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Privatization: Successes and Failures

Foreword by Joseph E. Stiglitz
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  • Book Info
    Book Description:

    The privatization of large state-owned enterprises is one of the most radical policy developments of the last quarter century. Right-wing governments have privatized in an effort to decrease the size of government, while left-wing governments have privatized either to compensate for the failures of state-owned firms or to generate revenues. In this way, privatization has spread from Europe to Latin America, from Asia to Africa, reaching its zenith with Central and Eastern Europe's transition from socialism to capitalism.

    In many countries state ownership has been an important tool in bringing cheap water, energy, and transport to poorer segments of the population. In other instances, it has sponsored aggressive cutbacks, corruption, and cronyism. Privatization: Successes and Failures evaluates the practices and results of privatization in Eastern Europe, Africa, Latin America, and Asia. Featuring the world's leading economists and experts on privatization, this volume offers a broad and balanced analysis of specific privatization projects and uncovers some surprising trends. Partial privatization, for example, tends to be more widespread than one might think, and the effects of privatization on efficiency are generally mixed but rarely negative. Also, while privatization appears uncontroversial in competitive sectors, it becomes increasingly complex in more monopolistic sectors where good regulation is crucial. Privatization concludes with alternative frameworks for countries in Africa and other regions that seek to develop privatization policy and programs.

    eISBN: 978-0-231-51828-4
    Subjects: Business, Finance, Law

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xx)
    Joseph E. Stiglitz

    This book brings together a set of essays on recent experiences and current thinking in the debate over privatization, the conversion of state-owned assets into privately managed assets. Especially after Ronald Reagan and Margaret Thatcher assumed office in the United States and the United Kingdom, a conventional wisdom developed that private management and ownership was better, in some sense, than public ownership and management: enterprises would be run more efficiently and there would be less opportunity for corruption. The World Bank and the International Monetary Fund (IMF) pushed countries to privatize as much as they could and as fast as...

    (pp. xxi-xxiv)
  5. Introduction
    (pp. 1-8)
    Gérard Roland

    Privatization of large state-owned enterprises (SOEs) has been one of the most radical new policies of the last quarter century. While many countries engaged in large nationalization programs during the decades following World War II, Margaret Thatcher initiated a policy swing in the other direction in the 1980s by pushing for aggressive privatization of many of the large state-owned British firms. In the following two decades, privatization policies were implemented throughout the planet by left- and right-leaning governments alike. Right-wing governments engaged in privatization in an effort to keep down the size of government, while left-wing governments implemented privatization policies...

  6. CHAPTER 1 Private and Public Ownership in Economic Theory
    (pp. 9-31)
    Gérard Roland

    One of the major economic events of the end of the twentieth century was the wave of privatization that, starting in the United Kingdom under Margaret Thatcher, was followed by mass privatization experiences in Russia and other transition countries. To the outsider, it would seem that this change had been prepared by intensive economic research, that it must have been the natural outcome of years of debates in academic circles. Nothing could be further from the truth. Mainstream economic theory, as it stood in the early 1980s, did not have much to say about privatization or even about ownership of...

  7. CHAPTER 2 Privatization in Western Europe: Stylized Facts, Outcomes, and Open Issues
    (pp. 32-75)
    Bernardo Bortolotti and Valentina Milella

    Started in the United Kingdom at the end of the 1970s, privatization spread in continental Europe during the 1980s. Western European countries, hard-pressed to improve mounting fiscal deficits and to introduce major product market reforms as requisite to join the European Union, pushed ahead one of the most extensive and ambitious privatization programs around the world during the 1990s.

    After more than a quarter of a century, it is possible to take stock of the main national experiences and to try to draw an overarching description of what has been achieved and not achieved through such a sustained divestiture policy....

  8. CHAPTER 3 Privatization in Central and Eastern Europe and the Commonwealth of Independent States
    (pp. 76-108)
    Jan Hanousek, Evžen Kočenda and Jan Svejnar

    The wisdom and economic effects of privatization in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS) are currently the subject of intense reexamination. While today privatization is under debate, in the early 1990s privatization was widely considered one of the keystones of the entire transition process. This view was advocated strongly by proponents of the so-called Washington Consensus, which emphasized fast transfer of ownership via privatization and the belief that private ownership, together with market forces, would ensure better and more efficient performance of the economy (see, e.g., Roland, 2001, for a discussion). The belief that...

  9. CHAPTER 4 Privatization in Africa: What Has Happened? What Is to Be Done?
    (pp. 109-135)
    John Nellis

    Consider the case of Guinea, one of the poorest countries in Africa and thus one of the poorest countries in the world. From independence in 1960 through the end of the 1980s, Guinea’s state-owned enterprises (SOEs) in telecommunications, energy, and water provided consumers with an inadequate quantity of low-quality services. As of 1989, only 38% of Guineans had access to piped water, and almost none in rural areas. Those connected suffered frequent interruption of service. Water quality was poor and unhealthy; “waterborne diseases were the main cause of death for infants and there were periodic cholera epidemics” (Ménard and Clarke,...

  10. CHAPTER 5 Privatization in Latin America: The Good, the Ugly, and the Unfair
    (pp. 136-169)
    Antonio Estache and Lourdes Trujillo

    Most casual observers of reform processes in Latin America are likely to quote privatization as one of the pillars of the 1990s reforms in that region. In fact, Latin America has over 30 years of experience with large-scale privatization. It started in 1974 with Chile.¹ Mexico and Jamaica followed at some distance when they launched the first phase of their own major privatization programs in the early 1980s.² The clearer image of a privatizing Latin America actually dates from the significant effort in Mexico by the Salinas administration in 1988 and from the widely publicized Argentinean reforms started in 1989...

  11. CHAPTER 6 Privatization in South Asia
    (pp. 170-198)
    Nandini Gupta

    In the last decade, governments worldwide have raised over US$1 trillion from the sale of state-owned enterprises (SOEs) (Megginson and Netter, 2001). However, the South Asian economies of Bangladesh, India, Pakistan, and Sri Lanka have been slow to divest from government-owned firms. Revenues raised from privatization between 1991 and 1999 totaled just US$11.9 billion in South Asia (World Bank, 2001b). In contrast, Latin America raised over US$177 billion over the same period (World Bank, 2001b). In this chapter we discuss the privatization process in South Asia with a focus on India, the largest economy in the region.

    State-owned enterprises in...

  12. CHAPTER 7 A Critical Review of the Evolving Privatization Debate
    (pp. 199-212)
    Jomo K. S.

    The impetus for privatization emerged in the 1980s under the aegis of the Thatcher government in the United Kingdom, which made privatization a core component of its economic reforms. Privatization in the United Kingdom gained momentum through politically popular projects such as the privatization of public housing. Thousands of families living in public housing became homeowners through government sales of such units. This project, while not wholly successful due to various factors (Vickers and Yarrow, 1991), was popular among segments of the working class.

    Privatization soon became a central tenet of the Washington Consensus package of economic reforms associated with...

    (pp. 213-218)
  14. INDEX
    (pp. 219-231)