Privatization or Economic Liberation

[ebrahym]

Most of us do not realize that the ongoing Privatization of government corporations is not only fiscally economical to us but is also vital for our society and politics .... Pakistan in its history has mostly been socialist and this is our chance at going capitalist ... it varies with political party in power .... PMLN is conservative capitalist but PPP is socialist-progressive and their opposition to PIA privatization is also justified by this but we all know their true concerns but we must realize that PIA privatization is in our best interest...

 

[Sulman Badshah]

yes PIA privatization is in our best interest .. Private sector perform better and perform without any politics involvement ..

 

[ajpirzada]

Here is how an economist will ask this questions:

Are their routes which PIA must serve even if such routes are not profitable? Maybe because of strategic, trade, and/or future reasons?

If the answer is yes then PIA should not be privatised. If the answer is no then PIA should be privatised.

 

[Faiez]

Here is how an economist will ask this questions:

Are their routes which PIA must serve even if such routes are not profitable? Maybe because of strategic, trade, and/or future reasons?

If the answer is yes then PIA should not be privatised. If the answer is no then PIA should be privatised.

An economist from soviet union maybe...

If it's a strategic thing (which is obviously a military thing then), you have the airforce transport aircraft etc..If it's trade, then there's no reason such route should not be profitable.

Even if there is such routes which are not profitable but are needed, you don't need to keep an entire airline to make sure that route operates. Just subsidize private tickets on that route. That's what they do in USA etc..

Although I disagree with even that, there's almost absolutely never anything worth subsidizing.

 

[somebozo]

Most of us do not realize that the ongoing Privatization of government corporations is not only fiscally economical to us but is also vital for our society and politics .... Pakistan in its history has mostly been socialist and this is our chance at going capitalist ... it varies with political party in power .... PMLN is conservative capitalist but PPP is socialist-progressive and their opposition to PIA privatization is also justified by this but we all know their true concerns but we must realize that PIA privatization is in our best interest...

Pakistan was established as very capitalist friendly hence we had rapid growth until 60's and we were richer than india on per captia basis thats when Bhutto and Mujeeb decided to screw over the country with socialism..

 

[ebrahym]

Pakistan was established as very capitalist friendly hence we had rapid growth until 60's and we were richer than india on per captia basis thats when Bhutto and Mujeeb decided to screw over the country with socialism..

you are right but after 71 pakistan became socialist under bhutto and that era was also marked by progress and uptill 1990 Pakistan was doing way better that india and many asian countries like malaysia and korea but after afghan war everything for pakistan changed into nightmare

Here is how an economist will ask this questions:

Are their routes which PIA must serve even if such routes are not profitable? Maybe because of strategic, trade, and/or future reasons?

If the answer is yes then PIA should not be privatised. If the answer is no then PIA should be privatised.

let us know your answer too

Okay everyone i must add that in recent comments our Finance Minister Quoted that we are not completely privatizing PIA but are only looking for strategic partner to lower fiscal losses...

 

[Faiez]

you are right but after 71 pakistan became socialist under bhutto and that era was also marked by progress and uptill 1990 Pakistan was doing way better that india and many asian countries like malaysia and korea but after afghan war everything for pakistan changed into nightmare

There was no real progress after bhutto...

Zia Ul Haq went back to privatizing and getting free market going again, and that helped plus foreign aid etc.

But it's really hard to get people's trust back once you've screwed them over once very badly...

socialist bhutto party keeps coming back in power every now and then. Also, these so called capitalist n-league are just dictators...remember the finance minister threatening people to sell dollar or else the dollar will fall even more lol ? Can't even let the currency trade freely....pathetic.

Also, even before bhutto, pakistan was not that free...even at that time, the state ran many big organizations...

 

[ebrahym]

There was no real progress after bhutto...

Zia Ul Haq went back to privatizing and getting free market going again, and that helped plus foreign aid etc.

But it's really hard to get people's trust back once you've screwed them over once very badly...

socialist bhutto party keeps coming back in power every now and then. Also, these so called capitalist n-league are just dictators...remember the finance minister threatening people to sell dollar or else the dollar will fall even more lol ? Can't even let the currency trade freely....pathetic.

Also, even before bhutto, pakistan was not that free...even at that time, the state ran many big organizations...

no no sir ..... PMLN is driving this country towards capitalism ..... they are the one who started economic liberation process for the first time in pakistan ..........finance minister is doing fine ..... not excellent though ..... but still it is undoing the damage during zardari regime

 

[Faiez]

no no sir ..... PMLN is driving this country towards capitalism ..... they are the one who started economic liberation process for the first time in pakistan ..........finance minister is doing fine ..... not excellent though ..... but still it is undoing the damage during zardari regime

Then how do you explain state-run metro ?

And now I'm reading in another thread, state run health insurance (or subsidy or what ever) ?

Also, SBP is not autonomous/independent, even the IMF has complained about that...

 

[ajpirzada]

An economist from soviet union maybe...

If it's a strategic thing (which is obviously a military thing then), you have the airforce transport aircraft etc..If it's trade, then there's no reason such route should not be profitable.

Even if there is such routes which are not profitable but are needed, you don't need to keep an entire airline to make sure that route operates. Just subsidize private tickets on that route. That's what they do in USA etc..

Although I disagree with even that, there's almost absolutely never anything worth subsidizing.

when we talk about reasons 'other than profitability', we are essentially talking about positive externalities according to econ 101. If social returns are greater than private returns, then the government should be involved in providing that service. This is standard economics.

Indeed if need be govt can always subsidize various routes if they are not profitable like you mentioned in your post.

let us know your answer too

i think it should be privatized. I dont think there are many routes which we need intact for reasons other than profitability. Also such destinations can always be reached via other airlines. Moreover, as Faiez mentioned, govt can always subsidize whichever route they want if need be even after privatising PIA.

In an ideal world, PIA would be a state owned airline which would be making minimal losses. However, given the inefficiencies, it might just be better to privatise it.

 

[Faiez]

when we talk about reasons 'other than profitability', we are essentially talking about positive externalities according to econ 101. If social returns are greater than private returns, then the government should be involved in providing that service. This is standard economics.

Indeed if need be govt can always subsidize various routes if they are not profitable like you mentioned in your post.

Oh yes, the good old social returns scam...

Because people have a right and they deserve...And other nonsense.

If there are positive externalities, they will be fully paid for if they are truly feasible and need not be subsidized.

 

[ajpirzada]

Oh yes, the good old social returns scam...

Because people have a right and they deserve...And other nonsense.

If there are positive externalities, they will be fully paid for if they are truly feasible and need not be subsidized.

Even though i agree with your privatisation point of view in case of PIA, I dont know which economics you are talking about. I am doing PhD in Monetary economics. Let me know which economics book says social returns is a scam? Also positive externalities are not fully paid for which is why government needs to subsidise such services/etc.

 

[Faiez]

Even though i agree with your privatisation point of view in case of PIA, I dont know which economics you are talking about. I am doing PhD in Monetary economics. Let me know which economics book says social returns is a scam? Also positive externalities are not fully paid for which is why government needs to subsidise such services/etc.

Such as ?

 

[ajpirzada]

Such as ?

such as planting a tree. Lets say I buy a tree and plant it in my garden. I benefit from it. This is called private (my own) benefit. I pay a price for this tree keeping in view the private benefit only. But my neighbor, other people nearby and society in general also benefits from it. This is called 'social benefit.' Now it is clear that 'social benefit' of planting this tree is greater than the 'private benefit.' Because of this simple reason, total number of trees planted will be less. Why? Because the number of trees planted is consistent with the private benefit and therefore less than what would have been consistent with the social benefit. Therefore, it is socially beneficial that the government steps in and either plant trees herself or subsidise planting of trees.

you can extend this to other possibilities.

 

[Faiez]

such as planting a tree. Lets say I buy a tree and plant it in my garden. I benefit from it. This is called private (my own) benefit. I pay a price for this tree keeping in view the private benefit only. But my neighbor, other people nearby and society in general also benefits from it. This is called 'social benefit.' Now it is clear that 'social benefit' of planting this tree is greater than the 'private benefit.' Because of this simple reason, total number of trees planted will be less. Why? Because the number of trees planted is consistent with the private benefit and therefore less than what would have been consistent with the social benefit. Therefore, it is socially beneficial that the government steps in and either plant trees herself or subsidise planting of trees.

you can extend this to other possibilities.

This entire example is based upon this simple assumption. Let's remove government control on deforestation and take the tree indoors.

Let's assume a society where government doesn't do anything. People cut down trees, trees run out to the point where the private benefit of owning a tree far outweighs public benefit. Now what?
Private companies start marketing trees upto the point where cost of tree equals private benefit. Back to equilibrium without the use of government and it's inefficiencies.