Borincano
26th May 2002, 07:52
Nationalization Done Right
by Luis Orlando Gallardo Rivera
(I didn't write the article.)
During the last administration under Governor Pedro Rosselló, the government-owned Puerto Rico Telephone Company (PRT) was privatized. One of the main reasons for its unleashing into the private market was the heavy bureaucracy involved in its administration and the hole that it left in the Puerto Rican government’s pocket. The PRT was a wreck and a burden and privatization was Rosselló’s answer to the problem. Surprisingly, at one time the PRT actually succeeded well and even improved for a while after its nationalization. *The purpose of this essay is to examine a number of methods that could be employed in order to make public corporations, such as the pre-Rosselló PRT, once again more efficient.
One might ask what is the reason to hold on to these public corporations. While some administrations seem to hold onto costly public enterprises in order to exercise more power, there are two main reasons why this essay suggests the maintenance of nationalized and public industries: 1) “The private sector’s goal is to make money,” states the President of the Senate Antonio Fas Alzamora, “while the government… will have the people’s well being as its primary objective." *2) To prevent further riches to leave the country. Private enterprises that provide public services in Puerto Rico are usually foreign-owned thus sending the profits earned by the corporation abroad. The vast profits of private corporations land in the hands of a few, while the earnings of a public company will land in the government’s treasury to be redirected into various social programs. As seen in Nationalization in Puerto Rico, enough profit could be generated by certain key nationalized industries to cover government costs for services such as free health care or the elimination of taxes.
Some suggest a return to the old tactics that revived the PRT after it was first nationalized but it must be noted that the environment in which it took place is much different from that of today. Today’s economy is more open to foreign investment, which plays a larger role than it did thirty years ago when the government purchased PRT. The government, acting as an investor, must be able to compete with the private market.
While foreign investment played a minor part in Puerto Rico’s government during the early days of its Commonwealth status, the government at times had a monopoly on investment. Any investment would be from the government. This was especially true during the early days of former Governor Luis Muñoz Marín. Today, private companies are willing to pump in more investment than the government, thus allowing its enterprise to better services and perform at a faster rate. Shortly after privatization, PRT began offering a variety of services that were never offered while it was government owned. The government should mimic these actions and incorporate them in their public corporations in order to match the performance of private businesses. Otherwise, privatization will be the only means to obtain innovation and new services. If this could be achieved, the monopolization of government industries would not have to take place since they would have the tools to compete in a market atmosphere.
The second tactic that could be employed is the reformation of the public corporation to run off of the private corporation model. The reason PRT, and many other nationalized enterprises were being such a drag, was that they were being ran like agencies and not companies. Like in the private market, public corporations should include profits within their goals. This is not negative, for not only would the public’s interest be tended to through the services offered by these corporations, but also the profits generated would be pumped back into the public pocket. The more profits earned off of these companies, the more they act as public services.
By taking on the form of a private market, this includes hiring from the private market. No longer would top executives in public corporations be politically-aligned bureaucrats chosen by Senators and Representatives, but would be chosen much like in the fashion of a modern day private organization. In fact, the whole entire structure from the top down will resemble that of a private company. The only difference between a private company and the proposed public company would be who pockets the profits. This in no way would hinder the innovative force behind a company, for those who usually pocket a company’s profits are usually not the scientists, scholars, and innovators who act as the company’s think tank. Simplified, the ‘public’ nature of a public corporation would just act as one big tax. The executive structure of the company would more or less remain the same but the profits would land in the government’s pocket.
by Luis Orlando Gallardo Rivera
(I didn't write the article.)
During the last administration under Governor Pedro Rosselló, the government-owned Puerto Rico Telephone Company (PRT) was privatized. One of the main reasons for its unleashing into the private market was the heavy bureaucracy involved in its administration and the hole that it left in the Puerto Rican government’s pocket. The PRT was a wreck and a burden and privatization was Rosselló’s answer to the problem. Surprisingly, at one time the PRT actually succeeded well and even improved for a while after its nationalization. *The purpose of this essay is to examine a number of methods that could be employed in order to make public corporations, such as the pre-Rosselló PRT, once again more efficient.
One might ask what is the reason to hold on to these public corporations. While some administrations seem to hold onto costly public enterprises in order to exercise more power, there are two main reasons why this essay suggests the maintenance of nationalized and public industries: 1) “The private sector’s goal is to make money,” states the President of the Senate Antonio Fas Alzamora, “while the government… will have the people’s well being as its primary objective." *2) To prevent further riches to leave the country. Private enterprises that provide public services in Puerto Rico are usually foreign-owned thus sending the profits earned by the corporation abroad. The vast profits of private corporations land in the hands of a few, while the earnings of a public company will land in the government’s treasury to be redirected into various social programs. As seen in Nationalization in Puerto Rico, enough profit could be generated by certain key nationalized industries to cover government costs for services such as free health care or the elimination of taxes.
Some suggest a return to the old tactics that revived the PRT after it was first nationalized but it must be noted that the environment in which it took place is much different from that of today. Today’s economy is more open to foreign investment, which plays a larger role than it did thirty years ago when the government purchased PRT. The government, acting as an investor, must be able to compete with the private market.
While foreign investment played a minor part in Puerto Rico’s government during the early days of its Commonwealth status, the government at times had a monopoly on investment. Any investment would be from the government. This was especially true during the early days of former Governor Luis Muñoz Marín. Today, private companies are willing to pump in more investment than the government, thus allowing its enterprise to better services and perform at a faster rate. Shortly after privatization, PRT began offering a variety of services that were never offered while it was government owned. The government should mimic these actions and incorporate them in their public corporations in order to match the performance of private businesses. Otherwise, privatization will be the only means to obtain innovation and new services. If this could be achieved, the monopolization of government industries would not have to take place since they would have the tools to compete in a market atmosphere.
The second tactic that could be employed is the reformation of the public corporation to run off of the private corporation model. The reason PRT, and many other nationalized enterprises were being such a drag, was that they were being ran like agencies and not companies. Like in the private market, public corporations should include profits within their goals. This is not negative, for not only would the public’s interest be tended to through the services offered by these corporations, but also the profits generated would be pumped back into the public pocket. The more profits earned off of these companies, the more they act as public services.
By taking on the form of a private market, this includes hiring from the private market. No longer would top executives in public corporations be politically-aligned bureaucrats chosen by Senators and Representatives, but would be chosen much like in the fashion of a modern day private organization. In fact, the whole entire structure from the top down will resemble that of a private company. The only difference between a private company and the proposed public company would be who pockets the profits. This in no way would hinder the innovative force behind a company, for those who usually pocket a company’s profits are usually not the scientists, scholars, and innovators who act as the company’s think tank. Simplified, the ‘public’ nature of a public corporation would just act as one big tax. The executive structure of the company would more or less remain the same but the profits would land in the government’s pocket.