privatization

Policy or process of selling or transferring state-owned or public assets and services (notably nationalized industries) to private investors. Privatization of services involves the government giving contracts to private firms to supply services previously supplied by public authorities.

Supporters of privatization argue that the public benefits from theoretically greater efficiency from firms already in the competitive market, and the release of resources for more appropriate use by government. Those against privatization believe that it transfers a country's assets from all the people to a controlling minority, that public utilities such as gas and water become private monopolies, and that a profit-making state-owned company raises revenue for the government.

The trend has grown worldwide, since inefficient state-run enterprises with little accountability required ever-larger subsidies. Governments in the USA, the UK, France, Japan, and Italy have pursued the policy, as have a number of developing states that seek to stimulate economic activity. Poland and other East European states are moving away from the communist system of state-run enterprises toward a free-market economy, in hopes of producing more and higher quality goods and services. Deutsche Telekom, Germany's state-owned telephone company, offered shares to the public Oct 1996 in the biggest privatization to date in Europe. See also monetarism.

In 1997, privatizations worldwide were expected to go beyond the $100 billion mark for the first time, up 14% from the 1996 record and up 28% from 1995. This was announced in Paris in a report by the Organization for Economic Cooperation and Development. The largest privatization in 1996 was Deutsche Telekom ($13.3 billion) and the largest expected for 1997 was France Telecom.