Abstract:
By utilizing the social order approach of North, Wallis, and Weingast, this article demonstrates how natural states with limited access orders and rent-based tendencies hinder the achievement of privatization policy goals. This study addresses the phenomenon of corruption in natural states as one of the main obstacles to the success of privatization programs. Using a descriptive-analytical approach, it examines the effect of corruption on achieving three of the most important goals of this policy: strengthening the role of the productive private sector in the economy, enhancing productivity, and improving the fiscal health of the state. Natural states, with their rent-based inclinations, prevent the presence and strengthening of the productive private sector through unfavorable business environments and deviations in divestments. Furthermore, this phenomenon makes achieving the goal of enhancing productivity difficult by distorting productive investment incentives and reducing available financial resources for the productive private sector to improve productivity. The transfer of state-owned enterprises to the private sector and the resulting liberation of resources provides an opportunity for natural states, making the benefit of elite coalitions from the liberated resources even greater. Therefore, improving the fiscal health of the state is not possible in conditions where the institutional structure is based on rent and corruption. Examining the experience of Iran as a country with a natural state and widespread levels of corruption confirms the theoretical-analytical discussions of this article and shows that none of the main objectives intended from the implementation of privatization policy in the country have been realized. During the years of implementing this program, not only has the role of the private sector in the economy not been strengthened, but the share of state holdings has also increased. Additionally, the total factor productivity index has not changed significantly, and the government budget deficit has increased even more with the acceleration of divestments.
Machine summary:
Political Economy of Privatization along with Corruption ** Farshad Momeni * and Shima Hajinorozi Date of Receipt: 2016/05/09 Date of Acceptance: 2017/02/19 Abstract By utilizing the social order approach of North, Wallis, and Weingast, this article shows how extractive states with limited access orders and rent-seeking tendencies prevent the achievement of privatization policy goals.
This study addresses the phenomenon of corruption in extractive states as one of the main obstacles to the success of privatization programs and, using a descriptive-analytical approach, examines the effect of corruption on achieving three of the most important goals of this policy, including strengthening the role of the productive private sector in the economy, increasing productivity, and improving the fiscal health of the state.
The question raised in this study is whether achieving these goals is possible in conditions where the social order prevailing in society is an extractive order and states are extractive states with widespread levels of corruption, and whether moving towards privatization in such an environment leads to strengthening the role and share of the productive private sector, increasing productivity, and improving the financial situation of states?
In conditions where a country's laws are mostly enacted in favor of elites and administrative regulations themselves are the source of creating corruption and cost, it cannot be expected that productive private sector investors will enter the field of competition and play an effective role in the privatization process, or that they can have a noteworthy performance compared to state-owned enterprises.
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