Greece’s Imposed Privatization (Denationalization)
and its Effects on Individuals’ Utility and Social Welfare
Dr. Ioannis N. Kallianiotis
The Arthur J. Kania School of Management
University of Scranton
Scranton, PA 18510-4602, U.S.A.
Tel. (570) 941-7577
Fax (570) 941-4825
. The objective of this work is to present and discuss the pros and cons of privatization or denationalization (transferring the ownership and management of state-owned enterprises to private firms) in Greece and its effect on the economy, financial markets, employment, individuals’ utility, national wealth, and social welfare. Privatization, under normal conditions, might increase efficiency, productivity, and liquidity in the financial markets of an independent nation; but, at the same time, it causes unemployment, dependency on foreign capital and multinational firms, and the worst of all the country loses its national wealth and the social welfare is declining. Greek governments have to increase productivity and efficiency of the public sector and must keep the state-owned enterprises, which provide national security, safety, and other public services, as public ones. Nationalization has proved recently, with the current financial crisis, which has been created by the uncontrolled U.S. private firms (financial institutions) that can improve stability. The financial market is a risky source of long term capital, but banks can provide similar and less risky services. The European integration with its strict Maastricht criteria and lately, Troika, have created an enormous social cost to the member-nations and mostly to Greece and their benefits are too small to cover it, especially the loss of public policy for Greece, the enormous austerity measures, and the destruction of her sovereignty are irreplaceable. The optimal level of privatization is the one that maximizes the social welfare (at the point, where the marginal benefits of privatization are equal to the marginal cost of socio-economic distress). Of course, we never privatize a public enterprise under pressure from abroad and when the financial market is at its distress level (bear market) because the stocks are undervalued and the revenue for the government becomes negligible. To pursue our domestic policies for the benefits of Greeks, the country has to abandon the Euro-zone.
. Assessment of the comparative performance of the different enterprises owned by private firms (POEs) or by governments (SOEs) is basically impossible, due to the complexity and social effects and due to political pressure and expediency. The Euro-zone had evolved surprisingly quickly (overshooting) into one of the most attractive hotly contested financial markets, through privatization, mostly, in the small and inexperienced Greece; but, what are the social benefits of market users and of the nation? By pure economic measures, we might say that there is some economic welfare, but there is no social one. The savers (investing in the stocks of these privatized SOEs) lost their money in the year 2000 and 2008, and many of them had sold their real assets and used this liquidity to invest in financial assets promising an outrageous return (without mentioning the risk of these investments). Employment has also been negatively affected from all these privatizations. The Euro-zone might have created some opportunities for the financial markets, but their risks have caused the cost to exceed the benefits. Thus, we cannot assert that with privatization, we will benefit from the high liquidity, which is created in the financial markets. The growth and the full employment must be the first priority of Greece, as a nation, which cares for the social welfare of her citizens.
. The excessive privatizations in Greece have been motivated by a range of different subjective goals and suspiciously imposed objectives; many have nothing to do with efficiency or social welfare. Some goals are fiscal; raising money from the sale of public enterprises in order to pay back the debt, to reduce deficits, and pay for the current government expenditures, due to its inefficient management and corruption. Also, privatization is reducing the economic and political influence of unions, which occasionally have acted against workers’ interest. These new private firms with their shares might stimulate and develop the domestic capital markets and provide more investment opportunities (share ownership) to wealthy citizens, to pension funds, to institutional investors, and to foreigners. Finally, the economic importance of the government will be reduced and the private firms (multinationals, Arabs, Chinese) will take over (economic imperialism, globalization, etc.) the entire national wealth.
. The social welfare system of Greece, today, has failed to sufficiently satisfy even the basic needs of mere life for all citizens. The first problem that arises from privatization is the failure of the system to create a balance between the rich (who are now the foreign owners of the private firms) and the poor (who are now unemployed, due to privatization). The wealthy people rule in our societies, both directly and indirectly; with their money, they erode the government, too. It is impossible for a challenger without a great deal of wealth to win a seat in the government. Most people never rule, and many people remain in office for decades (the Greek dynasties). Another problem is dependency. Lack of labor that satisfies one’s basic needs foster an atrophy of talents and work skills that must be honed in labor. If a family is not self-sufficient, it is unstable and the same is true for the nation. A system, which is unable to create full employment (), price stability (), and balanced its trade () and budget () is unnecessary for our societies.
 See, Kallianiotis (2012).
 It is true that unions need some more flexibility and must adopt policies that are based on some incentives for their members. Their communist philosophy cannot apply anywhere (this system is as bad as the one that they are against it, capitalism with its globalization). Lately, during the PASOKean era, many union officials have been found taking advantage of their position by been involved in abuses of their power, exploitations, and corruption. The latest crisis has weakened completely the labor unions.