The Challenges of Privatization

A combination of the Great Depression, Marxist ideology, and pragmatic politics led to widespread state ownership of productive enterprises in the post-1945 era, dramatized by the British Labour Party's mass nationalizations of the late 1940s. The economic inefficiencies of state-owned enterprises-especially due to overstaffing and the tendency to fall behind constantly advancing best practice in management, production, and marketing-grew more and more evident over time, and "privatization" became a rallying cry in the 1980s, proceeding apace around the world through the 1990s. This book usefully records and analyzes privatization between 1977 and 2001. The authors find a major slowdown after 1999 (1997 in Latin America), not because the stock of state-owned enterprises was exhausted but because the easy ones had been done and doubts began to be raised about the alleged benefits of privatization, which often seemed slow to materialize. The authors also find a general reluctance by governments to let go of their erstwhile charges, so many "privatized" enterprises are still subject to governmental control through one channel or another. Perhaps for this reason, the full expected gains in efficiency have not been realized. This book provides a useful, if preliminary, overview of a historically significant process.