America's Helium Privatization Fiasco

Moneybox
A blog about business and economics.
May 14 2012 2:05 PM

America's Helium Privatization Fiasco

Big blimpin'
Big blimpin'

Photograph by Kevin C. Cox/Getty Images.

It sounds funny, but the growing helium crisis in the United States is only partially a laughing matter. The gas is needed for not only party balloons, but also an array of industrial purposes and if we run out it's a problem. Brad Plumer has the story, but it's really just a special case of the all-too-common problem of privatization gone wrong.

To think about privatization it's useful to think about selling something. If you have a bunch of helium and you want to sell it, what you do is sell it to the highest bidder. And if you're a public entity selling some publicly owned assets to private owners, you're privatizing them. So you might think that privatizing a country's helium stockpile would consist of selling the publicly owned helium to private owners at market prices. But in 1996 when Congress decided that the United States did not need a giant strategic helium reserve, Chris Cox, R.-Calif., and his colleagues passed a Helium Privatization Act that ordered the helium supplies to be sold down at a formula-driven price rather than auctioned. That price has turned out to be way below the market rate. That's encouraging overconsumption of helium, discouraging new helium production, and all-in-all creating a big helium shortage.

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It's a mess.

But this kind of thing is a problem you see over and over again. One of the big problems with state-owned enterprises is that they often end up being poorly managed. But the same dysfunctional political institutions that produce poorly managed state-owned enterprises all to often also produce poorly managed privatization schemes. That's what we saw in post-Communist Russia, and in a small way we saw it right there with the helium stockpile.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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