Nationalization as Privatization in Reverse: Understanding the Nature of the Commons to Identify a Possible Point of Optimal Nationalization, Part 2

editors | 20 July, 2010 20:11

By Lucio Munoz*

* Independent Qualitative Comparative Researcher / Consultant, Vancouver, BC, Canada Email: munoz@interchange.ubc.ca

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Methodology

First, the qualitative comparative terminology used in this paper is listed. Second, some operational concepts relevant to the presentation of the ideas in this paper are introduced. Third, a commons variability model is presented, which allows pointing out the nature and especial characteristics of the different types of commons consistent with it. Fourth, the notion that there can be four different levels of privatization is pointed out. Fifth, the inverse idea that there can be four different levels of nationalization is discussed.

Sixth, a framework that allows us to visualize the nature of a possible optimal level of nationalization both using a general asset and a specific asset inversegram is shown. Seventh, the optimal framework above is used to show how China, by slowly allowing some levels of privatization, is moving toward a point of optimal nationalization right now. Eight, some general implications that can be extracted from the ideas discussed above are highlighted. Finally, some relevant specific and general conclusions are provided.

Terminology

The qualitative comparative terminology used to present the main ideas in this paper is listed in Table 1 below.

Table 1

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C = The commons c = There is no commons

G = Public use exist g = no public use exist

P = Private use exist p = no private use exist

M = Compromised use M* = Optimal compromise use

FP = Full privatization FN = Full nationalization

N = Assets of national relevance L = Assets of local relevance

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Operational concepts

a) Inversegram: refers to a diagram used to present or represent opposite processes.

b) Representing the commons as a rectangular general asset inversegram

The commons(C) can be represented by a rectangular object or cake made up of assets under inverse uses, public use moves from left to the right; and private use moves from right to the left, as shown by the arrows in Figure 1 below.

The inversegram in Figure 1 above allows us to see that the commons(C) can be envisioned as a rectangular figure or cake that can be divided among different uses such as public use(G) or private use(P) or compromised uses(M).

i) Public use(G): When the commons is being used to meet social goals it is said to be in public use. Figure 1 above shows, as indicated by the arrow at the top moving left to right, that public use of the commons(C) can vary from zero to one or from nothing to 100%. When public use is zero(G = 0), then the commons is totally privatized or there is full privatization(FP).

When the public use is one(G = 1), then all the commons is in a fully totalitarian state or there is full nationalization(FN). When public use is between zero and one(0 ≤ G ≤1), the commons is in a mixed use state.

ii) Private use(P): When the commons is being used to meet private goals it is said to be in private use. Figure 1 above also indicates as shown by the arrow at the bottom moving right to left, that private use can vary from zero to one or from nothing to 100% too. When private use is zero(P = 0), then the commons is totally in public use or there is full nationalization(FN).

When the private use is one(P = 1), then all the commons is in a fully private state or there is full privatization(FP). When private use is between zero and one(0 ≤ P ≤1), the commons is in a mixed use state.

iii) Compromised use(M): When the commons is in a mixed used state, it is said to be in a compromised use(M). When the portion of the commons in public use related to the portion in private use is bigger, we have a public use-dominated mixed use or public use-dominated compromised use. When the portion of the commons in public use related to the portion in private use is smaller, we have a private use-dominated mixed use or private use-dominated compromised use.

For example, it can be seen in Figure 1 above that if the commons or cake is cut as indicated by the broken line in such a way that 0.6 of the commons is in public use and 0.4 of the commons is in private use, then we have a public use-dominated mixed or compromised state in this case.

c) Optimal nationalization point(M*): refers to the nationalization point where social/public goals can be met while allowing efficient levels of privatization at the same time. It is an optimal point of compromised use. Nationalizing after this optimal point leads to nationalization inefficiencies or waste; and nationalizing short of this point leads to nationalization deficits, both of which are sources of system unsustainability. In the long-term, as they accumulate, they can even lead to system collapse.

d) Representing the optimal nationalization of the commons through the general asset inversegram

If we assume that the optimal nationalization level is found at point M*, as shown in Figure 2 below, then we can use it to introduce the following concepts:

i) General asset optimal compromise use: is the level of public use and the level of private use that meet at the point of optimal nationalization(M*). Operating to the right or left of M* is not optimal. The further away we operate from optimal M*, be it right or left, the more unsustainable it is expected to be in the long-term, as these would be non-optimal levels of nationalization. Point M* can be appreciated in Figure 2 below.

ii) General asset social welfare waste: represents the inefficiencies that accrue or accumulate when operating at levels of excess nationalization found at any point to the right of M*. Social welfare waste can be partial or total. For example, point T in Figure 2 below represents a point of full nationalization; and therefore, it is a point of total social welfare waste(section “a” and “b”) while point Q shows a place of partial welfare waste(section “a”) as it is somewhere between optimal(point M*) and total(point T) nationalization.

iii) General asset excess capitalism: refers to private use of assets beyond the optimal point of nationalization(M*), it can be partial or total. For example, we can see in Figure 2 below that the private use to the left of point M* represented by section “e” is partial excess capitalism while operating private use at point W would be total excess capitalism.

iv) General asset Social welfare deficit: refers to the situation where nationalization stops to the left of the optimal point of nationalization(M*) leading to a situation where it is not possible to fully meet the social goals. For example, we can see in Figure 2 below that if we operate at point K, and therefore to the left of M*, then we would have the social welfare deficit represented by section “f”.

v) General asset capitalism deficit: refers to the situation where we have excess nationalization. For example, we can see in Figure 2 below that if we operate at the point of excess nationalization T, we have a privatization deficit represented by sections “d” and “c”; and if we operate at point Q, then we have a capitalism deficit represented by section “d”.

vi) General asset Soviet Union effect: refers to the expected system breakdown that results from operating at the point of full social welfare waste or point T in Figure 2 in the long-term. This effect may explain why the Soviet Union broke down under full excess nationalization and total privatization deficits.

vii) General asset full privatization effect: refers to the expected system breakdown that results from operating at the point of full excess capitalism or point W in Figure 2 in the long-term. This effect may explain why the financial system broke down recently under full excess capitalism and total social welfare deficits.

viii) General asset principle of inverse action: If the road from full capitalism to full nationalization is fast to ensure system stability, then road from full nationalization to privatization should be slow, to remain stable.

e) Representing the commons as a rectangular specific asset inversegram

The commons(C) can also be represented by a rectangular object or cake made up of assets of national(N) and local(L) relevance under inverse uses nationalized use and privatized use as shown in Figure 3 below:

Figure 3 above allows us to see that the commons(C) can be envisioned as a rectangular figure or cake that can be divided among different uses such as full privatized use(FP) or full nationalized use(FN) or compromised use(M) of assets of national(N) and local relevance(L).

i) Asset specific full nationalization(FN):

Figure 3 above allows us to see the following: Line “a” indicates that all assets, national(N) and local(L), are nationalized; Line “b” shows that all national assets(N) are nationalized and some local assets(L) are privatized; and Line “c” demonstrates that some national assets(N) are privatized and all local assets(L) are nationalized;

ii) Asset specific full privatization(FP)

Figure 3 above lets us appreciate the following: Line “e” indicates that all assets, national(N) and local(L), are privatized; Line “f” shows that all national assets(N) are privatized and some local assets(L) are nationalized; and Line “g” demonstrates that some national assets(N) are nationalized and all local assets(L) are privatized;

iii) Asset specific compromised use(M)

Figure 3 above permits us to point out the following: Lines “d”, “b”, and “c” represent three different types of nationalization-dominated compromised use; and that Lines “h”, “f”, and “g” represent three different types of privatization-dominated compromised use.

f) Representing the optimal nationalization of the commons through the specific asset inversegram

If we assume again that the optimal nationalization level is found at point M*, as shown in Figure 4 below, then we can use it to restate the following concepts:

i) Specific asset optimal compromise use: is the level of public use and the level of private use of national and local assets that meet at the point of optimal nationalization(M*). Operating to the right or left of M* it is not optimal and the further away we operate from optimal M*, be it right or left, the more unsustainable we expect it to be in the long-term. Point M* can be appreciated in Figure 4 below.

ii) Specific asset social welfare waste: represents the inefficiencies that accrue or accumulate when operating at a level of excess nationalization of national and local assets as found at any point to the right of M*. Social welfare waste can be partial or total. For example, line T in Figure 4 below represents a point of full nationalization of both national(N) and local(L) assets; and therefore, it is a point of total social welfare waste in assets of national relevance(N) as shown by section “a” and of assets of local relevance(L) as indicated by section “b” while any point of compromised used between M* and T would show a place of partial welfare waste in national and local assets.

iii) Specific asset excess capitalism: refers to private use of national(N) and/or local(L) assets beyond the optimal point of nationalization(M*), it can be partial or total too. For example, we can see at point K in Figure 4 below that the private use to the left of point M* of national assets(N) as represented by section “d” and of local assets(L) as indicated by section “c” is partial excess capitalism while operating private use of national(N) and local(L) assets at point W would be total excess capitalism.

iv) Specific asset Social welfare deficit: refers to the situation where nationalization of local(L) and national assets(N) stops to the left of the optimal point of nationalization leading to a situation where it is not possible to fully meet the social goals. For example, we can see in Figure 4 below that if we operate at point K, and therefore to the left of M*, then we would have the social welfare deficit in national assets(N) represented by section “d”; and a social welfare deficit in local assets(L) indicated by section “c”.

v) Specific asset capitalism deficit: refers to the situation where we have excess nationalization. For example, we can see in Figure 4 below that if we operate at the point of excess nationalization T, we have a privatization deficit in national assets(N) represented by section “a”; and a privatization deficit in local assets(L) indicated by section “b”.

vi) Specific asset Soviet Union effect: refers to the expected system breakdown that results from operating at the point of full social welfare waste in national(N) and local assets(L) or line T in Figure 4 in the long-term. This effect may explain why the Soviet Union broke down into different states under full excess nationalization of assets of national(N) and local(L) relevance; and full privatization deficits in assets of national(N) and local relevance(L).

vii) Specific asset full privatization effect: refers to the expected system breakdown that results from operating at the point of full excess capitalism in national(N) and local assets(L) or point W in Figure 4 in the long-term. This effect may explain why the financial system broke down recently under full excess capitalism in assets of national(N) and local(L) relevance; and total social welfare deficits in assets of national(N) and local(L) relevance, creating unsustainability within and between capitalistic countries.

viii) Specific asset principle of inverse action: If the road from full capitalism to full nationalization is fast, from national to local assets to ensure system stability, then the road from full nationalization to privatization should be slow, from local to national assets to remain stable.

g) Dwarf country: refers to a state that is viewed as having a full use paradigm, but it does not as it in fact has a compromised use; it is neither this, nor that, but a mixed used model.

h) Dwarf development: refers to the process that is viewed as reflecting a specific use development paradigm, but it does not as it in fact is being supported by a compromised use; it is neither this, nor that, but a mixed development model.

h) Dwarf market: refers to a market that is viewed as being driven by free invisible hand, when in fact is being cleared by a regulated invisible hand.

The commons variability model

If we think of the commons( C) as assets that can be under public use(G) or under private use(P) or in both uses at the same time or compromised use(GP), then it can be expressed as follows:

C = G + P

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