Privatization (also spelled privatisation) can mean different things including moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heavily regulated private company or industry becomes less regulated. Government functions and services may also be privatized; in this case, private entities are tasked with the implementation of government programs or performance of government services that had previously been the purview of state-run agencies. Some examples include revenue collection, law enforcement, and prison management.[1]

Another definition is the purchase of all outstanding shares of a publicly traded company by private investors, or the sale of a state-owned enterprise or municipally owned corporation to private investors. In the case of a for-profit company, the shares are then no longer traded at a stock exchange, as the company became private through private equity; in the case the partial or full sale of a state-owned enterprise or municipally owned corporation to private owners shares may be traded in the public market for the first time, or for the first time since an enterprise's previous nationalization. The second such type of privatization is the demutualization of a mutual organization, cooperative, or public-private partnership in order to form a joint-stock company.[2]


The Economist magazine introduced the term "privatization" (alternatively "privatisation" or "reprivatization" after the German Reprivatisierung) during the 1930s when it covered Nazi Germany's economic policy.[3][4] It is not clear if the magazine coincidentally invented the word in English or if the term is a loanword from the same expression in German, where it has been in use since the 19th century. [5]


The word privatization may mean different things depending on the context in which it is used. It can mean moving something from the public sphere into the private sphere, but it may also be used to describe something that was always private, but heavily regulated, which becomes less regulated through a process of deregulation. The term may also be used descriptively for something that has always been private, but could be public in other jurisdictions.[6]

There are also private entities that may perform public functions. These entities could also be described as privatized. Privatization may mean the government sells state-owned businesses to private interests, but it may also be discussed in the context of the privatization of services or government functions, where private entities are tasked with the implementation of government programs or performance of government services. Gillian E. Metzger has written that: "Private entities [in the US] provide a vast array of social services for the government; administer core aspects of government programs; and perform tasks that appear quintessentially governmental, such as promulgating standards or regulating third-party activities." Metzger mentions an expansion of privatization that includes health and welfare programs, public education, and prisons.[7]


Pre-20th century

The history of privatization dates from Ancient Greece, when governments contracted out almost everything to the private sector.[8] In the Roman Republic private individuals and companies performed the majority of services including tax collection (tax farming), army supplies (military contractors), religious sacrifices and construction. However, the Roman Empire also created state-owned enterprises—for example, much of the grain was eventually produced on estates owned by the Emperor. Some scholars suggest that the cost of bureaucracy was one of the reasons for the fall of the Roman Empire.[8]

Perhaps one of the first ideological movements towards privatization came during China's golden age of the Han Dynasty. Taoism came into prominence for the first time at a state level, and it advocated the laissez-faire principle of Wu wei (無為), literally meaning "do nothing".[9] The rulers were counseled by the Taoist clergy that a strong ruler was virtually invisible.

During the Renaissance, most of Europe was still by and large following the feudal economic model. By contrast, the Ming dynasty in China began once more to practice privatization, especially with regards to their manufacturing industries. This was a reversal of the earlier Song dynasty policies, which had themselves overturned earlier policies in favor of more rigorous state control.[10]

In Britain, the privatization of common lands is referred to as enclosure (in Scotland as the Lowland Clearances and the Highland Clearances). Significant privatizations of this nature occurred from 1760 to 1820, preceding the industrial revolution in that country.

20th century onwards

The first mass privatization of state property occurred in Nazi Germany between 1933-37: "It is a fact that the government of the National Socialist Party sold off public ownership in several state-owned firms in the middle of the 1930s. The firms belonged to a wide range of sectors: steel, mining, banking, local public utilities, shipyard, ship-lines, railways, etc. In addition to this, delivery of some public services produced by public administrations prior to the 1930s, especially social services and services related to work, was transferred to the private sector, mainly to several organizations within the Nazi Party."[11]

Great Britain privatized its steel industry in the 1950s, and the West German government embarked on large-scale privatization, including sale of the majority stake in Volkswagen to small investors in public share offerings in 1961.[8] However, it was in the 1980s under Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States that privatization gained worldwide momentum. Notable privatization attempts in the UK included privatization of Britoil (1982), Amersham International PLC (1982), British Telecom (1984), Sealink ferries (1984), British Petroleum (gradually privatized between 1979 and 1987), British Aerospace (1985 to 1987), British Gas (1986), Rolls-Royce (1987), Rover Group (formerly British Leyland, 1988), British Steel Corporation (1988), and the regional water authorities (mostly in 1989). After 1979, council house tenants in the UK were given the right to buy their homes (at a heavily discounted rate). One million purchased their residences by 1986.

Such efforts culminated in 1993 when British Rail was privatized under Thatcher's successor, John Major. British Rail had been formed by prior nationalization of private rail companies. The privatization was controversial, and the its impact is still debated today, as doubling of passenger numbers and investment was balanced by an increase in rail subsidy.[12]

Privatization in Latin America flourished in the 1980s and 1990s as a result of a Western liberal economic policy. Companies providing public services such as water management, transportation, and telecommunication were rapidly sold off to the private sector. In the 1990s, privatization revenue from 18 Latin American countries totaled 6% of gross domestic product.[13] Private investment in infrastructure from 1990 and 2001 reached $360.5 billion, $150 billion more than in the next emerging economy.[13]

While economists generally give favorable evaluations of the impact of privatization in Latin America,[14] opinion polls and public protests across the countries suggest that a large segment of the public is dissatisfied with or have negative views of privatization in the region.[15]

In the 1990s, the governments in Eastern and Central Europe engaged in extensive privatization of state-owned enterprises in Eastern and Central Europe and Russia, with assistance from the World Bank, the U.S. Agency for International Development, the German Treuhand, and other governmental and nongovernmental organizations.

Ongoing privatization of Japan Post relates to that of the national postal service and one of the largest banks in the world. After years of debate, the privatization of Japan Post spearheaded by Junichiro Koizumi finally started in 2007. The privatization process is expected to last until 2017. Japan Post was one of the nation's largest employers, as one-third of Japanese state employees worked for it. It was also said to be the largest holder of personal savings in the world. Criticisms against Japan Post were that it served as a channel of corruption and was inefficient. In September 2003, Koizumi's cabinet proposed splitting Japan Post into four separate companies: a bank, an insurance company, a postal service company, and a fourth company to handle the post offices and retail storefronts of the other three.

After the Upper House rejected privatization, Koizumi scheduled nationwide elections for September 11, 2005. He declared the election to be a referendum on postal privatization. Koizumi subsequently won the election, gaining the necessary supermajority and a mandate for reform, and in October 2005, the bill was passed to privatize Japan Post in 2007.[16]

Nippon Telegraph and Telephone's privatization in 1987 involved the largest share offering in financial history at the time.[17] 15 of the world's 20 largest public share offerings have been privatizations of telecoms.[17]

In 1988, the perestroika policy of Mikhail Gorbachev started allowing privatization of the centrally planned economy. Large privatization of the Soviet economy occurred over the next few years as the country dissolved. Other Eastern Bloc countries followed suit after the Revolutions of 1989 introduced non-communist governments.

The United Kingdom's largest public share offerings were privatizations of British Telecom and British Gas during the 1980s under the Conservative government of Margaret Thatcher, when many state-run firms were sold off to the private sector. The privatization received very mixed views from the public and the parliament. Even former Conservative prime minister Harold Macmillan was critical of the policy, likening it to "selling the family silver".[18] There were around 3 million shareholders in Britain when Thatcher took office in 1979, but the subsequent sale of state-run firms saw the number of shareholders double by 1985. By the time of her resignation in 1990, there were more than 10 million shareholders in Britain.[19]

The largest public shares offering in France involved France Télécom.

Egypt undertook widespread privatization under Hosni Mubarak. He was later overthrown in the 2011 revolution, the public called for re-nationalization as the privatized firms were accused of practicing crony capitalism with the old regime.[20]

Medicare and Medicaid managed care

In the United States, under the Medicare managed care the government pays a managed care organization (MCO) a fixed amount called the "capitated rate" for all medical services received by a beneficiary in a given period. Enrollment in the programs has increased substantially since 1990; in 2002 60% of Medicaid beneficiaries and 12% of Medicare beneficiaries were being treated by MCOs. Private sector involvement in Medicare and Medicaid is not limited to MCOs; private doctors, hospitals, nursing homes provide medical care; reimbursement claims are processed by private intermediaries; and peer review organizations, utilization review committees and accreditation organizations like JCAHO are staffed by private medical personnel.[7]

Welfare privatization

Homeless shelters and food banks are run by private organizations, who also provide treatment services, operate Head Start programs and work with child welfare agencies. Privatization of welfare system expanded in 1996, when the Aid to Families with Dependent Child (AFDC) program was replaced with the Temporary Aid to Needy Families (TANF) program. Welfare services that are often privatized include workforce development, job training and job placement are often privatized.[7]

Public education

There is also some private sector involvement in the public education system including charter schools, Educational Management Organizations (EMOs), and school voucher programs. EMOs are usually for-profit and manage charter schools and sometimes traditional public schools as well. The United States Supreme Court upheld school voucher programs against an Establishment Clause challenge in Zelman v. Simmons-Harris.[7]

Private prisons

In the US in 2001, private prison facilities housed 12.3% of all federal prisoners and 5.8% of state prisoners. Contracts for these private prisons regulate prison conditions and operation, but the nature of running a prison requires a substantial exercise of discretion. Private prisons are more exposed to liability than state run prisons.[7]

Foreign affairs

Both for-profit and non-profit entities are tasked with various responsibilities related to the US foreign aid budget such as providing emergency humanitarian relief, development assistance, as well as post-conflict reconstruction efforts. Similarly, private entities have started to perform tasks that have traditionally been regarded as falling within the government's diplomatic and military authority like participating in peace negotiations, military training, intelligence gathering and other security services or combat-related missions. Many of the military interrogators at Abu Ghraib prison were provided by a private contractor and lacked formal military training; this was subsequently identified as a contributing factor to detainee abuse at the prison by the Fay report.[21]

The United Nations uses private subcontractors as well, and in some cases, "failed states" have relied on private entities extensively for a range of tasks including building critical infrastructure, managing social services programs and using private military companies during the course of armed conflicts.

US Constitution

The United States Constitution only constrains state action and, with few exceptions, "erects no shield against merely private conduct, however discriminatory or wrongful".[22][7] Gillian Metzger writes:

Adequately guarding against abuse of public power requires application of constitutional principles to every exercise of state authority, regardless of the formal public or private status of the actor involved: 'It surely cannot be that government, state or federal, is able to evade the most solemn obligations imposed in the Constitution by simply resorting to the corporate form' and thereby transferring operation of government programs to private hands"

Even if private actors can't be held accountable through the traditional constitutional mechanism, they may be bound by other regulatory or contractual requirements. Tort law might be another avenue of protection, and some may argue that this protection could be even more effective as public agencies and employees usually enjoy some degree of immunity from civil liability.[7][21]

Forms of privatisation

There are five main methods of privatization:

  1. Share issue privatization: Shares sale on the stock market.
  2. Asset sale privatization: Asset divestiture to a strategic investor, usually by auction or through the Treuhand model.
  3. Voucher privatization: Distribution of vouchers, which represent part ownership of a corporation, to all citizens, usually for free or at a very low price.
  4. Privatization from below: Start of new private businesses in formerly socialist countries.
  5. Management buyout or employee buyout: Distribution of shares for free or at a very low price to workers or management of the organization.

The choice of sale method is influenced by the capital market and the political and firm-specific factors. Privatization through the stock market is more likely to be the method used when there is an established capital market capable of absorbing the shares. A market with high liquidity can facilitate the privatization. If the capital markets are insufficiently developed, however, it would be difficult to find enough buyers. The shares may have to be underpriced, and the sales may not raise as much capital as would be justified by the fair value of the company being privatized. Many governments, therefore, elect for listings in more sophisticated markets, for example, Euronext, and the London, New York and Hong Kong stock exchanges.

Governments in developing countries and transition countries more often resort to direct asset sales to a few investors, partly because those countries do not yet have a stock market with high capital.

Voucher privatization occurred mainly in the transition economies in Central and Eastern Europe, such as Russia, Poland, the Czech Republic, and Slovakia. Additionally, privatization from below had made important contribution to economic growth in transition economies.

In one study assimilating some of the literature on "privatization" that occurred in Russian and Czech Republic transition economies, the authors identified three methods of privatization: "privatization by sale", "mass privatization", and "mixed privatization". Their calculations showed that "mass privatization" was the most effective method.[23]

However, in economies "characterized by shortages" and maintained by the state bureaucracy, wealth was accumulated and concentrated by "gray/black market" operators. Privatizing industries by sale to these individuals did not mean a transition to "effective private sector owners [of former] state assets". Rather than mainly participating in a market economy, these individuals could prefer elevating their personal status or prefer accumulating political power. Instead, outside foreign investment led to the efficient conduct of former state assets in the private sector and market economy.[23]

Through privatization by direct asset sale or the stock market, bidders compete to offer higher prices, generating more revenue for the state. Voucher privatization, on the other hand, could represent a genuine transfer of assets to the general population, creating a sense of participation and inclusion. A market could be created if the government permits transfer of vouchers among voucher holders.

Secured borrowing

Some privatization transactions can be interpreted as a form of a secured loan[24][25] and are criticized as a "particularly noxious form of governmental debt".[24] In this interpretation, the upfront payment from the privatization sale corresponds to the principal amount of the loan, while the proceeds from the underlying asset correspond to secured interest payments – the transaction can be considered substantively the same as a secured loan, though it is structured as a sale.[24] This interpretation is particularly argued to apply to recent municipal transactions in the United States, particularly for fixed term, such as the 2008 sale of the proceeds from Chicago parking meters for 75 years. It is argued that this is motivated by "politicians' desires to borrow money surreptitiously",[24] due to legal restrictions on and political resistance to alternative sources of revenue, viz, raising taxes or issuing debt.


Literature reviews[26][27] find that in competitive industries with well-informed consumers, privatization consistently improves efficiency. The more competitive the industry, the greater the improvement in output, profitability, and efficiency.[28] Such efficiency gains mean a one-off increase in GDP, but through improved incentives to innovate and reduce costs also tend to raise the rate of economic growth. Although typically there are many costs associated with these efficiency gains,[29] many economists argue that these can be dealt with by appropriate government support through redistribution and perhaps retraining[citation needed]. Yet, some empirical literature suggests that privatization could also have very modest effects on efficiency and quite regressive distributive impact. In the first attempt at a social welfare analysis of the British privatization program under the Conservative governments of Margaret Thatcher and John Major during the 1980s and 1990s, Massimo Florio points to the absence of any productivity shock resulting strictly from ownership change. Instead, the impact on the previously nationalized companies of the UK productivity leap under the Conservatives varied in different industries. In some cases, it occurred prior to privatization, and in other cases, it occurred upon privatization or several years afterward.[30]

A study by the European Commission found that the UK rail network (which was privatized from 1994–97) was most improved out of all the 27 EU nations from 1997–2012. The report examined a range of 14 different factors and the UK came top in four of the factors, second and third in another two and fourth in three, coming top overall.[31]

Privatizations in Russia and Latin America were accompanied by large-scale corruption during the sale of the state-owned companies. Those with political connections unfairly gained large wealth, which has discredited privatization in these regions. While media have widely reported the grand corruption that accompanied those sales, studies have argued that in addition to increased operating efficiency, daily petty corruption is, or would be, larger without privatization, and that corruption is more prevalent in non-privatized sectors. Furthermore, there is evidence to suggest that extralegal and unofficial activities are more prevalent in countries that privatized less.[32]

A 2009 study published in The Lancet medical journal initially claimed to have found that as many as a million working men died as a result of economic shocks associated with mass privatization in the former Soviet Union and in Eastern Europe during the 1990s,[33][34] although a further study revealed that there were errors in their method and "correlations reported in the original article are simply not robust."[35] Historian Walter Scheidel, a specialist in ancient history, posits that economic inequality and wealth concentration in the top percentile "had been made possible by the transfer of state assets to private owners."[36]

In Latin America, there is a discrepancy between the economic efficiency of privatization and the political/social ramifications that occur. On the one hand, economic indicators, including firm profitability, productivity, and growth, project positive microeconomic results.[13] On the other hand, however, these results have largely been met with a negative criticism and citizen coalitions. This neoliberal criticism highlights the ongoing conflict between varying visions of economic development. Karl Polanyi emphasizes the societal concerns of self-regulating markets through a concept known as a "double movement". In essence, whenever societies move towards increasingly unrestrained, free-market rule, a natural and inevitable societal correction emerges to undermine the contradictions of capitalism. This was the case in the 2000 Cochabamba protests.

Privatization in Latin America has invariably experienced increasing push-back from the public. Some suggest that implementing a less efficient but more politically mindful approach could be more sustainable.[37]

In India, a survey by the National Commission for Protection of Child Rights (NCPCR) —Utilization of Free Medical Services by Children Belonging to the Economically Weaker Section (EWS) in Private Hospitals in New Delhi, 2011-12: A Rapid Appraisal—indicates under-utilization of the free beds available for EWS category in private hospitals in Delhi, though they were allotted land at subsidized rates.[38]

In Australia a "People's Inquiry into Privatisation" (2016/17) found that the impact of privatisation on communities was negative. The report from the inquiry "Taking Back Control" made a range of recommendations to provide accountability and transparency in the process. The report highlighted privatisation in healthcare, aged care, child care, social services, government departments, electricity, prisons and vocational education featuring the voices of workers, community members and academics.


Arguments for and against the controversial subject of privatization are presented here.


Studies show that private market factors can more efficiently deliver many goods or service than governments due to free market competition.[26][27][28] Over time this tends to lead to lower prices, improved quality, more choices, less corruption, less red tape, and/or quicker delivery. Many proponents do not argue that everything should be privatized. According to them, market failures and natural monopolies could be problematic. However, anarcho-capitalists prefer that every function of the state be privatized, including defense and dispute resolution.[39]

Proponents of privatization make the following arguments:

  • Performance. State-run industries tend to be bureaucratic. A political government may only be motivated to improve a function when its poor performance becomes politically sensitive.
  • Increased efficiency. Private companies and firms have a greater incentive to produce goods and services more efficiently to increase profits.
  • Specialization. A private business has the ability to focus all relevant human and financial resources onto specific functions. A state-owned firm does not have the necessary resources to specialize its goods and services as a result of the general products provided to the greatest number of people in the population.
  • Improvements. Conversely, the government may put off improvements due to political sensitivity and special interests—even in cases of companies that are run well and better serve their customers' needs.
  • Corruption. A state-monopolized function is prone to corruption; decisions are made primarily for political reasons, personal gain of the decision-maker (i.e. "graft"), rather than economic ones. Corruption (or principal–agent issues) in a state-run corporation affects the ongoing asset stream and company performance, whereas any corruption that may occur during the privatization process is a one-time event and does not affect ongoing cash flow or performance of the company.
  • Accountability. Managers of privately owned companies are accountable to their owners/shareholders and to the consumer, and can only exist and thrive where needs are met. Managers of publicly owned companies are required to be more accountable to the broader community and to political "stakeholders". This can reduce their ability to directly and specifically serve the needs of their customers, and can bias investment decisions away from otherwise profitable areas.
  • Civil-liberty concerns. A company controlled by the state may have access to information or assets which may be used against dissidents or any individuals who disagree with their policies.
  • Goals. A political government tends to run an industry or company for political goals rather than economic ones.
  • Capital. Privately held companies can sometimes more easily raise investment capital in the financial markets when such local markets exist and are suitably liquid. While interest rates for private companies are often higher than for government debt, this can serve as a useful constraint to promote efficient investments by private companies, instead of cross-subsidizing them with the overall credit-risk of the country. Investment decisions are then governed by market interest rates. State-owned industries have to compete with demands from other government departments and special interests. In either case, for smaller markets, political risk may add substantially to the cost of capital.
  • Security. Governments have had the tendency to "bail out" poorly run businesses, often due to the sensitivity of job losses, when economically, it may be better to let the business fold.
  • Lack of market discipline. Poorly managed state companies are insulated from the same discipline as private companies, which could go bankrupt, have their management removed, or be taken over by competitors. Private companies are also able to take greater risks and then seek bankruptcy protection against creditors if those risks turn sour.
  • Natural monopolies. The existence of natural monopolies does not mean that these sectors must be state owned. Governments can enact or are armed with anti-trust legislation and bodies to deal with anti-competitive behavior of all companies public or private.
  • Concentration of wealth. Ownership of and profits from successful enterprises tend to be dispersed and diversified -particularly in voucher privatization. The availability of more investment vehicles stimulates capital markets and promotes liquidity and job creation.
  • Political influence. Nationalized industries are prone to interference from politicians for political or populist reasons. Examples include making an industry buy supplies from local producers (when that may be more expensive than buying from abroad), forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce unemployment, or moving its operations to marginal constituencies.
  • Profits. Corporations exist to generate profits for their shareholders. Private companies make a profit by enticing consumers to buy their products in preference to their competitors' (or by increasing primary demand for their products, or by reducing costs). Private corporations typically profit more if they serve the needs of their clients well. Corporations of different sizes may target different market niches in order to focus on marginal groups and satisfy their demand. A company with good corporate governance will therefore be incentivized to meet the needs of its customers efficiently.
  • Job gains. As the economy becomes more efficient, more profits are obtained and no government subsidies and less taxes are needed, there will be more private money available for investments and consumption and more profitable and better-paid jobs will be created than in the case of a more regulated economy.[40]


Opponents of certain privatizations believe that certain public goods and services should remain primarily in the hands of government in order to ensure that everyone in society has access to them (such as law enforcement, basic health care, and basic education). There is a positive externality when the government provides society at large with public goods and services such as defense and disease control. Some national constitutions in effect define their governments' "core businesses" as being the provision of such things as justice, tranquility, defense, and general welfare. These governments' direct provision of security, stability, and safety, is intended to be done for the common good (in the public interest) with a long-term (for posterity) perspective. As for natural monopolies, opponents of privatization claim that they aren't subject to fair competition, and better administrated by the state.

Although private companies will provide a similar good or service alongside the government, opponents of privatization are careful about completely transferring the provision of public goods, services and assets into private hands for the following reasons:

  • Performance. A democratically elected government is accountable to the people through a legislature, Congress or Parliament, and is motivated to safeguarding the assets of the nation. The profit motive may be subordinated to social objectives.
  • Improvements. the government is motivated to performance improvements as well run businesses contribute to the State's revenues.
  • Corruption. Government ministers and civil servants are bound to uphold the highest ethical standards, and standards of probity are guaranteed through codes of conduct and declarations of interest. However, the selling process could lack transparency, allowing the purchaser and civil servants controlling the sale to gain personally.
  • Accountability. The public has less control and oversight of private companies.
  • Civil-liberty concerns. A democratically elected government is accountable to the people through a parliament, and can intervene when civil liberties are threatened.
  • Goals. The government may seek to use state companies as instruments to further social goals for the benefit of the nation as a whole.
  • Capital. Governments can raise money in the financial markets most cheaply to re-lend to state-owned enterprises.
  • Cuts in essential services. If a government-owned company providing an essential service (such as the water supply) to all citizens is privatized, its new owner(s) could lead to the abandoning of the social obligation to those who are less able to pay, or to regions where this service is unprofitable.
  • Natural monopolies. Privatization will not result in true competition if a natural monopoly exists.
  • Concentration of wealth. Profits from successful enterprises end up in private, often foreign, hands instead of being available for the common good.
  • Political influence. Governments may more easily exert pressure on state-owned firms to help implementing government policy.
  • Profit. Private companies do not have any goal other than to maximize profits. A private company will serve the needs of those who are most willing (and able) to pay, as opposed to the needs of the majority, and are thus anti-democratic. The more necessary a good is, the lower the price elasticity of demand, as people will attempt to buy it no matter the price. In the case of a price elasticity of demand of zero (perfectly inelastic good), the demand part of supply and demand theories does not work.
  • Privatization and poverty. It is acknowledged by many studies that there are winners and losers with privatization. The number of losers—which may add up to the size and severity of poverty—can be unexpectedly large if the method and process of privatization and how it is implemented are seriously flawed (e.g. lack of transparency leading to state-owned assets being appropriated at minuscule amounts by those with political connections, absence of regulatory institutions leading to transfer of monopoly rents from public to private sector, improper design and inadequate control of the privatization process leading to asset stripping).[41]
  • Job loss. Due to the additional financial burden placed on privatized companies to succeed without any government help, unlike the public companies, jobs could be lost to keep more money in the company.
  • Reduced wages and benefits. A 2014 report by In the Public Interest, a resource center on privatization,[42] argues that "outsourcing public services sets off a downward spiral in which reduced worker wages and benefits can hurt the local economy and overall stability of middle and working class communities."[43]
  • Inferior quality products. Private, for-profit companies might cut corners on providing quality goods and services in order to maximize profit.[44]

Economic theory

In economic theory, privatization has been studied in the field of contract theory. When contracts are complete, institutions such as (private or public) property are difficult to explain, since every desired incentive structure can be achieved with sufficiently complex contractual arrangements, regardless of the institutional structure (all that matters is who are the decision makers and what is their available information). In contrast, when contracts are incomplete, institutions matter. A leading application of the incomplete contract paradigm in the context of privatization is the model by Hart, Shleifer, and Vishny (1997).[45] In their model, a manager can make investments to increase quality (but they may also increase costs) and investments to decrease costs (but they may also reduce quality). It turns out that it depends on the particular situation whether private ownership or public ownership is desirable. The Hart-Shleifer-Vishny model has been further developed in various directions, e.g. to allow for mixed public-private ownership and endogenous assignments of the investment tasks.[46]

See also


  1. ^ Chowdhury, F. L. ‘’Corrupt Bureaucracy and Privatisation of Tax Enforcement’’, 2006: Pathak Samabesh, Dhaka.
  2. ^ "Musselburgh Co-op in crisis as privatization bid fails". Co-operative News. 2005-11-01. Retrieved 2008-05-21.
  3. ^ Edwards, Ruth Dudley (1995). The Pursuit of Reason: The Economist 1843–1993. Harvard Business School Press. p. 946. ISBN 978-0-87584-608-8.
  4. ^ Compare Bel, Germà (2006). "Retrospectives: The Coining of 'Privatisation' and Germany's National Socialist Party". Journal of Economic Perspectives. 20 (3): 187–94. CiteSeerX doi:10.1257/jep.20.3.187.
  5. ^ Kämmerer, Jörn Axel (2001). Privatisierung: Typologie – Determinanten – Rechtspraxis – Folgen. Mohr Siebeck Verlag. p. 7. ISBN 978-3-16-147515-3.
  6. ^ Beerman, Jack (2001-01-01). "Privatization and Political Accountability". Fordham Urban Law Journal. 28 (5): 1507.
  7. ^ a b c d e f g Metzger, Gillian (2003-01-01). "Privatization as Delegation". Colum. L. Rev.: 1367.
  8. ^ a b c International Handbook on Privatization by David Parker, David S. Saal
  9. ^ Li & Zheng 2001, p. 241
  10. ^ Bouye, Thomas M., Manslaughter, markets, and moral economy
  11. ^ Bel, Germà (2010-02-01). "Against the mainstream: Nazi privatization in 1930s Germany1". The Economic History Review. 63 (1): 34–55. doi:10.1111/j.1468-0289.2009.00473.x. hdl:2445/11716. ISSN 1468-0289.
  12. ^ Birrell, Ian (2013-08-15). "Forget the nostalgia for British Rail – our trains are better than ever". The Guardian.
  13. ^ a b c "Privatization in Latin America: The rapid rise, recent fall, and continuing puzzle of a contentious economic policy" by John Nellis, Rachel Menezes, Sarah Lucas. Center for Global Development Policy Brief, Jan 2004, p. 1.
  14. ^ "The Distributive Impact of Privatization in Latin America: Evidence from Four Countries" by David McKenzie, Dilip Mookherjee, Gonzalo Castañeda and Jaime Saavedra. Brookings Institution Press, 2008, p. 162.
  15. ^ "Why is Sector Reform So Unpopular in Latin America?" by Mary Shirley. The Ronald Coase Institute Working Papers, 2004, p. 1.
  16. ^ Takahara, "All eyes on Japan Post"Faiola, Anthony (2005-10-15). "Japan Approves Postal Privatization". Washington Post. The Washington Post Company. p. A10. Retrieved 2007-02-09.
  17. ^ a b The Financial Economics of Privatisation By William L. Megginson, pp. 205–06
  18. ^ [1] Archived June 23, 2012, at the Wayback Machine
  19. ^ "Thatcher years in graphics". BBC News. 2005-11-18.
  20. ^ Amos, Deborah, "In Egypt, Revolution Moves Into The Factories", NPR, April 20, 2011. Retrieved 2011-04-20.
  21. ^ a b Dickinson, Laura A (2005). "Government For Hire: Privatizing Foreign Affairs and the Problem of Accountability Under International Law". William and Mary Law Review. 47: 104.
  22. ^ Shelley v. Kraemer, 334 U.S. 1, 13 (1948)
  23. ^ a b John Bennett, Saul Estrin, and Giovanni Urga (2007). "Methods of privatization and economic growth in transition economies" (PDF). Economies of Transition. 15 (4): 661–683. doi:10.1111/j.1468-0351.2007.00300.x. hdl:10419/140745. Retrieved 18 June 2017.CS1 maint: Multiple names: authors list (link)
  24. ^ a b c d Roin, Julie (2011-07-06). "Privatization and the Sale of Tax Revenues". SSRN 1880033, also published as "Privatization and the Sale of Tax Revenues" in Minnesota Law Review, Vol. 85, p. 1965, 2011, and U of Chicago Law & Economics, Olin Working Paper No. 560
  25. ^ U. of C. professor argues privatization of public assets just like borrowing money, July 22, 2011, Chicago Tribune, Ameet Sachdev's Chicago Law, Ameet Sachdev
  26. ^ a b "Privatisation in Competitive Sectors: The Record to Date, World Bank Policy Research Working Paper No. 2860". John Nellis and Sunita Kikeri. June 2002. SSRN 636224.
  27. ^ a b "From State To Market: A Survey Of Empirical Studies On Privatisation" (PDF). William L. Megginson and Jeffry M. Netter. Journal of Economic Literature. June 2001. Archived from the original (PDF) on 2005-10-02.
  28. ^ a b "Privatising State-owned Enterprises" (PDF). 2010-02-22. p. 9. Archived from the original (PDF) on 2011-09-09. Retrieved 2011-07-11.
  29. ^ "Winners and Losers: Assessing the Distributional Impact of Privatisation, CGD Working Paper No 6" (PDF). Nancy Birdsall & John Nellis. Center for Global Development. March 9, 2006. Archived from the original (PDF) on 2005-06-23. Retrieved 2005-06-23.
  30. ^ Evenson, Robert E.; Megginson, William L. (2006). "Reviewed work: The Great Divestiture: Evaluating the Welfare Impact of the British Privatizations, 1979-1997, Massimo Florio". Journal of Economic Literature. 44 (1): 172–174. JSTOR 30032311.
  31. ^ "European rail study report".
  32. ^ Privatisation in Competitive Sectors: The Record to Date. Sunita Kikeri and John Nellis. World Bank Policy Research Working Paper 2860, June 2002. Privatisation and Corruption. David Martimort and Stéphane Straub.
  33. ^ "Death surge linked with mass privatisation". University of Oxford. 2009. Archived from the original on 2014-07-02. Retrieved 2015-06-28.
  34. ^ Privatisation 'raised death rate'. BBC, 15 January 2009. Retrieved 29 June 2014.
  35. ^ Earle, John S.; Gehlbach, Scott (2010-01-30). "Did mass privatisation really increase post-communist mortality?". The Lancet. 375 (9712): 372, author reply 372–4. doi:10.1016/S0140-6736(10)60159-6. PMID 20113819.
  36. ^ Scheidel, Walter (2017). The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century. Princeton University Press. p. 222. ISBN 978-0691165028.
  37. ^ "Why is Sector Reform So Unpopular in Latin America?" by Mary Shirley. The Ronald Coase Institute Working Paper, 2004, p. 1.
  38. ^ Perappadan, Bindu shajan (August 17, 2013). "Private hospitals shun destitute children". The Hindu. Retrieved 21 August 2013.
  39. ^ "Review of Kosanke's Instead of Politics – Don Stacy" Libertarian Papers VOL. 3, ART. NO. 3 (2011)
  40. ^ Central Europe's Mass-Production Privatization Archived 2009-10-18 at the Wayback Machine, Heritage Lecture #352
  41. ^ Dagdeviren (2006). "Revisiting privatisation in the context of poverty alleviation". Journal of International Development. 18 (4): 469–88. doi:10.1002/jid.1244.
  42. ^ David Moberg (6 June 2014). Privatizing Government Services Doesn’t Only Hurt Public Workers. In These Times. Retrieved 28 June 2014.
  43. ^ Race to the Bottom: How Outsourcing Public Services Rewards Corporations and Punishes the Middle Class Archived 2014-06-04 at the Library of Congress Web Archives. In the Public Interest, 3 June 2014. Retrieved 7 June 2014.
  44. ^ Joshua Holland (17 July 2014). How a Bogus, Industry-Funded Study Helped Spur a Privatization Disaster in Michigan. Moyers & Company. Retrieved 20 July 2014.
  45. ^ Hart, Oliver; Shleifer, Andrei; Vishny, Robert W. (1997). "The Proper Scope of Government: Theory and an Application to Prisons". The Quarterly Journal of Economics. 112 (4): 1127–1161. CiteSeerX doi:10.1162/003355300555448. ISSN 0033-5533.
  46. ^ Hoppe, Eva I.; Schmitz, Patrick W. (2010). "Public versus private ownership: Quantity contracts and the allocation of investment tasks". Journal of Public Economics. 94 (3–4): 258–68. doi:10.1016/j.jpubeco.2009.11.009.



External links


Corporatization is the process of transforming state assets, government agencies, or municipal organizations into corporations. It refers to a restructuring of government and public organizations into their administration. The result of corporatization is the creation of state-owned corporations (or corporations at other government levels, such as municipally owned corporations) where the government retains a majority ownership of the corporation's stock.In contrast, the term may also refer to the construction of state corporatism, where state-owned corporations are created and delegated public joint-stock, publicly listed companies, in order to introduce corporate and business management techniques to social tasks resembling corporate nationalism as an alternative to privatization.[citation needed] Corporatization can also refer to non-corporate entities like universities or hospitals becoming corporations, or taking up management structures or other features and behaviors employed by corporations.[citation needed]

Detroit Water and Sewerage Department

The Detroit Water and Sewerage Department (DWSD) is a public utility that provides water and sewerage services for Detroit, Michigan and owns the assets that provide water and sewerage services to 126 other communities in seven counties. It is one of the largest water and sewer systems in the United States. In 2000, the utility utilized five water treatment plants using water from the Detroit River and Lake Huron. In mid 2014, the DWSD had acquired significant debt and delinquent accounts, and talks of privatization were occurring. As of January 1, 2016, under the terms of the City of Detroit's municipal bankruptcy the Great Lakes Water Authority (GLWA) was created with a $50 million annual lease agreement to the City of Detroit for 40 years, while the DWSD bifurcated to focus its services specifically on the water and sewer customers within only the city of Detroit.

Emmaus, Pennsylvania

Emmaus ( em-AY-əs) is a borough in Lehigh County, Pennsylvania, in the United States. It is located 5 miles (8.0 km) southwest of Allentown, Pennsylvania, in the Lehigh Valley region of the state. It is 50 miles (80 km) north of Philadelphia, Pennsylvania's largest city, and 20 miles (32 km) west of the Delaware River. Emmaus is located in the Allentown-Bethlehem-Easton, PA-NJ Metropolitan Statistical Area, which is in the New York City-Newark, New Jersey, NY-NJ-CT-PA Combined Statistical Area.

The population of Emmaus was 11,368 in 2015. This borough has been given many awards, including the Delaware Valley Green Building Council's Sustainable Community Award. In 2007 and 2009, Emmaus has been listed as one of the top 100 "Best Places to Live" in the United States by Money magazine.

Energy in Thailand

Energy in Thailand refers to energy and electricity production, consumption, import and export in Thailand. According to the Ministry of Energy, the country's primary energy consumption was 75.2 Mtoe (million tonnes of oil equivalent) in 2013, an increase of 2.6 percent over the previous year. According to British Petroleum, energy consumption was 115.6 Mtoe in 2013.

Intercontinental Broadcasting Corporation

Intercontinental Broadcasting Corporation (IBC) is a Philippine-based media company and VHF television network of the Government Communications Group under the Presidential Communications Operations Office (PCOO). IBC, along with sister media companies People's Television Network and Philippine Broadcasting Service, forms the media arm of the PCOO. Its studios, offices and broadcast facilities are located at the IBC 13 Compound, Lot 3-B, Capitol Hills Drive cor. Zuzuarregui Street, Barangay Matandang Balara, Diliman, Quezon City.

Japan Post

Japan Post (日本郵政公社, Nippon Yūsei Kōsha) was a government-owned corporation in Japan that existed from 2003 to 2007, offering postal and package delivery services, banking services, and life insurance. It was the nation's largest employer, with over 400,000 employees, and ran 24,700 post offices throughout Japan. One third of all Japanese government employees worked for Japan Post. As of 2005, the President of the company was Masaharu Ikuta, formerly Chairman of Mitsui O.S.K. Lines Ltd.

Japan Post ran the world's largest postal savings system and was often said to be the largest holder of personal savings in the world: with ¥224 trillion ($2.1 trillion) of household assets in its yū-cho savings accounts, and ¥126 trillion ($1.2 trillion) of household assets in its kampo life insurance services; its holdings accounted for 25 percent of household assets in Japan. Japan Post also held about ¥140 trillion (one fifth) of the Japanese national debt in the form of government bonds.

On October 1, 2007, Japan Post was privatized following a fierce political debate that was settled by the general election of 2005. Following privatization, Japan Post Holdings operate the postal business.

In 2010, privatization was put on hold. The Japanese Ministry of Finance remains the 100% shareholder. However, on October 26, 2012, the Japanese government unveiled plans to list shares of Japan Post Holdings within three years, partly to raise money for the reconstruction of areas devastated by the earthquake and tsunami of 2011.

Marriage privatization

Marriage privatization is the concept that the state should have no authority to define the terms of personal relationships such as marriage. Proponents of marriage privatization, including certain minarchists, anarchists, libertarians, and opponents of government interventionism, claim that such relationships are best defined by private individuals and not the state. Arguments for the privatization of marriage have been offered by a number of scholars and writers. Proponents of marriage privatization often argue that privatizing marriage is a solution to the social controversy over same-sex marriage. Arguments for and against the privatization of marriage span both liberal and conservative political camps.

Polycentric law

Polycentric law is a legal structure in which providers of legal systems compete or overlap in a given jurisdiction, as opposed to monopolistic statutory law according to which there is a sole provider of law for each jurisdiction. Devolution of this monopoly occurs by the principle of jurisprudence in which they rule according to higher law.

Privatisation in Pakistan

The Privatization process in Pakistan (sometimes referred to as Denationalization programme or simply the Privatization in Pakistan) was a policy measure programme in the economic period of Pakistan. It was first conceived and implemented by the then-people-elected Prime Minister Nawaz Sharif and the Pakistan Muslim League, in an attempt to enable the nationalized industries towards market economy, immediately after the economic collapse of the Soviet Union in 1989–90. The program was envisaged and visioned to improve the GDP growth of the national economy of Pakistan, and reversal of the nationalization programme in 1970s— an inverse of the privatization programme.In the period of the 1970s, all major private industries and utilities were put under the government ownership in an intensified programme, called the nationalization programme that led the economic disaster in Pakistan. Since then, the demand for denationalization gained currency towards the ending of the government of Pakistan Peoples Party in 1977, although a commission was set up by General Zia-ul-Haq government but no denationalization programme began until 1990.

The privatization programme was launched on 22 January 1991 by Prime minister Nawaz Sharif in a vision to promote free-market economic principles, private-ownership and the mainstream goal to attract foreign investment in the country. But, as a result a good deal of the national wealth fell into the hands of a relatively small group of so-called business oligarchs (tycoons), and the wealth gap increased dramatically in the 1990s that halted the programme by Benazir Bhutto. Revisions were made in 1999, and finally launched the much more intensified privatization programme under the watchful presiding leadership of Prime minister Shaukat Aziz in 2004. Finally, the programme was ended effectively at the end of 2007 when ~80%–90% of the industries were put under the management of private ownership of enterprises by Prime minister Shaukat Aziz.

Privatisation of British Rail

The Privatisation of British Rail was the process by which ownership and operation of the railways of Great Britain passed from government control into private hands. Begun in 1994, it had been completed by 1997. The deregulation of the industry was initiated by EU Directive 91/440 in 1991.

British Railways (BR) had been in state ownership since 1948, under the control of the British Railways Board (BRB). Under the Conservative government of Margaret Thatcher elected in 1979, various state-owned businesses were sold off, including various functions related to the railways – Sealink ferries and British Transport Hotels by 1984, Travellers Fare catering by 1988 and British Rail Engineering (train building) by 1989.

It was under Thatcher's successor John Major that the railways themselves were privatised, using the Railways Act 1993. The operations of the BRB were broken up and sold off, with various regulatory functions transferred to the newly created office of the Rail Regulator. Ownership of the infrastructure including the larger stations passed to Railtrack, while track maintenance and renewal assets were sold to 13 companies across the network. Ownership of passenger trains passed to three rolling stock operating companies (ROSCOs) – the stock being leased out to passenger train operating companies (TOCs) awarded contracts through a new system of rail franchising overseen by the Office of Passenger Rail Franchising (OPRAF). Ownership and operation of freight trains passed to two companies – English Welsh & Scottish (EWS) and Freightliner, less than the originally intended six, although there are considerably more now.

The process was very controversial at the time, and still is, and its success is hotly debated – with the claimed benefits including a reduced cost to the taxpayer, lower fares, improved customer service, and more investment. Despite opposition from the Labour Party, who gained power in 1997 under Tony Blair, the process has never been reversed wholesale by any later government, and the system remains largely unaltered. A significant change came in 2001 with the collapse of Railtrack, which saw its assets passed to the state-owned Network Rail (NR), with track maintenance also brought in-house under NR in 2004. The regulatory structures have also subsequently changed.

Privatization in Croatia

Privatization in Croatia refers to political and economic reforms which include the privatization of state-owned assets in Croatia. Privatization started in the late 1980s under Yugoslav Prime Minister Ante Marković and mostly took place in the 1990s after the breakup of Yugoslavia, during the presidency of Franjo Tuđman and the rule of his party Croatian Democratic Union (HDZ), and continued in the 2000s with the privatization of large state enterprises. Many aspects of the privatization process are still seen as controversial as the political and economic turmoil, coupled with the events of the simultaneous 1991–95 independence war, are thought to have led to a degree of criminal activity.

Privatization in Iran

According to the Fourth Five-Year Economic Development Plan (2005–2010), the Privatization Organization of Iran affiliated with the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange. The privatization effort is primarily backed by reformist members of the Iranian government and society who hope that privatization can bring about economic and social change.

In 2007, Supreme Leader Ayatollah Khamenei requested that government officials speed up implementation of the policies outlined in the amendment of Article 44, and move towards economic privatization. Khamenei also suggested that ownership rights should be protected in courts set up by the Justice Ministry; the hope was that this new protection would give an additional measure of security and encourage private investment. Despite these statements, true official backing for privatization remains very slow due to political reasons.

Some 80 percent of the companies subject to Article 44 of the Constitution would be transferred to public ownership, 40 percent of which will be conducted through the "Justice Shares" Scheme and the rest through the Bourse Organization. The government will keep the title of the remaining 20 percent.It is widely believed that if current governmental organizations are privatized they will need to become more efficient. At present many are not profitable due to large numbers of unnecessary employees hired by the government to reduce unemployment. Furthermore, many of these companies are subsidized by oil revenues. True privatization will inevitably lead to many unpopular job cuts and large scale lay offs.The current privatization effort calls for an initial public offering (IPO) of five percent of the firms being privatized. Once the five percent is public, it will establish a market price that further offerings can be based on. According to a study conducted by the IMF in 18 countries, privatization adds 2 percent to the government's GDP per annum.

Privatization in Russia

Privatization in Russia describes the series of post-Soviet reforms that resulted in large-scale privatization of Russia's state-owned assets, particularly in the industrial, energy, and financial sectors. Most privatization took place in the early and mid-1990s under Boris Yeltsin, who assumed the presidency following the dissolution of the Soviet Union.

Private ownership of enterprises and property had essentially remained illegal throughout the Soviet era, with Soviet communism emphasizing national control over all means of production but human labor. Under the Soviet Union, the number of state enterprises was estimated at 45,000.In the later years of the Soviet Union, Mikhail Gorbachev relaxed restrictions on private property and introduced initial market reforms. Privatization shifted Russia from the Soviet planned economy towards a market economy, and resulted in a dramatic rise in the level of economic inequality and a collapse in GDP and industrial output.Privatization facilitated the transfer of significant wealth to a relatively small group of business oligarchs and New Russians, particularly natural gas and oil executives. This economic transition has been described as katastroika (combination of catastrophe and the term perestroika) and as "the most cataclysmic peacetime economic collapse of an industrial country in history".A few "strategic" assets, including much of the Russian defense industry, were not privatized during the 1990s. The mass privatization of this era remains a highly contentious issue in Russian society, with many Russians calling for revision or reversal of the reforms.

Privatization of public toilets

Privatization of public toilets is an ongoing process in the United States and other countries. Police (e.g. in Los Angeles) have sometimes supported their privatization, claiming that public toilets are "crime scenes" that attract illegal activity.A criticism of toilet privatization is that it results in the denial of a basic service to the urban poor. In southern California in the 1980s, authorities consciously reduced the number of public toilets to make certain areas less attractive to "undesirables".In some cases, partial privatization of the toilet system takes place in the form of vendors supplying the service in exchange for advertising rights. Mayor of New York City Michael Bloomberg described such a deal as a "unique opportunity to...creat[e] a vibrant and aesthetically pleasing streetscape…without the burden of public investment."John Stossel points out that private property may be better taken care of than public property: "Think about shared public property, like public toilets. They're often gross...Compare dirty public toilets to privately run toilets. They're common in Europe, and cleaner, because their owners – selfishly seeking a profit – work at keeping them clean."

Reason Foundation

The Reason Foundation is an American libertarian think tank founded in 1978. The foundation publishes the magazine Reason. Based in Los Angeles, California, it is a non-profit, tax-exempt organization. According to its web site, the foundation is committed to advancing "the values of individual freedom and choice, limited government, and market-friendly policies." According to the 2014 Global Go To Think Tank Index Report (Think Tanks and Civil Societies Program, University of Pennsylvania), the Foundation is number 41 (of 60) in the "Top Think Tanks in the United States".Reason Foundation's policy research areas include: air traffic control, American domestic monetary policy, school choice, eminent domain, government reform, housing, land use, immigration, privatization, public-private partnerships, urban traffic and congestion, transportation, industrial hemp, medical marijuana, police raids and militarization, free trade, globalization and telecommunications. Affiliated projects include Drew Carey's Reason TV video website. Reason Foundation staff also regularly contribute to the Out of Control Policy Blog.

Reason Foundation cofounder Robert Poole is an MIT-trained engineer and the author of Cutting Back City Hall. The book provided the intellectual support for Margaret Thatcher's privatization efforts in the United Kingdom. Poole remains at Reason serving as an officer on the organization's board of trustees and Director of Transportation. Poole founded Reason with Manny Klausner and Tibor Machan.

Russian oligarch

Russian oligarchs (see the related term "New Russians") are business oligarchs of the former Soviet republics who rapidly accumulated wealth during the era of Russian privatization in the aftermath of the dissolution of the Soviet Union in the 1990s. The failing Soviet state left the ownership of state assets contested, which allowed for informal deals with former USSR officials (mostly in Russia and Ukraine) as a means to acquire state property. Historian Edward L. Keenan has drawn a comparison between the current Russian phenomenon of oligarchs and the system of powerful boyars which emerged in late-Medieval Muscovy.The first modern Russian oligarchs emerged as business-sector entrepreneurs under Mikhail Gorbachev ( General Secretary 1985–1991) during his period of market liberalization. The term "oligarch" derives from the Ancient Greek word ὀλιγάρχης (oligárkhēs), a derivative itself from oligarchy ὀλιγαρχία (oligarkhia) meaning literally "the rule of the few".


Saskatchewan Telecommunications Holding Corporation, operating as SaskTel, is a Canadian crown-owned telecommunications firm based in the province of Saskatchewan. Owned by the provincial government, it provides wireline and wireless communications services, including landline telephone, mobile networks, broadband internet (including copper DSL, fibre to the home, and wireless broadband), IPTV, and security services. Through a subsidiary, SaskTel International, the company has also worked on telecom infrastructure projects in countries such as Argentina and the Bahamas.As of 2018, SaskTel serves around 1.4 million customers, and has an annual revenue of around $1.2 billion.

Social Security debate in the United States

This article concerns proposals to change the Social Security system in the United States. Social Security is a social insurance program officially called "Old-age, Survivors, and Disability Insurance" (OASDI), in reference to its three components. It is primarily funded through a dedicated payroll tax. During 2015, total benefits of $897 billion were paid out versus $920 billion in income, a $23 billion annual surplus. Excluding interest of $93 billion, the program had a cash deficit of $70 billion. Social Security represents approximately 40% of the income of the elderly, with 53% of married couples and 74% of unmarried persons receiving 50% or more of their income from the program. An estimated 169 million people paid into the program and 60 million received benefits in 2015, roughly 2.82 workers per beneficiary.

Reform proposals continue to circulate with some urgency, due to a long-term funding challenge faced by the program as the ratio of workers to beneficiaries falls, driven by the aging of the baby-boom generation, expected continuing low birth rate, and increasing life expectancy. Program payouts began exceeding cash program revenues (i.e., revenue excluding interest) in 2011; this shortfall is expected to continue indefinitely under current law.Social Security has collected approximately $2.8 trillion more in payroll taxes and interest than have been paid out since tax collection began in 1937. This surplus is referred to as the Social Security Trust Fund. The fund contains non-marketable Treasury securities backed "by the full faith and credit of the U.S. government". The funds borrowed from the program are part of the total national debt of $18.9 trillion as of December 2015. Due to interest, the Trust Fund will continue increasing through the end of 2020, reaching a peak of approximately $2.9 trillion. Social Security has the legal authority to draw amounts from other government revenue sources besides the payroll tax, to fully fund the program, while the Trust Fund exists. However, payouts greater than payroll tax revenue and interest income over time will liquidate the Trust Fund by 2035, meaning that only the ongoing payroll tax collections thereafter will be available to fund the program.There are certain key implications to understand under current law, if no reforms are implemented:

Payroll taxes will only cover about 79% of the scheduled payout amounts from 2034 and beyond. Without changes to the law, Social Security would have no legal authority to draw other government funds to cover the shortfall.

Between 2021 and 2035, redemption of the Trust Fund balance to pay retirees will draw approximately $3 trillion in government funds from sources other than payroll taxes. This is a funding challenge for the government overall, not just Social Security. However, as the Trust Fund is reduced, so is that component of the National Debt; in effect, the Trust Fund amount is replaced by public debt outside the program.

The present value of unfunded obligations under Social Security was approximately $11.4 trillion over a 75-year forecast period (2016-2090). In other words, that amount would have to be set aside in 2016 so that the principal and interest would cover the shortfall for 75 years. The estimated annual shortfall averages 2.49% of the payroll tax base or 0.9% of gross domestic product (a measure of the size of the economy). Measured over the infinite horizon, these figures are 4.0% and 1.4%, respectively.

The annual cost of Social Security benefits represented 4.0% of GDP in 2000 and 5.0% GDP in 2015. This is projected to increase gradually to 6.4% of GDP in 2035 and then decline to about 6.1% of GDP by 2055 and remain at about that level through 2086.President Barack Obama opposed privatization (i.e., diverting payroll taxes or equivalent savings to private accounts) or raising the retirement age, but supported raising the annual maximum amount of compensation that is subject to the Social Security payroll tax ($118,500 in 2016) to help fund the program. In addition, on February 18, 2010, President Obama issued an executive order mandating the creation of the bipartisan National Commission on Fiscal Responsibility and Reform, which made ten specific recommendations to ensure the sustainability of Social Security.Federal Reserve Chairman Ben Bernanke said on October 4, 2006: "Reform of our unsustainable entitlement programs should be a priority." He added, "the imperative to undertake reform earlier rather than later is great." The tax increases or benefit cuts required to maintain the system as it exists under current law are significantly higher the longer such changes are delayed. For example, raising the payroll tax rate to 15% during 2016 (from the current 12.4%) or cutting benefits by 19% would address the program's budgetary concerns indefinitely; these amounts increase to 16% and 21% respectively if no changes are made until 2034. During 2015, the Congressional Budget Office reported on the financial effects of various reform options.

Water privatization

Water privatization is short for private sector participation in the provision of water services and sanitation. Private sector participation in water supply and sanitation is controversial. Proponents of private sector participation argue that it has led to improvements in the efficiency and service quality of utilities. It is argued that it has increased investment and has contributed to expanded access. They cite Manila, Guayaquil in Ecuador, Bucharest, several cities in Colombia and Morocco, as well as Côte d'Ivoire and Senegal as success stories. Critics however, contend that private sector participation led to tariff increases and has turned a public good into a private good. Many believe that the privatization of water is incompatible with ensuring the international human right to water. Aborted privatizations in Cochabamba, Bolivia, and Dar es-Salaam, Tanzania, as well as privately managed water systems in Jakarta and Berlin are highlighted as failures. Water privatization in Buenos Aires, Argentina and in England is cited by both supporters and opponents, each emphasizing different aspects of these cases.

Even the figures about how many people receive water from the private sector are controversial: One source claims that 909 million people were served by "private players" in 2011 globally, up from 681 million people in 2007. This figure includes people served by publicly owned companies that have merely sourced out the financing, construction and operation of part of their assets, such as water or wastewater treatment plants, to the private sector. The World Bank estimated the urban population directly served by private water operators in developing countries to be much lower at 170 million in 2007. Among them only about 15 million people, all living in Chile, are served by privately owned utilities. The remainder are served by privately managed, but publicly owned companies under concession, lease and management contracts.

Cultural aspects
Social aspects
By owner
By nature
(key work)

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