Modern man has complex and variegated needs and desires. He needs institutional structures to make it possible for him to attain these wants. However, there is no agreement on the nature, role, powers and responsibilities to be endowed upon these institutions. Should all of them be voluntary in nature? How much powers have to be given to governments, the coercive institutions of society for managing (or meddling into) the lives of citizenry? Are private organizations capable and willing to shoulder primary responsibility for improving quality of life of people? Who has to play and what role? These questions form the query that Savas aspires to answer.

Man’s quest to seek answers to these questions, though, is not of recent origin. Even in primitive societies people tried to delineate and demarcate the area of responsibility for sovereign and other institutions. The answers to these questions have, however, never been uniform. Plato, the legendary Greek philosopher, wanted all affairs of society to be managed by ‘communes’. There was no role for private institutions, even for the families. All children were to be raised jointly by the communes. No person was even to know which child he had fathered! His compatriot Aristotle specified diametrically opposite prescription. He was a firm believer in private ownership; his oft-quoted refrain being “that which is owned in common by all will be neglected by all.” This, then, is earliest outline of a debate that, with little variations, has periodically haunted mankind and the winning ideas of which have, surfaced in cyclical waves, in colors of different hue. Adam Smith (Laissez Faire), Proudhon (Early Socialism), Marx (Communism), Keynes (Interventionist State), Milton (Intellectual Foundations of Privatization) and a score of other thinkers grappled with this problem and came up with different solutions. If one had to summarize the result of this debate in one sentence, it would be best to recall the famous dictum; “Nothing is more powerful than an Idea whose time has come”. And, at the moment, one such buzzword is “privatization”, which is defined as, “relying more on the private institutions of society and less on government to satisfy people’s needs”.

The reason for ascendancy of this creed is not difficult to fathom. People, world over, have been dismayed by the performance of governments in responding to expectations reposed in them. Inefficiency, waste, unresponsiveness, officialdom and power politics, red-tapism and corruption are typical of malaise afflicting the entire spectrum of public sector institutions. Therefore, understandably, privatization has gained ever-increasing momentum and acceptability. Savas, who has been one of the pioneers and leading proponents in the field, demonstrates the need for privatization with empirical evidence. We need not go into the specifics of this evidence, since it is widely known. I am sure, given an opportunity; all of us can come up with our own experiences in this regard.

Savas, who is seized of ‘the idea of the moment’, however, has opened himself to criticism on different account. Throughout his work, beginning with its very conceptualization, he exhibits presumption of universal superiority of the idea. His concept of Public-Private Partnership- “Any arrangement between government and private sector in which partially or traditionally public activities are performed by private sector”- is very narrow and restrictive. It is not clear why he prefers this definition to a more general and inclusive definition, which could be on the lines of, ‘any arrangement in which both the sector join hands and perform the role best suited to each for betterment of the society’. In the present context, it will not alter conclusion. Removing excessive governmental flab is the need of hour. But, no solution is valid for all occasions. When encountering general depression in economy, Keynesian therapy of increasing governmental expenditure must be administered. Is this not what industry asks of government at the first hint of even a mild recession?

Similarly, take the case of India, just after independence. In the absence of adequate infrastructure and profitable opportunities, government was per-force led into assuming commercial activity. We may, of course, question the extent to which it was required vis-à-vis that undertaken. But, government intervention was a practical wisdom of the times, just as much as privatization is today. We also have to concede the fact that 21st century capitalism is not the same as 19th century capitalism. Under the influence of socialistic ideas, many of its harsher features have disappeared or at least have become moderated. Therefore, Savas should have adopted a more general version of the concept as it leaves scope for flexibility and adaptation, when the circumstances no longer remain the same.

In the same vein, Savas believes that when talking about relative performance of the two sectors, the issue is not of ownership, but of ‘monopoly against competition’. “Most of the times government institutions work under monopolistic environment. We have unwittingly created and maintained such monopolies under the naïve assumption that if monopoly is a public one, somehow it will automatically perform in public interest. Moreover, often we prohibit competition under the belief that competition constitutes duplication and waste”. Moreover, he reckons, if we present the proposition to public in this manner, resistance to privatization will be much lesser. He has a point.

Indeed, infusion of competition can help in improving the performance of the public sector and also this proposition is politically more palatable. However, if the issue indeed is monopoly against competition, then why leave out private monopolies, that are beginning to actively influence and control the governments. If the growth of governments has resulted in estrangement of stakeholders from the managers (bureaucrats), it must surely be true also of large private organizations, which are growing phenomena of economic life. As someone as remarked, “Big corporations are dead. Long live enormous corporations”. In fact, in this respect, I consider Savas to be already getting behind times. We comprehend the problem caused by excessive governmentalism. We have also found its solution, i.e. privatize economic activity and decentralize political structures. But, we are yet to wake up to the problem of growth of private monopolies. Certainly, we have enacted anti-trust laws, like MRTP in India. However, these have proven woefully ineffective in tackling the problem. Savas presents persuasive arguments against the existence of public monopolies. Unfortunately, he restricts his Endeavour to addressing public monopolies alone. The reason for which is far from apparent.

Now, let’s move away from the contour of ideology into the realm of theory and practice of privatization. This is where Savas has novel ideas. Which goods should be produced by the private sector? Which goods are best left to government? Often, we come across ad-hoc answers to these questions, which are not wholly satisfactory. Savas has theorized the concept very beautifully. Chapters 3 and 4, which contain this framework, form the backbone of the book. “Vast jumble of goods can be sorted and classified according to two characteristics: exclusion and consumption. The resulting classification determines the role of government and private institutions in supplying the goods”. ‘Exclusion’ implies that a user can be denied the use of goods unless he meets the conditions set by the potential supplier. In other words, goods can change hands only if both seller and buyer agree on the terms of sale. A good is marketable to the extent it is excludable. The ‘consumption’ dimension relates to joint or individual usage of goods. Some goods can be enjoyed jointly by many people without being diminished in quality or quantity, while others are available only for individual consumption. These two characteristics give rise to four pure combinations- individual goods, toll goods, common-pool goods, and collective goods. Individual goods (e.g. Personal car) are those goods which are consumed individually and where exclusion is possible. Tolled goods (e.g. Satellite television) are consumed jointly, but exclusion is feasible. Common-pool goods (e.g. air) are those goods which are consumed individually, but where exclusion is not feasible. Collective goods (e.g. National defense) are jointly consumed, in-excludable goods.

Individual goods are the easiest for the market to handle. Individual demands the goods; producer makes it and sells it at mutually agreeable price. Public action is required only for the purpose of regulation. Toll goods, similarly, can be easily supplied by the market, except in case of natural monopolies. Common-pool goods pose a problem for the market economy, since their consumption cannot be excluded. “Common pool and Collective goods have troublesome properties. Market place is unable to supply them because nobody can be excluded from their consumption. With no need to pay for such good, and with no means to prevent their consumption, such goods will be consumed- even squandered- to the point of exhaustion”.

Savas, then, goes on to differentiate between goods producer and arranger. “The distinction between arranging and producing goods is profound. It is at the heart of entire concept of privatization and puts the role of government in perspective”. The goods producer directly performs the work and delivers them to the consumer. Goods provider or arranger merely assigns the producer to the consumer, or vice versa. A government that decides to provide a service at collective expense does not have to produce the service using government employees and equipment. This chapter is, in my opinion, the best chapter in the book. It outlines recommendations on different kind of arrangements possible for producing and providing goods, along with their relative merits. Among a score of possible arrangements, Savas recommends the maximum use of market system. Subsidies, wherever necessary, should be provided directly to the consumer, rather than to the producer. I could not agree more with the author on this issue. Consider for example, our PDS (ration and fair price shops). Given its ineffectiveness and high cost of distribution, it will certainly be a better idea to give food stamps, as in USA, to the targeted beneficiaries and allow them to buy from wherever they want.

There is one more issue, which I feel compelled to raise. Savas believes religion should be introduced in public schools to rectify the immorality existing in the world. I would abstain myself from writing much on it, except quoting Bertrand Russell from his essay on ‘Why I am not a Christian’. “You find this curious fact that the more intense has been the dogmatic belief, the greater has been the cruelty and the worse has been the state of affairs. In the so-called ages of faith, when men really did believe the Christian religion in all its completeness, there was the inquisition, with its tortures; there were millions of unfortunate women burnt as witches; and there was every kind of cruelty practiced upon all sorts of people in the name of religion”. Lest anyone gets an idea that it was a phenomenon that afflicted Christianity alone or that it belonged to middle ages alone. Please turn around and have a look at the record of Taliban regime, or the teaching imparted at most Madras’s, or at the instructions given by Hindu fundamentalist organizations, or at the happenings in recent months throughout the world. It is my fervent appeal that we should work to undermine the spread of such ideology.

Overall, the book makes for an interesting reading. Savas makes a strong case for privatization. The empirical evidence presented by him is impeccable. I have glossed it over only because I trust all of us are intuitively aware of it. Savas may be faulted for having a closed mind on the ideological front, but at least, these prejudices are not out of sync with times. Even if, only just as yet.

Punit Arora is an expert on management and public policy in developing countries. He can be reached at pun8max@gmail.com.