Privatization can be defined broadly as relying more on the private institutions of society and less on government to satisfy people’s needs. It is the act of reducing the role of government or increasing the role of the other institutions of society in producing goods and services and in owning property. In general, both the public and private sectors play important roles, and it is increasingly common to refer to „public-private partnerships“, a less contentious term than „privatization“. A public-private partnership is defined as any arrangement between a government and the private sector in which partially or traditionally public activities are performed by the private sector.
The distinction between public and private is elusive. We speak of a park or government office building as being publicly owned, but we use the same term to describe Microsoft because it has many stockholders and any member of the public may buy part of the company; it is a private firm that is publicly owned. In the same way, a public restaurant is one that caters to the public at large, although it may be owned by a sole proprietor. Confusingly, we use the same word, public, to describe three very different conditions: government ownership, widespread ownership, and open access. Their semantic confusion is nevertheless instructive, for it implies that government ownership - and by extension, government action - is not necessary to achieve widespread (i.e., „public“) benefits. Privatization capitalises on this underappreciated truism and takes advantage of the full array of ownership and operating relations to satisfy people’s wants and needs and thereby to serve the public interest.
The term service or public service refers not only to a narrow task such as maintaining street lights, delivering mail, running a bus service, or operating a telephone system, but to broad functions as well, such as assuring pensions for retirees, defending a nation against external threats, clothing the populace, supplying food, manufacturing goods, and protecting endangered species and the environment.
Several major influences have propelled the privatization movement: pragmatic, economic, philosophical, commercial, and populist. The goal of the pragmatists is better government, in the sense of a more cost-effective one. Economic affluence reduces people’s dependence on government and increases their acceptance of privatized approaches. The goal of those who approach the matter philosophically - some would say ideologically - is less government, one that plays a smaller role vis-à-vis private institutions; government which governs least governs best.
The goal of commercial interests is to get more business by having more of government’s spending directed toward them. And the goal of the populists is to achieve a better society by empowering people so they can satisfy their common needs, while diminishing the power of large public and private bureaucracies. We try to analyse all three forces to influence privatisation process.
The purpose of privatization is to improve government performance and thereby improve the lives of those dependent on government, while saving money and improving services for all taxpayers and thereby improving their lives as well. Moreover, poorly performing private firms tend to go out of business, while poorly performing public institutions are often given more money to try to overcome their shortcomings.
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