the operator that offered the best and most inexpensive service to the consumer. In Venezuela, however, the sale of public service companies or the letting of concessions for public service operations are based on the maximization of income for the State by means of a kind of tax, payable in advance, and which will be repaid by the consumer year after year through increased tariffs. The results are there for all to see. In Venezuela, the cost per minute of the cellular telephone service is over ten times that in Israel.

Nobody can or should oppose the theory that the State, through privatization, must transfer to the private sector the relative responsibility for its public services. However, when this transfer is made by maximizing the sales price with the principal intention of filling the State’s coffers, we are effectively confronted by a new and strange version of tropical neoliberalism, invented not to serve the needs of the population, but merely to satisfy the insatiable appetite of the state public sector for income” … (or in this case, the case of Greece, the short-sighted appetite of creditors)

The creditors should know that what the buyers of those privatized services expect, are financial returns way higher than what they as creditors will obtain on their refinanced loans.

You are a bank creditor of someone delinquent on a mortgage against a house that earns you very low interests... and you allow that mortgage to be increased, for instance by a credit-card company charging much higher interest rates? It does not sound very smart!

Sunday, August 09, 2015

If we are going to squeeze the rich, let us do it at the lowest cost... government bureaucrats are too expensive

I refer to The Economist's "If the world introduces a 'Piketty tax': Squeezing the rich"

Let us be careful since too many rich-squeezers are just out to maximize their commissions from the squeezing.

As Sheriff of Nottingham said, “Squeezing the rich is always good business for some… especially for us"

We need to privatize the squeezing of the rich, to those who will charge the lowest commissions for the service.

Can you imagine a privatization bid to see who offers to redistribute 1% of the wealth of the richest 1% to the poorest 10% every year at the lowest cost… delivering an insurance of adequate compliance for a couple of billions of US$?

Or better yet that offers to redistribute 1% of the wealth of all to all, so that there is no political benefits derived from the distribution, since those are what probably costs us all the most.

That said we must also be careful that redistributing wealth does not concentrate wealth even more... as that could happen if we do not remove some of the distortions.

But of course, in an oil cursed country like my Venezuela, where government coffers receive 97 percent of all exports, the wealth that needs to be redistributed is 100% of the net oil revenues, since governments should work only with resources provided to them by the citizens... so that they have to care a lot about how it goes for the citizens

Wednesday, August 05, 2015

Nothing wrong with Congress being a cheerleader, but it real mission is only fulfilled when it is not!

When a Congress approves of what is proposed by the Executive Branch that is perfectly okey but let us not forget that it is only when a Congress disapproves of what is proposed by the Executive, that it is fulfilling its real mission.