Nation may not be ready for privatizationRegarding the recent debate on privatization: In theory, presuming more than one actor in industry, privatization invites competition for corporations that primarily pursue maximizing of profits.
Despite the widely discussed concept of corporate social responsibility (CSR), the foremost objective of corporations still dictates that profits rule all.
CSR’s role typically is to complement profit; its is seldom, if ever, the priority under any circumstance.
Therefore, privatizing publicly owned industries into several independent businesses intrinsically stimulates competition among them. And making money remains central to the system.
Side effects, however, deserve more attention when discussing privatizing public sectors. If privatized, central public utilities industries will be unlikely to invest for the “greater common good,” for instance, such as new but less lucrative railway routes.
Aside from classic side effects, it is more important to understand that the Korean economy remains oligopolistic and at risk of price-fixing in certain key sectors, such as the telecommunications industry.
Provided that privatization does not result in a common goods problem, the price-fixing concern would remain. More alarming is that only ex-post, not ex-ante, measures can effectively prevent price- fixing. Imagining the unthinkable political, economic and social costs associated with such ex-post measures, exhaustion of alternatives to privatization is a prerequisite.
Privatization can and does function well in countries, but for a nation still fiercely wrestling with price-fixing, privatizing public corporations is an approach that goes too far.
By Choi Si-young, Editing adviser of Yonsei European Studies at Yonsei University