The masters of the universe must be rubbing their hands with glee: Dubai has announced it is considering a policy of privatisation of government assets, and the fees for the investment banks, brokers and other assorted hangers-on, in what could be a multibillion-dollar bonanza, will be enormous.
But, as they all begin beating a path to Dubai's door with proposals, it is worth looking at how other governments, with different perspectives and imperatives, have gone about the process of privatisation. As an economic policy, it has a mixed track record.
Privatisation can be described as the transfer of government-owned assets to the private sector in return for cash. Critics from the left brand it the biggest trick a government can pull because, to them, it seems like selling the people something they already own, and it is sometimes branded the "sale of the family silver".
On the centre and right, however, privatisation is regarded as a liberating and enriching process, one by which ownership and control of assets is transferred away from faceless and unaccountable bureaucrats and handed over to modern, entrepreneurial management answerable to shareholders.
The two golden decades of privatisation were the 1980s and 1990s, when the world seemed to go crazy on a privatising spree that rolled back the frontiers of state ownership. Everybody seemed to be doing it, with the initial impetus coming from the government of Margaret Thatcher in the UK and the process then given a gigantic shove by the downfall of communism in Russia and Eastern Europe.
In between, governments in Latin America, Africa and Asia all jumped on the privatisation bandwagon. Those investment banks that had developed early expertise in the process found their services in demand all over the world.
To paraphrase Winston Churchill, never in the field of human enterprise have so many air miles been clocked up by so few on behalf of so many. If the process goes ahead in Dubai, first and business-class seats on Emirates Airline, itself a prime candidate for privatisation, will be in great demand for years to come.
There are, no doubt, other examples in history, but Mrs Thatcher's government is widely credited with or blamed for, depending on your orientation, creating the modern vogue for privatisation.
Partly for ideological reasons (she hated state control) and partly for financial imperatives (she had a recession and a large unemployment bill to fund), Mrs Thatcher embarked on an unprecedented sale of state assets.
Some of the best-known names in British business were privatised, including Cable & Wireless, Jaguar, British Telecom, British Gas, British Airways and Rolls-Royce. Now, it is hard to remember those companies were ever state-controlled, or to understand why, which is a mark of the policy's success.
The companies themselves became more efficient and competitive, and shareholders made money. It was a model for the rest of the world. But many of the privatised companies have since been taken over, sometimes by foreigners, which raises issues for Dubai's own privatisation.
On the other hand, the great historical example of a privatisation programme that went badly wrong also sprang from those two decades. In 1991, Boris Yeltsin took over the Soviet Union in its death throes, with a crumbling economy that could not even feed its own people. The communist system of 100 per cent state ownership - the essence of the Soviet philosophy since the 1917 revolution - had clearly failed.
Under the advice of western investment bankers, Russia set about the biggest state giveaway in history. Perhaps the masters of the universe failed to understand the unique circumstances they were dealing with, but the scheme they dreamed up was a disaster.
It involved handing out vouchers of entitlement to Russian citizens, who, having no previous experience or knowledge of private ownership, simply failed to get the concept. Their pieces of paper gave them part-ownership of hugely valuable companies, rich in oil and other natural resources, but the new shareholders simply saw the face value - about US$30 (Dh110.18). They sold their birthright for a few bucks, often just to buy food.
There were some, however, who fully appreciated the value of the pieces of paper being traded in street markets from Moscow to Vladivostok. The new oligarchs, some associated with organised crime, snapped up ownership of the country's economy for a fraction of its value. Many of the problems of modern-day Russia, with its vast inequalities of wealth, spring directly from Mr Yeltsin's disastrous privatisation.
Of course, no historical situation is completely analogous, and today's Dubai is entirely different from the UK or Russia in their privatisation heydays.
In particular, it is difficult to see any great ideological commitment to privatisation in the emirate. The possible sale of state assets is being suggested to meet a financial imperative.
But the leaders of Dubai Inc should choose their advisers carefully. As the cases of the UK and Russia show, privatisation has implications for the national economy and society that endure long after the proceeds have been counted and spent.
fkane@thenational.ae
