An Appraisal of Privatization

An Appraisal of Privatization

This book offers comprehensive country-specific studies on the effects of privatization on people—winners and losers in different income, employment, and education groups.
Reality Check: The Distributional Impact of Privatization in Developing Countries, John Nellis and Nancy Birdsall, eds.
Published by The Center for Global Development 2005. 442 pp.

"Most studies of privatization look at what happens to companies; this volume looks at what happens to people—workers, consumers, and the disadvantaged. This is progress."
--Joseph Stiglitz, Professor, Columbia University

"Politically, privatization has always been a difficult sell: Critics claim it rewards the wealthy and the foreign at the expense of the poor and local. The studies in this book show this is not the case: privatization’s reputation is largely undeserved."
--Pedro-Pablo Kuczynski, Minister of Economy and Finance of Peru

The privatization of state-owned enterprises has been among the most controversial of market reforms. This new edited volume brings together a comprehensive set of country studies on the effects of privatization on people—and answers the overarching question: who are the winners and losers of the wave of privatizations that swept across the developing world in the 1980s and 1990s?

The studies are sophisticated and careful, and address the big questions: Are the poorest households paying more for water, power, and other basic services? Did those who lost jobs suffer permanent declines in income? Were state assets sold at prices that were too low, and who benefited from the resulting windfalls? Was the process, in laypersons’ terms, "fair"?

Some readers will be surprised at the general conclusion: that privatization has, in many cases, been a reasonably good thing, and not only for the rich. Others will be surprised at its limited effects. As privatization remains on the policy agenda despite public resistance and continuing controversy, almost all readers will want to understand the potential of privatization to stimulate competition while at the same time being fundamentally more just and fair.

The book is downloadable chapter by chapter with specific country studies including Brazil, Argentina, Russia and China. This 30-Page PDF by the same authors provides a useful summary of the topic.

The following conclusions are drawn from the report:
  • It is possible for governments to design and implement privatisation to obtain gains in efficiency, at least without harming distribution.
  • Efficiency gains do not automatically imply equity losses or increased poverty.
  • Minimising the sometimes real inequity in privatisation, and countering the misperception that it is inevitably unfair is important in order to preserve the political possibility of deepening and extending reform.

Book review reprinted with permission from The Center for Global Development. Book available for order from the Brookings Institute.

To read another Global Envision article about privatization, see Latin America's Explosive Debt.

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