privatization

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Related to privatized: denationalization, privatising

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 ?
Up to now the government has obtained about 150 applications in electronic form for participation in the auctions for the privatization of state assets, and about 300 state facilities have been privatized on the basis of electronic applications.
Recommendation: To facilitate more efficient operations before, during, and after the transition from service-operated to privatized lodging, the Secretary of Army should direct the Assistant Secretary of the Army (Installations and Environment), working with the Assistant Chief of Staff for Installation Management and the Commander, Installation Management Command, and other appropriate stakeholders, to develop a single, comprehensive transition plan for future lodging privatization that includes details on key aspects of privatizing.
Things will be just as they were before NTT was privatized.
Others were not even optimistic that the port would be privatized at all.
Ishihara also said government guarantees of bonds to be issued by the privatized entities will be limited.
Under the plan, JH will be privatized after about 20 years, while the Metropolitan Expressway Public Corp.
The kilowatt capacity valuation of recently privatized electrical utilities tends to be unnecessarily low.
Pakistan has privatized nearly 100 industrial units since the privatization process was launched in 1990, but bids to privatize major corporations like Pakistan Telecom and two major banks have failed because of related scandals.
Its `most acute manifestation' is in areas where those who have privatized power aim at `political mobilization on the basis of identity'.
Fully privatizing Social Security into individual accounts, or "simply" adding supplemental individual investment accounts, presents huge and largely ignored logistical hurdles that raise serious questions about whether a privatized Social Security system could function as intended at this time, according to the report.
Michigan's John Engler has privatized mental health services.
Women's charitable strategies began to move more in line with those of their husband's families while, at the same time, those family strategies took on some of the more privatized characteristics which women had demonstrated.