privatization

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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 ?
At the same time, it is in accord with his insistence on human rights in the face of their increasing abrogation in the era of denationalization.
To be sure, denationalization policies have been popular; even Hollande's proposed constitutional reform was supported by 80 percent of the French public at one point.
For example, Czech Republic, Slovakia and Hungary started denationalization and restitution back in 1991, Bulgaria in 1992, Germany in 1994, Romania and Poland in 1996, Albania in 2004.
9) The denationalization and deportation of Japanese Canadians from internment in Canada to Japan following World War Two remains a shameful episode in Canadian history.
It may be said that the first stage is a pure formality, but it is clear to everyone that a bill was concerned, a bill on revising the denationalization process in favor of one certain ethnic group," claims Dzintars.
International experience suggests that denationalization of key economic fields may prove a durable limit to Populism.
This denationalization (sometimes called expatriation) would be easier because it is a civil and not a criminal remedy.
Due to all this, Rizaov advises that serious initiative must be instigated as well as a great battle for new denationalization of the social property with which the country, by implementing unconstitutional laws, robbed its citizens.
In July 1977, Zia ul Haq government announced the denationalization programme, disinvestment and decentralization to build the confidence of private investors.
The Kaczynski brothers are routinely maligned by leftist intellectuals and journalists precisely because they oppose denationalization and support decommunization.
Pic traces explicit lines between Friedman's neoliberal disciples in that country, the denationalization of its industries, the Nixon administration's support of Pinochet and the murder of thousands of Chilean citizens.
Although it is illogical that a minister admits such contradiction, former Minister Mokhtar Khattab, who was in charge of the privatization program in Atef Ebeid's cabinet, told Al-Badeel newspaper in a recent interview that his personal position was against the policy he implemented and that he was not convinced of many facets of denationalization.