Will this be the century of the private sector or the state?

• Author: Virata, Cesar
• Position: Guest Column - Column

The answer would seem obvious, considering the major changes in economic structures that have taken place in the last fifteen years. Countries have had to face challenges in managing the transition from varying degrees of state ownership to more market-oriented private-sector economies with varying degrees of government regulation. This transition process continues and is gaining strength. However, unemployment and the political effects of globalization on State or protected enterprises threaten to hinder this process. The first phase of trade liberalization, as negotiated during the Uruguay Round, has affected the industrial and service sectors more than the agricultural sector. Since developing countries rely more on agriculture, there has been greater resistance to breaking down trade barriers, both tariff and non-tariff, on manufactured goods and the resulting imbalance of economic benefits from the General Agreement on Tariff and Trade/World Trade Organization agreement in 1994.

On the other hand, the agriculture sectors of developed countries, although relatively small components of their economies, have strong lobbies and are protected by common policies, subsidies and sheer bargaining strength. Thus, debates and negotiations go on to improve the imperfect systems of State control and intervention versus free-market mechanisms under private control. I am quite certain that based on their respective situations, each country will try to find a system that balances government regulation with market-oriented private enterprise. At the same time, Governments will continue to play a basic role in maintaining peace and order, providing a judicial system; providing basic social services of education, health care and welfare; protecting labour; and caring for and protecting the environment.

Lessons can be learned from history and from more current experience. By ignoring these lessons, we are liable to repeat mistakes. Philosophers, economists and political scientists have over many years introduced ideas and concepts on welfare, state ownership or capitalism, private property, allocation of resources, efficiency, value added, rent, returns to the factors of production, bills of rights, sovereign will and constitutional provisions governing relationships. The world has benefitted from these principles, many of which have been adopted by the United Nations.

Until just before the turn of the twentieth century, economic and governance systems...