The Privatization of Wealth in the Rich Countries
If we look the trend of last 10 years around the world, you will find that there is a very sharp increase in the private wealth in the rich countries i.e. for example Europe and to some extent Japan.
During the period 1970 – 2010, largely due to slower growth in the Europe coupled with continued high savings brought distinctively two things which we can say the phenomena of gradual transfer of public wealth into private hands and the other one is catching up the assets prices over the long run. These two have happened as a complimentary to each other.
Data indicates that in Italy, private capital rose from 240% to 680% of National Income between 1970 – 2010, while public capital dropped from 20% to (-)70%. The plotted series of the above behavior can be traced at piketty.pse.ens. fr/capital2IC. The proportion of public capital in National Capital has dropped sharply in last 10 years.
Examples with respect to above can be checked up with data in case of France and Germany where net public wealth represented 25% to 33% of total National wealth between the period 1950 – 1970, whereas today it represents just a few percent. Now the situation is that the public assets are just enough to balance public debt. This is already happening in the leading developed economies. Simultaneously, the ratios i.e. public capital to national income decreased while the private capital to national income increased in the same proportion.
The above referred phenomena among the European Nations indicated the revivable of private wealth due to privatization of National wealth. National wealth is measured in terms of yearly income of the nation. The national income increased over the years less rapidly in comparison to growth of private capital owing to privatization.
Therefore, the above phenomena is a lesson for the developing economies where only governance may bring a check on the balancing of public versus private capital growth. The real advantages will flow to the general public/residents of the country if the balancing is controlled by the Government. Those who advocate total privatization against public funding for the development should exercise caution as the concentration of wealth in the fewer private hands is dangerous.