Privatization

The American economist Steve Hanke defines privatization as "the transfer of assets and service functions from public to private hands. It includes, therefore, activities that range from selling state-owned enterprises to contracting out public services with private contractors" (p. 4). At one extreme, privatization might entail the wholesale transfer to the private sector of both ownership and management and service delivery functions formerly undertaken by the public sectors; at another it might entail the transfer of management and service delivery functions to the private sector while ownership remains with the public sector. Various intermediate arrangements can also be found whereby various degrees of government or public ownership are combined with different forms of management transfer to the private sector. In the early twenty-first century the term has been broadened to include normal administrative public sector functions as well.

Thus, the notion of privatization has resulted in a wholesale questioning of the role of the public sector in the economy, thereby raising a number of technical and philosophical issues pertaining to economic, social, and political organizations across countries and over time. For developing and transitional economies the commitment to privatization as a policy has become, in the eyes of developed market economies and prospective foreign investors, symbolic of a country's commitment to an unfettered, free enterprise economy, which in its wake is expected to open doors to inflows of foreign investment and foreign aid.