No. 21, 1994 - Privatization: An Interpretative Endeavor

In this paper an attempt has been made to define the term privatisation in general. Therefore, this discussion is not directed towards the unique circumstances in Central and Eastern Europe (CEE), unless clearly specified. When almost every country in the world is moving towards privatisation, partly due to dissatisfaction with the performance of public enterprises and partly due to ideology, there are one definition of privatisation. Some (e.g., Ferguson, 1992, p. 490) have already cautioned that “privatisation implies the reduction of state influence in the operations to the firm. Beyond this there is no universally accepted definition.” Certainly, we should be careful to ensure that we are cautious when it comes to writing about privatisation, “a term as broad and elastic as motherhood” (Daintith, 1991, p.1).
To reduce the conceptual and definitional problems associated with the concept of privatisation, this paper divides it into privatisation operations (i.e. ownership changes in the form of partial or full divestiture, liquidation, etc.) and the process of privatisation (i.e. organisational and operational changes within SOEs, development of the private sector, rearrangement of state functions and strengthening of competition, etc.) Various motives and objectives of privatisation; relationships among ownership, competition and regulation; and between ownership and management are discussed. Theoretical justifications made by different schools are briefly analysed. Empirical studies by scholars in different countries comparing the performance of the public and private sector also are reviewed.
The paper is available here.