The ideology of privatization

Image: Nithin PA


When the company is privatized, a new type of cost is introduced, which is profit, the remuneration to shareholders. How to rebalance the budget with the new expense?

The budget of a state-owned company, such as SABESP, needs to balance revenues with all expenses: labor remuneration costs, payments to suppliers and taxes. If possible, it is also advisable to create savings for new investments, to reduce dependence on loans.

When the company is privatized, a new type of cost is introduced, which is profit, the remuneration to shareholders. How to rebalance the budget with the new expense? The alternatives, which are not mutually exclusive, are to increase revenues by increasing the price of services or products, or to reduce labor, operational, tax and investment costs.

In the case of a monopolistic sector, such as the water and sewage service in greater São Paulo, increasing prices is a simple solution, if there is political support. This is not the case of a company like the former Vale do Rio Doce, today Vale, which sells to the world market and, therefore, cannot control the prices of its products. In all situations, it is important to consider cost-cutting alternatives.

In any area of ​​the economy, the first step taken by new shareholders is usually to launch a voluntary dismissal plan. In the long term, involuntary layoffs and a reduction in real wages will come.

In general, reducing labor while maintaining production requires accumulation of functions by the worker and intensification of the work process, with limited effects. But labor and other expenses can be drastically reduced, without immediate consequences, in the maintenance and accident prevention sectors.

There are, of course, long-term consequences. The most recent example is the ENEL blackout in greater São Paulo, which affected four million homes, lasting up to four or five days in some locations. Before, the blackout in Amapá lasted an entire month. More recently, Cariocas had the surprise and disgust of seeing the taps in their homes pour a brown, smelly liquid. With the collapse of the Mariana dam, Vale, which had removed the Rio Doce from its name, removed all life from the Rio Doce to its mouth, entering the ocean, after burying residents in the path of the mud. But the collapse of the Brumadinho dam killed many more workers, more than two hundred.

The numbers of work accidents in Brazil are not widely publicized; the total number of deaths is known to be around 3000 per year. Even less publicized is the tendency of an increase in work accidents after privatizations, since the first ones, such as COSIPA in São Paulo.

Reducing payments to suppliers, while maintaining production, demands the acquisition of cheaper inputs and services, which may compromise the quality of the product or service offered and, eventually, its acceptance in the market. But, in the case of a company with a monopoly, it is a seductive alternative for shareholders.

Tax reduction is always sought by capitalist businesspeople, ranging from tax evasion to sophisticated and efficient tax law. LOBBY political. A current practice is to delay paying taxes and bargain for discounts on payment of arrears, which the Executive accepts due to the urgency of obtaining resources.

New investments would be the only way to increase the physical productivity of work, by incorporating technology. After all, the privatist discourse exalts efficiency as a virtue of the private economy. But new investments are the easiest expenses to cut, as their elimination is not met with resistance. And these are the expenses whose financial return is the furthest away.

Therefore, a logical analysis of the budget, corroborated by well-known facts, makes it clear that privatizations are usually unfavorable for consumers, workers, the environment and tax revenue. Strictly speaking, they are only favorable for new shareholders.

But the ideology of privatization covers many more people than those directly interested, for known reasons. Banks and other companies in the financial market, which have a deep interest in privatizations, in the dismantling of state power, in the emptying of labor power, etc., are important advertisers in all commercial press, in addition to being shareholders, that is, owners of some important organs. This press transforms the interests of the financial market into the dogmas that it tries to instill in its public, and with them put pressure on politicians.

However, some politicians behave with too much privatist voluptuousness. A ruler even compromises his own political future, insisting on privatization even when the people have already realized the damage. They strive to sell as dedicated brokers of the nation's wealth, but they do not behave as such.

Commercial brokers charge a percentage of the sales price, and strive to increase the value of their product. Homeland brokers behave the opposite. They accept the defamatory speech of what they intend to sell, that state-owned companies would be inefficient by definition. And they sell for less. They accept bad coins and devalued securities at nominal value in payment. They accept sales prices as low as Vale do Rio Doce, sold for the price corresponding to the company's revenue in three months, or Telebrás, for the price corresponding to the government's investment in the company in the previous three years, or, more recently, the Landulpho Alves Refinery, sold for half the market value.

What explanation would there be for such privatist voluptuousness? One hypothesis is that such Pátria brokers would expect to receive some informal brokerage fee, a percentage of how much the company was devalued. In this sense, the book The Toucan Privataria, by journalist Amaury Ribeiro Jr, researches financial circulation between companies off-shore of amounts with evidence of being related to the privatizations of Vale do Rio Doce and Telebras. In the case of Landulpho Alves, the brokerage fee, everything indicates, was the jewels of Arabia.

*Jose Ricardo Figueiredo He is a retired professor at the Faculty of Mechanical Engineering at Unicamp. Author of Ways of seeing production in Brazil (Associated Authors\EDUC). []

the earth is round exists thanks to our readers and supporters.
Help us keep this idea going.

See this link for all articles


  • About artificial ignoranceEugenio Bucci 15/06/2024 By EUGÊNIO BUCCI: Today, ignorance is not an uninhabited house, devoid of ideas, but a building full of disjointed nonsense, a goo of heavy density that occupies every space
  • Franz Kafka, libertarian spiritFranz Kafka, libertarian spirit 13/06/2024 By MICHAEL LÖWY: Notes on the occasion of the centenary of the death of the Czech writer
  • The society of dead historyclassroom similar to the one in usp history 16/06/2024 By ANTONIO SIMPLICIO DE ALMEIDA NETO: The subject of history was inserted into a generic area called Applied Human and Social Sciences and, finally, disappeared into the curricular drain
  • Strengthen PROIFESclassroom 54mf 15/06/2024 By GIL VICENTE REIS DE FIGUEIREDO: The attempt to cancel PROIFES and, at the same time, turn a blind eye to the errors of ANDES management is a disservice to the construction of a new representation scenario
  • Hélio Pellegrino, 100 years oldHelio Pellegrino 14/06/2024 By FERNANDA CANAVÊZ & FERNANDA PACHECO-FERREIRA: In the vast elaboration of the psychoanalyst and writer, there is still an aspect little explored: the class struggle in psychoanalysis
  • Letter to the presidentSquid 59mk,g 18/06/2024 By FRANCISCO ALVES, JOÃO DOS REIS SILVA JÚNIOR & VALDEMAR SGUISSARDI: “We completely agree with Your Excellency. when he states and reaffirms that 'Education is an investment, not an expense'”
  • Volodymyr Zelensky's trapstar wars 15/06/2024 By HUGO DIONÍSIO: Whether Zelensky gets his glass full – the US entry into the war – or his glass half full – Europe’s entry into the war – either solution is devastating for our lives
  • PEC-65: independence or patrimonialism in the Central Bank?Campos Neto Trojan Horse 17/06/2024 By PEDRO PAULO ZAHLUTH BASTOS: What Roberto Campos Neto proposes is the constitutional amendment of free lunch for the future elite of the Central Bank
  • Introduction to “Capital” by Karl Marxred triangular culture 02/06/2024 By ELEUTÉRIO FS PRADO: Commentary on the book by Michael Heinrich
  • The strike at federal Universities and Institutescorridor glazing 01/06/2024 By ROBERTO LEHER: The government disconnects from its effective social base by removing those who fought against Jair Bolsonaro from the political table