The Political Economy of Privatization

This paper examines some of the main arguments relating to the effect of privatization on efficiency. It is concerned with both narrow economic issues and wider political issues. After a critical examination of some theories, which assert that private ownership is intrinsically more efficient than public ownership, it is argued that for large scale enterprise there are no strong economic reasons for believing in the superiority of private enterprise. As long as the government in question has the will and the power to make a public enterprise junction in a socially efficient fashion, the public enterprise may be just as efficient as private enterprise whilst offering additional economic and social advantages.