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The sale or transfer of public assets to the private sector. This should not be confused with deregulation, which concerns the reduction or elimination of state regulation on activities that may already be privately owned. The case for privatization is usually grounded in claims that efficiency will be increased, but the aim may also be to raise revenue for the state, to spread share ownership and to de-politicize decision-making. That private production is actually more efficient than state enterprise is hard to demonstrate, and depends crucially on the competitive process. Thus, the privatization of state monopolies (like public utilities and transport systems; cf. public goods) carries no guarantee of greater efficiency passed on as benefits for the consumer, unless strong competition can be introduced. This is very difficult, if not impossible, in circumstances of natural monopoly where there is only one possible source of the commodity in question (like water), or when geographical circumstances make the duplication of facilities impracticable (as in the privatization of British Rail). Then, the public interest may have to be protected via some form of state regulation of prices and/or quality of service, which somewhat contradicts the principle of private ownership and control.
Privatization is generally part of a broader political agenda intended to inculcate or strengthen positive attitudes towards the free enterprise system associated with capitalism, as in Britain under the Thatcher government and in post-socialist eastern Europe. In the post-socialist world privatization has sometimes led to those who controlled state assets becoming the main private owners, which has tended to discredit the process — especially where this form of \'insider privatization\' is perceived to have taken place by dubious means. The term reprivatization is used to describe the process of returning to the original private owners, or their descendants, property expropriated by the state with the advent of socialism, as in Poland. (DMS) |
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