The $12 billion listing of state-owned Japan Post Holdings overnight makes it the largest initial public offering (IPO) in the world this year. In choosing to list its postal business, Japan follows the lead of Britain, which privatized the Royal Mail in 2013.
The float split out the financial and insurance arms of Japan Post, and delivered for Japanese retail investors, with the stock soaring as much as 56 percent on its first day of trade.
Investors might be happy, but the question is whether international governments should be privatizing core infrastructure, and what this privatization might mean for other government-owned postal services around the world, such as Australia Post.
Privatization trends have over time reflected the consensus view of economists regarding the efficacy of state-owned enterprises. For the first three-quarters of the 20th century, state ownership was a common feature across industries such as railways, industrials, communications, financials, health and postal services. At this time, economists placed significant emphasis on the importance of competitive pricing, even if that meant accepting government ownership in non-competitive industries.
However by the 1980s, economists had widely recognized the inefficiencies of government ownership. The World Bank associated it with excessive employment, wage distortion, low product quality, and economic costs, all incurred for the purposes of achieving political objectives rather than for social welfare. For example, the British mining industry was propped up for decades after World War II at a huge economic cost purely because the National Union of Mineworkers had sufficient influence to bring down the government.
As a consequence of the problems identified with socialism, the Thatcher government initiated a raft of privatizations in the U.K., a move that was subsequently replicated across many other regions, including Asia, Europe, Latin America, and Australia. The 1990s saw the privatization of a raft of large Australian companies, including Qantas, the Commonwealth Bank, CSL, TAB Corporation, and Telstra.
This trend of privatizing state-owned firms has continued into the 21st century, as evidenced by the recent IPO of Japan Post. Last year the National Commission of Audit recommended the Australian government continue with its program of privatization, explicitly identifying our own mail service, Australia Post, as an appropriate candidate for privatization in the medium term.
