The last decade has seen a radical revolution all over the world in the roles of the government and the private sector. Many state enterprises in Europe, North America, Asia, Latin America and Africa have been privatized. One country that seriously adopted privatization has to be the U.K. From the Conservative Party Manifesto in 1979, which barely discussed privatization, to the year 2000 when the only companies left in public hands were the Post Office, British Nuclear Fuels, the London Underground and the BBC. Some of the firms and companies privatized were British Airways, British Gas, British Petroleum, Britoil, Jaguar, Rolls Royce etc. In 1994, the program was successful in that it generated fifty billion pounds in revenue for the government.
A lot of the goals that the UK government wished to achieve through privatization were reached. Costs went down ensuring productive efficiency and clearer signals to the market. Competition increased, leading to an improvement in product quality, more choice for the consumers, innovation and other technological advances ensuring efficiency. Share Ownership increased. The Public Sector borrowing requirement went down and the government revenue increased. Cost-Push Inflation was also curbed. Nicholas Ridley, the then Secretary of State for Trade and Industry stated, “In privatizing British Telecom, we stimulated competition by licensing Mercury as a competing network. By liberalizing, introducing competition in services ( paging, cellular, mobile and other services) and giving choice to the public over the telephone apparatus they buy, the result was a dramatic improvement in the variety and quality of services available to the public and of course a growing and flourishing telecommunication service sector able to compete in the international market.”
Privatization though fiercely opposed by many in the 1980’s is now generally considered to have been a success in the UK. Few would argue that companies such as ICL, British Steel and British Aerospace would have flourished, had they remained under state ownership.
But there are always two sides to a coin. Privatization did result in losses for the UK government in certain areas. The long term loss of revenue, the government could have received had it not given up the industries. The rise in the prices of stocks usually indicates that the firm was sold over at a much lower price then it would have otherwise generated. Not all private industries act in the interests of the public i.e. there has been a dramatic increase in the number of households disconnected from the water, gas and electric supplies due to their inability to pay bills. The government also has to regulate the privatized industries i.e. British Telecom has to provide public telephones and has been obliged to allow its smaller rival Mercury to use its line. And ultimately the government’s influence was reduced.
Another fear of the negative aspect of privatization reflects in an article published in the Evening Standard 20.7.1999 labeled “Air Traffic Sell Off will make passport fiasco look like peanuts”. The article was against the privatization of airlines in the country saying that the industry would become impossible to manage. More delays, queues, disruptions, increase in the likelihood of accidents. It said the government held itself responsible for the safety of the 1.6 million flights a year, hovering over Britain and that the number would soon soar to 103 million flights in 2000. To sum it up the smooth running of the airline industry would become a thing of the past.
To Change Our Focus to other parts of the world, countries apart from the UK have initiated privatization programs for particular reasons. New Zealand turned to privatization to increase competition. Mexico resorted to privatization to reduce its government’s budget deficit and to generate revenue. Malaysia and South Africa have initiated privatization programs to reduce the huge income disparities that are prevalent there. In brief privatization as an instrument of macro economic policy is here to stay and a country wanting to have a successful venture into privatization should have an objective in mind. What to Privatize? How to Privatize? What portion of what to Privatize? And what will be the possible outcome of the privatization? Only then is Privatization for any country sensible, enterprising and justified.
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