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The transfer of government-owned or government-run companies to the private sector, usually by selling them.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


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.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Summary: A report has slammed the Ministry of Defence over equipment, calling for privitisation.
Peyia councillor Linda Leblanc said the fact that a private company had dammed the river raised the question of privitisation of a public resource.
Jacques de Bandt, Privatisation in an Industrial Policy Perspective, in PRIVITISATION IN THE EUROPEAN UNION: THEORY AND POLICY PERSPECTIVES 88, 88 (David Parker ed., 1998).
It is feared to be just one part of the health service lined up for privitisation.
AFTER years of declining passenger numbers and following privitisation succesful attempts to woo people out of their cars and back onto trains it now appears that they are to force them off by price rises!
The Permanent Way turns privitisation of the railways into a drama peopled by victims of four rail disasters, including the Paddington rail crash.
Curley, who condemned the service as worse than the Third World, says vast areas of the network are " life expired" and have had barely basic maintenance since privitisation.
In fact, it would seem to me that readers must respond not to mesmerism but to the idea of mesmeric song--or as Browning puts it in The Ring and the Book to "galvanism for life." As Woolford puts it, "the initial privitisation of the discourse presents an ontological problem which remains unsolved" (p.
(46.) For an account of the privatization methods used in Eastern Europe, see BUTTERWORTHS PRIVITISATION IN CENTRAL AND EASTERN EUROPE (Stephen A.
Since the privitisation of the Swiss telephone system, prices have continued to drop as the competition between providers has become more and more intense.
In fact, the major task of the enterprise reform is the decentralisation and privitisation of ownership.