Zombie Economy: Free Public Companies, Not Public Funds

Imagine a house that burns money instead of firewood or gas in its stove. Every winter, the owners continue to spend money to keep the house warm. This money could be spent on a child’s education or roof maintenance.

The owners do not sell the stove because it is called an heirloom, even if it harms the future of the house. This is the reality of the zombie economy. This is a system in which the government supports the existence of weak and small public companies in the name of national pride or “strategic interests,” even if these companies continue to drain public funds. For many years, privatization was considered a choice between selfish capitalism and social protection. This is an unfair choice. Privatization is not contrary to the public interest; it is often the last responsible step to stop the stagnation of governance.

The first reason for privatization is simple: the numbers do not work. Around the world, many state-owned enterprises, from airlines to steel mills, have suffered heavy losses. If a private company goes bankrupt, it can be allowed to fail. When a public company collapses, it often receives financial assistance. These relief efforts are not free of charge. Taxpayers pay for them. For every billion spent on failed companies, one billion is not spent on medical care, power grids, or rural infrastructure. People are often afraid of the “destruction” of privatization, but the public should be more afraid of the constant loss of public funds in inefficient systems. Many people think that privatization means that the government is simply throwing away assets. There is another view. This is called the liberation of capital.

State property often functions as a cage. In this cage, decisions are made under the influence of politics, not the reality of the market. When public utilities need to raise funds to repair ageing infrastructure, politicians can stop this because they do not want voters to be unhappy. In this case, it is worse if the equipment continues to work: the quality of service decreases, and the final breakdown costs much more than small repairs. When these companies are transferred to the private sector, real market discipline comes into play. Private owners have a compelling reason to innovate, reduce waste, and meet customer needs. A company that previously relied on the state can become an additional source of revenue for the treasury, not a burden on the public.

The most powerful argument against privatization is the fear of layoffs and “corporate greed.” This fear is understandable. It deserves a clear answer. Privatization often leads to restructuring. Some inefficient jobs are cut. But a serious question must be asked: at a time when the whole country is suffering, is it more ethical to force three people to do one person’s work? Saving unnecessary jobs in failed public companies is like having expensive hidden social security. It is better to privatize the industry, save public funds, and devote part of these funds to unemployment insurance and professional retraining programs. The priority should be to protect employees, not the jobs that are no longer needed.

In addition, privatization processes often cause short-term damage. In the long run, these processes can lead to economic growth. In many countries, with the transition of the telecommunications sector from a state monopoly to private competition, prices have fallen, services have expanded, and new jobs have been created in the technology, retail, and maintenance sectors.

The government often uses “strategic interests” as a reason to avoid privatization. Certain industries, such as nuclear defense, or basic judicial functions should remain the property of the state. But the list of so-called “strategies” has become too long.

Is the luxury hotel chain of strategic importance? Are nationalized cement plants important for national security? In the twenty-first century, the real strategic interest of the country is a flexible, stable, and competitive economy. The government, engaged in the management of transport enterprises and factories, cannot fully concentrate on its real responsibilities: regulation, justice, and protection of vulnerable segments of the population.

The transition period is not easy. Privatization requires clear offers, strict antitrust regulations, and the refusal to sell assets to crony capitalists at extremely low prices. This must be done carefully, like a surgeon, not roughly, like a hammer.

But the current system is no longer sustainable. The country cannot continue to gamble with children’s future. The country must stop considering public companies as sacred cows and start recognizing their inherent potential. If the country lets go, it loses something.

It gains the freedom to manage, and the economy also gains the freedom to grow. The “destruction” of reform is only a signal that the stagnant system has finally begun to act again.