Privatization, Nationalization, and Aspects of Transition

Abstract

Privatization was a popular concept during the last two decades of the 20th century. Not only did economists write about it, but also governments in many countries did sell assets to private investors. The most dramatic instances of privatization were aspects of the transition from communism that accompanied the collapse of the Soviet Empire, but the phenomenon of governments selling state owned enterprises (SOEs) could be observed in both developed and underdeveloped countries throughout the world. Sheshinski and López-Calva (1998) provide the World Bank estimates that SOE activity as a percentage of GDP in low income countries decreased from 15 to 3 percent over the period 1980 to 1997. While the decreases were less (from a lower base) in the higher income countries, the ubiquity of the phenomenon is apparent. Moreover , the careful analysis of even core governmental functions to see whether Chapter 12 Abstract This chapter treats some of the main themes found in the literature dealing with privatization, nationalization, and transition. It starts by surveying some of the main arguments that have been advanced in favor of nationalization. Subsequently, it reviews the growth of privatization. While it might seem axiomatic to some to treat the growth of privatization as a manifestation of the triumph of capitalism over socialism, there are some problematical considerations that would have to be addressed before any such treatment could be embraced.