From: mossop@pangea.Stanford.EDU (Antony Mossop)
Subject: Re: Privatisation snippets
Organization: Stanford Univ. Earth Sciences
Date: Sat, 10 Oct 1992 01:04:17 GMT

In article <26721@castle.ed.ac.uk> fofp@castle.ed.ac.uk (M Holmes) writes:
>martin.baines@uk.sun.com (Martin Baines - Sun UK - SE Manager Cambridge) writes:
>
>[....on privatisation...]
>
>>The government is in a very similar position: if they think that
>>they can use the money they get from selling a business better
>>than having the capital tied up they can (I would say should)
>>sell it.
>
>Absolutely. In most arguments I've had over privatisation, opponents
>simply ignore the opportunity cost of the cash that governments have
>tied up in owning all these businesses.
>
>[... on whether the proceeds are "fair value"...]
>
>>In fact the situation is identical
>>to you selling your house: if you accept an offer and
>>are happy with it at the time that is the "full market
>>value". Period. If someone later comes up and says
>>"you could have got more for that" so what? You had the
>>choice of selling or waiting, you were happy at the
>>time, why worry? The government is in the same position:
>>the "full market value" is the price at which the asset
>>is sold, and all parties to the sale are happy on the
>>day. Period.
>
>I can't agree because the hidden assumption here is that the government
>are somehow the "owners" of the asset in question. The government are
>more like a board of directors working for us, the shareholders. They've
>decided (perhaps correctly) that it is to our benefit to have the cash
>rather than the shares and therefore offers up those shares for sale.
>For those folks that do actually want our shares sold, they do have a
>right to a fair price and it's up to the government to get it.
>
>However, I'm confused by those people who argue:
>
>a) The government shouldn't be selling the shares. I am happy currently
>being an effective shareholder in nationalised company X.
>
>b) They're selling them too cheaply anyway.
>
>..the obvious thing for these people to do is to buy some shares,
>because:
>
>a) They'll still be a shareholder as they requested above.
>
>b) By their own calculation, they're getting a bargain.
>

This is a strange argument? If you disagree with the dissolution of
nationalised industries because you beleive it is motivated by greed
for short term profits and will ultimately be highly damaging to
many peoples lives (especially those at the bottom of the pile) and
eventually the economy as a whole, you should take advantage of the
situation and get your cut? This may strike you as slightly odd but there
are many people who feel that it is not always in their long term 
interests to take advantage of every situation that comes their way
(not forgetting those who dislike behaving hypocritically and the out and
puritans). In fact judging from the way such economies are 
performing they appear to be justified in their view.

There was also the suggestion of "Let them buy shares" (reminds me of
a famous quote by a renowned economist and popular figure of
the past called Antoinette). This is fine if you've got spare 
capital hanging about, a lot of people don't.

So if privatisation is a big con job who wins? Wealthy hypocrites,
well that's a shock.

Tony Mossop, geophysics, Stanford

>>Martin
>
>FoFP