Privatization

The case for privatization has been based on a number of reasons. On a theoretical level economists in support of privatization have attempted to show that outside of the first function indicated above, the private sector is either a more efficient provider than the public sector or that the failures of the private sector are much lower than those of the public sector. This argument has increasingly been applied to justify the privatization of all of the functions listed above except the first one. At an empirical level, what Cowan refers to as "pragmatic" level attempts have been made to show the benefits and costs of public versus private ownership, management and service delivery of given activities under given circumstances. The evidence here has been mixed and areas of difference have related to methodological issues to philosophical ones as to the legitimacy of the criteria used to assess the relative performance of the two sectors. While at the microeconomic or enterprise level, analysis of costs and benefits of the production of goods and the provision of services by either sector has been straightforward enough and the analysis of net social benefits and costs in both dynamic and static terms has been inadequate to settle the issues at stake. The case for privatization has also been justified on the basis of the need to establish "sound" or "good" macroeconomic fundamentals conducive to the efficient and undistorted operation of domestic and global market forces related to capital, trade, and labor markets as demanded by global imperatives supported by neoliberalism. A final rationale for privatization has been an ideological or political one grounded in the theoretical and macroeconomic rationales above. The political rationale sees privatization as a policy stance that sends the right message regarding a country's commitment to free enterprise to existing and prospective entrepreneurs and investors. It signals to domestic and international markets that the government is committed to protecting property rights and contractual obligations demanded by capitalism and the market.