Privatization Essay

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Privatization is a transfer of public services provided by various levels of governments in national states to the private sector of business. It is a relatively recent transformation of governance and markets in countries worldwide. In fact, it is an extraordinary, rapidly expanding phenomenon that is rising in global waves, transferring ownership from governments to private enterprises.

Rendering public services via private businesses creates important political, economic, and cultural changes. The actual methods for privatization are manifold; they can be outright purchases, leases, subsidies or other cooperative partnerships, or yet other approaches. However, they put the privatized public service into the hands of private managers. The concept of privacy is not identical with privatization, but it is a part of the cluster of values linked to other changing values for governance and for markets. Privacy of enterprises emphasizes autonomy, independence, secrecy, and profit for the owners; both governance and markets demand transparency, accountability, and benefits for the public good. Democracy can be benefited by the efficiencies of privatization if the provided service responds to public needs and sensitivities, but it may be harmed where the private owners of a function are alien to the public.

Early efforts to reduce the economic role of the state included Churchill’s ”denationalization” of the British steel industry and Adenauer’s withdrawal of the West German government’s major investment in Volkswagen in 1961. However, denationalization at the time was not very popular. The major movement toward privatization was energized much later by Margaret Thatcher. She also coined the concept of privatization. At that time (the early 1980s) a number of privatization goals were pursued by the British government:

  1. provide new revenue through privatization of pubic enterprises;
  2. improve economic efficiency;
  3. limit the government’s role in the economy;
  4. encourage broader share ownership;
  5. encourage competition;
  6. require state-owned enterprises to aspire to market discipline.

In the USA Ronald Reagan won a landslide victory in 1980 and easily won his second term in 1984. His policies were to reduce taxes, cut government programs, and finance an astounding defense buildup, resulting in a large budget deficit. Privatization in various forms was encouraged by Reagan. Reducing the role of government (except the military) was a high priority.


  1. Parker, D. & Saal, D. (eds.) (2003) International Handbook on Privatization. Edward Elgar, Cheltenham.
  2. Yarrow, G. & Jasiriski, P. (eds.) (1996) Privatization: Critical Perspectives on the World Economy, 4 vols. Routledge, New York.

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