Privatisation follows a simple logic. Governments are poor at providing a wide range of goods and services. Hence, the case for relinquishing such functions to private enterprise. Opinions vary on the details of what goods and services can be privatised, and how. At the extremes, some ideologues say everything should be privatised, and some say everything should be provided by government. The historical experience varies from nation to nation.
But however wide the definition of privatisation may be, it doesn’t encompass handing over public revenues to private individuals, without receiving some services, or goods, in exchange. That kind of transfer is usually called “corruption”. When it is very cleverly done, it is called “prohibition”.
Prohibition, or the act of banning some widely used substance (or a popular service), is one of the most effective ways of transferring state revenues into private hands.
The game plan is simple. The demand for a ban can be accompanied with lots of moral tub-thumping so, it’s a great political platform. Explain at length why using a given substance (or service) has a terrible effect on individuals, and on society. Gloss over the fact that such bans are always unenforceable. If the moral science lecture is delivered with sufficient gusto, it is easy enough to win an election.
The demand for a banned substance doesn’t disappear. So, there are attempts to smuggle it. The smugglers pay off officials to look the other way. There are some seizures as well. Those costs will all be indexed to operating expenses and overheads and passed onto users with a fat mark-up.
The smugglers will make pots of money. The officials tasked with enforcing the prohibition will also make pots of money. The state will cease to make money since it cannot, by definition, impose taxes on a substance that it has banned. In fact, the state will spend large sums in its attempts to ineffectually enforce the unenforceable.
The users of a banned substance will continue to use it. If they cannot afford to use the safer but more expensive versions, they will seek cheaper alternatives. The smuggler’s clever cousin will step in and produce a cheaper version, cutting a few corners in terms of safety. More revenue streams will develop at different price points with a few deaths thrown in.
Eventually the state will try to raise taxes from other areas. For instance, it will raise bus fares. People will then complain about being punished this way. Eventually, even the moral diehards will notice that a ban doesn’t seem to work. Then this specific ban may be repealed.
A few years later, since public memory is short, some version of it can be tried again. America, for example, banned alcohol for about 13 years, repealed the ban, and promptly banned other drugs. Repeals of marijuana bans have just started at state level and over half of America’s prison population consists of ganja-smokers.
Versions of the ban-game have been played out with many substances like alcohol, marijuana, morphine and cocaine. Those substances all continue to be freely available even where peddlers face death sentences. The margins just rise to adjust for the higher labour turnover. Cheaper, more dangerous variations like meths, crack, heroin, varnish and turpentine are also consumed. Popular services like prostitution, massage parlours, dance parlours, etc, fall into a similar category. If these are banned, somebody makes more money while the state makes less and the service remains accessible. Associated dangers like AIDS and other STDs become more likely.
The police forces of entire nations, arguably entire continents, have been enriched by the vast revenues they have mopped up while “enforcing” bans. The living standards of the police in Kerala and in Maharashtra are likely to improve substantially if alcohol is banned in one state and dance bars in the other.