Privatization

The term privatization is used in two distinct but related ways. First, privatization is what occurs when an industry previously owned by the government is returned to the private sector. In the past a country may have “nationalized” an industry by either starting it or taking ownership of it. In either case the government owns the industry within the country. Through privatization, the government sells the various companies in the industry and thus relinquishes its ownership of the industry itself. In many cases this produces a great deal of cash for the country and is seen as a move toward CAPITALISM. Great Britain experienced massive privatization under Prime Minister Margaret Thatcher’s administration. Within the United States, the word privatization is used to refer to the practice of governments to hire private companies to carry out SERVICES normally done by the government. For example, many city and state governments outsource services for garbage collection, school buses, drivers’ license issuance, and penal corrections. Proponents of privatization say that it produces cost savings resulting from ECONOMIES OF SCALE, higher labor productivity, fewer legal requirements, and lack of COMPETITION in government. Opponents assert that there is not as much competition among suppliers as privatization’s supporters suggest and that privatization entails many hidden COSTS, such as those connected to monitoring the services being provided, and this actually make the alternative more expensive. Opponents also argue on the philosophical grounds that nongovernmental providers should not handle some services, no matter what the savings. For example, they question whether private companies should handle such matters as imprisonment, noting that the removal of someone’s liberty should only be carried out by governments, not by private businesses. Related to this is the concern that certain kinds of privatization may erode citizens’ legal rights when it is only a case of the lowest bidder is providing the service.