Governments Should Privatize Property
January 21, 2014
Governments should look at selling their non-financial assets, says The Economist.
According to the International Monetary Fund, Organization for Economic Cooperation and Development countries hold $35 trillion worth of non-financial assets, such as land, buildings and underground resources.
- A 2011 audit found that the United States' federal government owns nearly 1,000,000 buildings, 45,000 of which were underused or not needed at all.
- Greece has 80,000 non-heritage buildings and land plots with unrealized value.
- PricewaterhouseCoopers estimates that Sweden has state-owned property worth about $100 billion to $120 billion.
Despite this potential for an inflow of cash, governments have been reluctant to raise revenue this way.
- When Ronald Reagan attempted to sell parts of the American West, he faced opposition from green interest groups and ranchers. Similarly, Britain was foiled by environmentalists in 2010 when the country tried to sell some of its land.
- Italy currently has a public-debt burden worth 132 percent of gross domestic product, but it has not embarked upon a bold course of privatization, even though the state has corporate stakes worth $225 billion and $1.6 trillion in non-financial assets.
Privatization allows governments to boost their credit ratings and cut their debts while improving the economy's efficiency. Margaret Thatcher and Ronald Reagan used privatization and transformed a number of industries such as telecom and transportation; in the 21st century, leaders should look to doing the same for buildings, land and resources.
Source: "The $9 Trillion Sale," The Economist, January 11, 2014.
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