Privatisation of Markets

11 Key excerpts on "Privatisation of Markets"

• 

  eBook - PDF

  Modern Capitalism

  Privatization, Employee Ownership, and Industrial Democracy

  • Nicholas V. Gianaris(Author)
  • 1995(Publication Date)
  • Praeger

    (Publisher)

  4 Privatization in Developed Market Economies INTRODUCTION Many governments in the past acquired private firms or created public enterprises to generate more employment, to supply goods with lower prices, and to increase investment and new technology in certain strategic sectors. In some public utilities the transfer of private firms to the govern- ment was made in order to avoid monopolization of the market by private companies and protect the customers from high prices, supply limitations, and other devices that are used by monopolies or oligopolies to maximize their profits. In most cases, governments and politicians fill public enterprises with not needed personnel, just for political favors. Although some public enterprises have been productive and profitable, the vast majority of them have been inefficient and absorbed large amounts of subsidies from the general budget of the government to cover their annual deficits. That is why more than 2,000 public enterprises have been privatized since 1980 in more than 80 developed and primarily developing countries. Economies of scale, productivity, assets, and equality increased in almost all privatization cases considered, especially in high- and middle- income countries. Privatization is the process of transferring economic activities from the public sector to the private sector. It may include transfer of ownership or controls in favor of private institutions, employers, and other individuals. Specific norms of privatization may include: divestment, by selling an enterprise or shares, by free transfer to employees and the public at large

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Privatization Performance in Turkey

  • Esra Kabaklarli(Author)
  • 2016(Publication Date)
  • Peter Lang Group

    (Publisher)

  16 private sector responsibility. In the narrowest sense, privati- zation is a change in ownership which involves a change in state-owned instruments and governments’ influence in an economy (Köthenbürger et al., 2006). According to another definition, privatization, in addition to being the transfer in ownership, is a change of management and regulations, transfer of capital, and implementation of new technologies (Hibou, 2004: 47). In general terms, privatization is the sale of real and fi- nancial assets to the private sector. In some cases, partial privatization, by eliminating obstacles to market entry, i.e. deregulation, reduces the monopoly power of state mo- nopolies and allows them to compete with private enterprises (McFetridge, 1997: 3). Privatization is the rearrangement of the state’s and public’s roles in production and income distribution (Armella, 1994: 11). Calva and Sheshinski (2003) classify privatization as ei- ther macro- or micro- privatization. Macro-privatization occurs when a government in a transition economy decides to privatize either the whole economy of the country, or a specific sector of it. With the market conditions created in this manner, increasing state revenues and the transition from a socialist economy to a liberal economy are the aims. By contrast, micro-privatization is privatization implemented by management and employees at the firm level. The concept of privatization can also be considered in narrow or broad senses. In its narrow sense, privatization refers to the transfer of the ownership and management of state enterprises to the private sector, while in its broad sense, privatization refers to all practices involving a re- duction of state responsibilities in the economy (Aktan, 1995: 7). 17 1.2. Historical Development of Privatization Practices Throughout history, the ownership of economic, trade, and production instruments has been transferred many times from the public sector to the state or vice versa.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Privatisation in Ireland

  Lessons from a European Economy

  • D. Palcic, E. Reeves(Authors)
  • 2011(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Starr (1988) provides a useful working definition of privatisation as any shift in the production of goods and services from public to pri- vate. According to Starr (1988: 16–17), this more focused definition of privatisation includes the following sub-categories: 1) The cessation of public programmes and disengagement of gov- ernment from specific kinds of responsibilities. At a less drastic level, this may involve the restriction of publicly produced services in volume, availability, or quality which may lead to a shift by consumers toward privately produced and purchased substitutes (called ‘privatisation by attrition’ when a government lets public services run down); 2) The transfer of public assets to private ownership, through the sale or lease of public land, infrastructure and SOEs; 3) The withdrawal of government from the production, but not the financing, of services, for example, through contracting-out or vouchers; and Privatisation in Europe 9 4) The deregulation of entry into activities previously treated as public monopolies. This book concentrates on one single variant of Starr’s (1988) typology, namely the transfer of SOEs to the private sector (see 2 above), and the use of the term ‘privatisation’ hereafter refers only to their sale. In this context, it is also relevant to acknowledge that there is no standard definition of SOEs. Here, they are understood to be commercial public enterprises that earn the majority of their income from the sale of goods and services. 1.2 Development of state-owned enterprises In order to place privatisation policies in perspective, it is first necess- ary to understand the original rationale for the creation of public enter- prises in Europe. Megginson and Netter (2001) describe how, throughout history, ownership of the means of production and trade moved back and forth from the public to the private sector.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Economic Neoliberalism and International Development

  • Michael Tribe(Author)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  3   Privatisation in developing countries An evolving relationship between state and markets Colin Kirkpatrick

  Introduction

  ‘Privatisation’ is generally used to refer to the transfer of a business, industry or service from public to private ownership and control. While there is uncertainty about who first coined the term, the adoption of privatisation as a strategic policy objective is unambiguously linked to the UK Conservative government led by Prime Minister Margaret Thatcher.1 The years from 1979 to 1997 saw a large movement of assets in Britain from state to private ownership using a range of privatisation measures including public flotations and trade sales of nationalised industries, divestments and assets sales, and competitive tendering and contracting out of public services and by June 1987 ‘the programme of privatization was a central plank of government economic policy’ (Parker, 2009: 140). In 1988, the Chancellor of the Exchequer, Nigel Lawson, commented that while the techniques and methods of privatisation had changed during the 1980s to reflect the different types of businesses, the objective had remained the same, namely ‘to improve industry’s efficiency and its service to the customer’.2

  While the Conservative government under Mrs Thatcher’s leadership can claim to have pioneered the concept of privatisation as a policy instrument, the term ‘privatisation’ quickly became part of the public lexicon with privatisation policy being actively pursued throughout the developed and developing worlds.

  The intellectual principles of economic neoliberalism are discussed at length elsewhere in the volume, particularly in the first two chapters in this collection, by Michael Tribe and Bernard Walters. Here, we use the term ‘economic neoliberalism’ to refer to the fundamental idea that ‘markets matter’ for achieving economic efficiency and economic growth, with the important caveat that markets can only operate efficiently under certain ‘conditions’ that can be affected (positively and negatively) by government or societal intervention.3

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Economic Management and Transition Towards a Market Economy

  An Asian Perspective

  • Anthony T H Chin, Ng Hock Guan;;;(Authors)
  • 1996(Publication Date)
  • WSPC

    (Publisher)

  Privatisation; Conceptual Issues, Methods and Implications 239 Business environment The last category involves changes in the business environment. In this field a number of terms need to be distinguished. Liberalisation can be taken to describe any measures taken to increase market access and enhance competition. Deregulation implies removal of specific restrictions or rules adversely affecting competition or barriers to entry. In contrast, de-monopolisation concerns the removal of rules creating a statutory monopoly and thereby opening the market to competition, usually from the private sector. It should be noted that the various methods and techniques described above have significant implications for legal arrangements. Thus, if existing laws preclude a particular privatization measure, either alteration in the law or recourse to alternative privatization measure will need to be undertaken. In the developing, and socialist countries, many enterprises became state enterprises through nationalization. If these are to be privatised, legal claims of the former owners would need to be addressed for smoother implementation. In some cases, privatization may require setting up of a regulatory framework, particularly when national monopolies or strategic sectors are involved. There is also a problem of obtaining the assent of the third parties or the stakeholders. These include creditors, debtors, contractors, customers, and others. This is because the transfer of ownership implies the transfer of such relations. Privatization methods which may be employed by ex-socialist countries are summarized in Figure 10.2.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Politics and Policies in Post-Communist Transition

  Primary and Secondary Privatisation in Central Europe and the Former Soviet Union

  • Károly Attila Soós(Author)
  • 2011(Publication Date)
  • Central European University Press

    (Publisher)

  2 Privatisation: why and how? Of course, in this discussion of privatisation policies and mechanisms, aside from the political circumstances and pressures of those turbulent times, it is important to note some deeper, partly political but partly eco-nomic factors that determined the need for and the method of privatisa-tion. 2.1 The need for privatisation and the irrelevance of long-term considerations In the early 1990s, the slogan of transition meant a demand for a market economy, political freedom and democracy. The herd of enterprise man-agers appointed and supervised by the government had been an important pillar of one-party dictatorship. To establish democracy and ensure politi-cal freedom, this kind of party-state control over the economy had to end. The situation in which (almost) everybody was a public employee (and thus more or less an employee of the ruling party) had to change. An al-most universal belief was that the market economy required private own-ership. Previous market economy models built on state property (Barone, Lange, Taylor, Lerner) were almost forgotten in the early 1990s. In the countries under study, they did not have many adherents with serious in-tellectual or political clout. Economic arguments against the theory of market socialism based on public property were less important than the theory’s lack of adherents— but they are worth noting nonetheless. The starting point of the theory in question is that the state as owner can order enterprise managers to follow the objective function that is usually attributed to private firms (i.e., the maximalisation of shareholder value). However, this is problematic in at 16 Politics and Policies in Post-Communist Transition least two respects. First, actual private owners’ appetite for risk varies (as Hayek notes); thus we do not know how to fine-tune the appetite for risk of the managers of state-owned firms. In other words, we do not know what the latter has to be similar to.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Privatization, Corporate Governance and the Emergence of Markets

  • E. Rosenbaum, F. Bönker, H. Wagener, E. Rosenbaum, F. Bönker, H. Wagener(Authors)
  • 2000(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Indeed markets and their accompanying institu- tions are, and have always been, the (by-)products of political processes 2 Privatization in Context: an Introduction and decisions (Polanyi, 1944). Both are the outcomes of decisions in which political means are used in order to achieve extra-economic objectives. However the specific conditions of transformation make political influence over, and political repercussions from, privatization even more likely than in established market economies because the creation of a market economy was explicitly formulated as an objective of economic policy in transition countries. Hence it should not come as a surprise that the design of privatization programmes in trans - formation countries is heavily influenced by extra-economic considera- tions and forces, the more so as privatization has by definition profound distributional consequences which invite rent seeking and coalition building among those most affected by the outcomes of the privatization process. Both the political nature of privatization and its instrumental func- tion as regards the creation of markets suggest that privatization has to be examined from a much broader perspective. This broader perspect- ive encompasses three dimensions. The first consists of a positive analysis of privatization which blends economic and political aspects with a view to identifying the determinants of privatization choices as well as cross-country differences and similarities of methods and out- comes. A second dimension includes the interrelationship of privatiz- ation, corporate control and enterprise restructuring in an attempt to investigate the preconditions and the progress of enterprise restructur- ing. A third strand, finally, looks at the development of markets and the emergence of market actors vis-à-vis different privatization methods and large-scale institutional changes. The present volume is divided into three parts which correspond to the aforementioned dimensions.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Privatization and the Welfare State

  • Sheila B. Kamerman, Alfred J. Kahn, Sheila B. Kamerman, Alfred J. Kahn, Sheila Kamerman, Alfred Kahn(Authors)
  • 2014(Publication Date)
  • Princeton University Press

    (Publisher)

  ECONOMIC M O D E L 1: PRIVATIZATION AS A REASSIGNMENT OF PROPERTY RIGHTS Private ownership and competitive markets are normally thought to go hand in hand, but the two issues of ownership and market structure are often separate. For the economist devoted to both, the question then arises as to which object of affection is more beloved: private ownership or competition? Here a difference of opinion appears among economists that corresponds to a preference for either privatization or liberalization. Those who believe that efficient performance depends on private owner- ship per se favor privatization, even in cases generally regarded as natural monopolies. Conversely, those who see competition as the critical spur to efficiency are more skeptical about the benefits of privatizing monopolies and often put emphasis on other policies, such as deregulation. In the case of a government telecommunications monopoly, for example, those who stress ownership may be willing to privatize the monopoly intact, whereas those who stress competition may prefer to break it up before sale or even keep it in public ownership while allowing private firms to compete with it on equal terms. Thus the perspective that unequivocally points to privatization as de- sirable policy holds that property ownership is the fulcrum of political economy. Curiously, the two unlikely bedfellows sharing this apprecia- tion of ownership are Marxism and Chicago School economics, which draw from it opposite but equally strong conclusions about the overrid- ing importance of getting ownership into the right sector. From the Chi- cago tradition come two closely related clusters of work: the theory of property rights and the theory of public choice. Both attempt to enlarge the conventional economic paradigm by treating the classical firm and modern package of property rights as only one of various possible insti- tutional forms. In this enlarged model, public institutions merely repre-

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Last Exit

  Privatization and Deregulation of the U.S. Transportation System

  • Clifford Winston(Author)
  • 2010(Publication Date)
  • Brookings Institution Press

    (Publisher)

  Government ownership of firms is not justified in a market that would be perfectly competitive. If the industry is a natural monopoly—a rare situa-tion that exists when production costs are minimized if one firm supplies the good or service—the policy choice is between a government enterprise and a private monopoly regulated by the government. Privatization is an option for a publicly owned enterprise(s) or unregulated natural monopoly that would operate as a private firm(s) in an imperfectly competitive environment. Roland (2008) characterizes contract-theoretic assessments of the differ-ence between public and private ownership of firms as stressing the infor-mational differences stemming from different forms of ownership. Govern-ment ownership reduces outsiders’ access to information about a firm; hence public firms may have weak incentives to operate efficiently because they are poorly monitored. Vickers and Yarrow (1991) add that direct subsidies and cross-subsidies from public funds and regulations are easier to institute under public ownership. Private firms face capital market pressures that give them greater incentives than public firms have to innovate and reduce pro-duction costs, albeit at a potential cost to consumers in higher prices and lower product quality. Theory and Evidence on the Economic Effects of Privatization 127 Thus, whether privatization is superior to public ownership on economic grounds is likely to turn on the extent of market power that a private firm(s) possesses; the extent to which incentives influence whether a firm(s) achieves its goals; and whether consumers have any recourse for applying competitive pressure on the private firm(s).

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Scrutinising Science

  The Changing UK Government of Science

  • R. Boden, D. Cox, M. Nedeva, K. Barker(Authors)
  • 2003(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  If a range of competitive suppliers cannot be stimulated and government still proceeds with privatisation, then it will be left with a monopolistic/monopsonistic provider in the private sector. This might be problematic and suggests the need for regulation of some sort. In an efficient market for a genuinely needed service other players will enter to compete for the work once barriers to entry are lowered (e.g. the government starts market testing). But this will not occur if government has only been able to divest itself of something in an artificial manner: for instance by offering financial inducements to those in the private sector who might take the supply work over. Such artificialities may effectively keep up barriers to entry to other private sector players. A good example here is government awarding generous guaranteed work programmes to private sector suppliers. In such an outcome, the government moves from being a monopoly state supplier to creating and sustaining a monopoly private supplier. Under Type II, where the government has a natural monopoly, there are even greater problems. Natural monopolies in the general economy include things such as water supply pipes or metrology reference standards: it will never be efficient to have more than one set of water pipes in a city or set of measurement standards. If a particular science or technology service provision is a natural monopoly then a range of com- petitive suppliers cannot be envisaged. In such circumstances privatisa- tion or marketisation could only occur if there was regulation of any ensuing private monopoly or if novel solutions to ownership and operation questions were found which utilised private sector efficiencies but also safeguarded the public welfare. Turning to the customer axis, in free markets customers might not willingly divest themselves of a dominant position because this shifts the relative balance of power in favour of suppliers.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Doing Business in Newly Privatized Markets

  Global Opportunities and Challenges

  • Russell Miller(Author)
  • 2000(Publication Date)
  • Praeger

    (Publisher)

  It also usually results in more competent enterprise management that has a vested interest in the company’s competitive success. This form of privatization also tends to avoid one of the basic problems that confronts many newly privatized enterprises: the lack of working capital. In most cases, the government verifies the availability of sufficient operating funds during the evaluation process. It is important to a divesting government that the enterprise, when privatized, is capable of continuing its operation without further government intervention. The use of trade sales that are negotiated with a selected number of potential buyers is often the preferred method of privatization in less developed markets. The governments in many of these countries clearly understand that this methodology provides an effective strategy for improving the competitive ability of the privatized firm through the potential infusion of managerial, technical, and marketing knowledge. Enhanced competitive competence is usually not available through the mass privatization process. The direct sale of stateowned assets to qualified bidders usually results in a better managed firm that provides a stronger customer base or a more competent partner. INITIAL PUBLIC OFFERINGS (IPOs) Issuing shares to the public through the flotation of an initial public offering is another privatization method that many governments use successfully. This method is especially popular in countries that possess a welldeveloped legal and financial framework. To be successful, an IPO depends on considerable transparency, both in the economy and within the firms to be sold to the public. This form of privatization also provides a method for a government to develop an equity market, while at the same time creating a broad class of share owners throughout the country.

  Sign up to read

  Learn more about book