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Denationalization
Structural Issues
As
mentioned earlier, the tasks which confront denationalizers are
enormous. (For example, Egypt's Public Enterprise Office will
dispose of $45 billion of state assets via commercially-based
holding companies.)
Denationalization has long-term effects: once accomplished,
denationalization becomes virtually irreversible. Moreover, it is
impractical to issue guidance as to the selection of an optimum
technique for privatization. The technical difficulties are
compounded by a shortage of experienced privatization managers,
particularly, persons with the vision required to succeed in
culturally diverse situations.
The
most important challenge to implementers of privatization is posed
by the national ethos of the host nation. Where a choice has been
made to denationalize, the model of the process (i.e., its nature,
timing, and extent) is greatly influenced by cultural,
technological, and social factors.
The
ethical awareness of some implementers may differ sharply from that
of the hosts. For example, disciples of Milton Friedman, the
University of Chicago economist, may have been misguided into
viewing profit generation as the basic objective of business.
Friedman's views have been decried by ethicists as well as by
leaders of business.
For
example, Margaret Downes, the deputy governor of the Bank of
Ireland, has noted that some have described Friedman's views as
amoral. In my view, Downes has used the correct adjective.
With
respect to a related matter, the U.S. Financial Accounting Standards
Board has issued "concept statements" which aver that the
objectives of financial reporting are to provide information to
"decision makers," identified primarily as investors and
creditors. Other stakeholders, including regulators, workers,
suppliers, members of the community, and taxing authorities, are
largely disregarded with respect to their financial information
needs. Contrariwise, from an Islamic perspective, U.S. financial
reporting could be regarded as substantially irrelevant, because of
its preoccupation with two categories of decision makers that are
likely to be scarce in developing nations.
Muslims
perceive problems with absentee shareholders: Islam obliges business
owners to be concerned activists, especially with respect to the
welfare of their employees and the preservation of the environment.
Islamic theologians tend to be suspicious of stock transactions;
they fear that the issuers may have gained some of their profits
from interest-based financial deals, contrary to Islamic law.
Conservative Muslims may even regard share trading as a form of
(prohibited) gambling.
Also,
privatization advocates have been known to ignore the employment
circumstances of developing nations which may require national,
provincial, or municipal governments to serve as employer of last
resort. Furthermore, the act of denationalization may incorporate
hidden disincentives. For example, it may curtail
pre-denationalization public employment which may have brought
benefits through policies designed to protect women and minorities.
The
operational difficulties of denationalization will be discussed
before an attempt is made to reconcile privatization, a free market
technique, to Islam.
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