privatization

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Related to denationalisation: nationalisation

Privatization

The transfer of government-owned or government-run companies to the private sector, usually by selling them.

privatization

The conversion of a public enterprise to a private enterprise. For example, a government-owned railroad or airline may undergo privatization if ownership shares of the enterprise are sold to individual and institutional investors.

Privatization.

Privatization is the conversion of a government-run enterprise to one that is privately owned and operated. The conversion is made by selling shares to individual or institutional investors.

The theory behind privatization is that privately run enterprises, such as utility companies, airlines, and telecommunications systems, are more efficient and provide better service than government-run companies.

But in many cases, privatization is a way for the government to raise cash and to reduce its role as service provider.

privatization

see NATIONALIZATION VERSUS PRIVATIZATION.

privatization

the denationalization of an industry, transferring it from public to private ownership. The extent of state ownership of industry depends very much on political ideology, with CENTRALLY PLANNED ECONOMY proponents seeking more NATIONALIZATION, and PRIVATE-ENTERPRISE ECONOMY advocates favouring little or no nationalization. Thus, in the UK, the wide-ranging programme of privatization embarked upon by the Conservative government in the 1980s can be interpreted partly as a political preference for the private-enterprise system.

Advocates of privatization, however, also espouse the economic virtues of free enterprise over state control. Specifically they argue that firms that are left to fend for themselves in a competitive market environment are likely to allocate resources more efficiently and to meet changing consumers’ demands more effectively than a bureaucratic state monopolist (see PRICE SYSTEM).

In this regard, it is pertinent to distinguish between industries that can be considered NATURAL MONOPOLIES and those where, in theory, a more fragmented industrial structure could be recreated. In the former category come those industries, such as gas and electricity distribution, railway and telephone services, where ECONOMIES OF SCALE are so great that only a monopoly supplier is in a position to fully maximize supply efficiency. There could be a serious loss of efficiency through unnecessary duplication of resources if these activities were to be fragmented. The alternative of a private-enterprise MONOPOLY is not appealing either, critics argue, because of the dangers of monopolistic abuse.

In the latter category come industries, such as iron and steel, gas and electricity generation, shipbuilding and car manufacture, where, because production usually takes place on a multiplant basis, the scope exists for placing each plant under a different ownership interest, thereby creating a more competitive supply situation. However, because these activities are capital-intensive and, like natural monopolies, are characterized by significant economies of scale, the most that can be hoped for is the creation of a high seller concentration OLIGOPOLY. By contrast, the removal from the public sector of those individual firms (as distinct from whole industries) that were nationalized because they were making losses and needing reorganizing (for example, Ferranti, Inter nation-al Computers, Rolls-Royce, Jaguar, British Leyland, British Shipbuilders) can be more easily justified.

The main problem with privatization is the extent to which competition can in fact be introduced into sectors hitherto confined to state monopolies, either by breaking up an existing state corporation into a number of separate private companies (as for electricity) or by encouraging new entry (as in gas and telecommunications). Because of this, it has been necessary in most cases to establish a regulatory authority (Ofgas and Oftel respectively for gas and telecommunications), backed up by the possibility of a reference to the COMPETITION COMMISSION, to control the industry. See DEREGULATION, INDUSTRIAL POLICY.

References in periodicals archive ?
Sub-claim four, which argues that the emergent TREMF paradigm denies a significant redistributive role to the (Third World) state while favouring more and more disinvestment and denationalisation on the part of states is also demonstrated by the evidence discussed in section three.
I was also bemused to see that, following decades of denationalisation, Gordon decided to spend taxpayers' money bailing out an ailing private financial institution.
The writer and broadcaster Melvyn Bragg believes that Bevan's NHS survived 50 years of underfunding, the Thatcher years and denationalisation for one reason alone.
China will have made a great leap forward towards being a superpower and the EU will be struggling between enlargement and denationalisation of member states.
These reforms measures include liberalisation of trade, decontrol of prices, simplification and liberalisation of investment sanctioning, flexible exchange rate, a policy of denationalisation and a whole series of steps designed to enhance the role of private sector in the economic management and development of the economy.
A meeting with Transport Minister Marios Demetriades on Tuesday did not appear to satisfy unions, whose main gripe is the voluntary exit scheme that will be put in place ahead of the denationalisation.
ER: What are your views about the denationalisation process in the country?
In a joint session on Wednesday, the five CyTA employee unions settled on a single position with regard to the Finance minister's stated intention of forwarding a government amendment to the existing law regulating the operation of the company to the cabinet for a vote, which, according to the unionists, is the first step in the denationalisation of the company.
These reform measures include liberalisation of trade, decontrol of prices, simplification and liberalisation of investment sanctioning, flexible exchange rate, a policy of denationalisation and a whole series of steps designed to enhance the role of private sector in the economic management and development of the economy.
1 million was added to the Cyprus Ports' Authority (CPA) 2015 budget to pay for the denationalisation of the ports of Larnaca and Limassol, House Finance committee chairman Angelos Votsis said on Monday.
ER: How will you comment on privatisation and denationalisation efforts of the government?
Employee unions at the semi-state Cyprus Telecommunications Authority (CyTA) on Wednesday held the first in a series of protests against the government's denationalisation programme.