Abstract
As indicated in the previous section, the decision to privatize should be guided by whether privatization is likely to raise national welfare and living standards. Most discussions on privatization suggest that policymakers are indeed primarily motivated by a desire to improve economic efficiency and growth. For example, Mark Baker from Privatization International suggests that:
There can be no doubt … that the once prevalent view of privatization as an exclusively rightwing ideology has shown itself to be shortsighted and ill informed. Practically every administration in the world has now embraced the principles of rationalization and efficiency that the majority of contributors to this book give as the major objective in transferring state owned companies to the private sector (Baker, 1998: 1).
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Notes
On the argument of the diminishing role of national governments as a result of globalization see also Tanzi (1998).
Rodrik (1996), however, argues that the empirical evidence that reforms lead to adverse short-term impacts is sketchy. He mentions, for example, how disinflation policies through the adoption of exchange rate anchors quickly led to a resumption of growth in countries such as Argentina, Israel, and Mexico. He argues that the evidence on structural reforms suggests that growth performance improves only two to three years after the reform is implemented. Also, while there are similarities between privatization and other economic reforms, divestment differs in one fundamental way. For example, once a government has decided to remove price controls the resulting change in relative prices will eventually lead to an improvement in the allocation of resources. In a similar vein, a political decision to reduce trade barriers such as tariffs will ultimately increase competition, fostering efficiency and growth. In both cases and from a political economy point of view, the critical question is how to get politicians to move to economic reforms given the potentially politically costly adverse short-term implications. In the case of privatization, the decision to move forward does not necessarily coincide with an improvement in efficiency afterward but will still depend on the prime objectives for choosing to privatize in the first place. Again, unlike in the case of most other economic reforms, the motivation for divestment can be multifold and some of the objectives might not necessarily be compatible with an improvement in the structure of the economy, especially if the prime objective of the government is to raise domestic or external financing. The latter might be more consistent with a delay in economic reform rather than a change in the structure of the economy.
For a brief discussion of the causes of the pressure on the British pound see Hayashi 1999.
On rising debt-to-GDP ratios see Alesina and Roubini (1997): 228.
See, for example, Alesina and Drazen (1991)
These models are sometimes also dubbed electoral-cycle or opportunistic models.
See, for example, Lewis-Beck (1988) and Alesina and Rosenthal (1995).
See Schulknecht (1996).
See Klein (1996) and Alesina and Rosenthal (1995).
Ranis and Mahmood (1992), for example, show that a number of countries engaged in such spending sprees.
The Bank of England, for example, gained independence in 1997. For a number of countries such as Spain and France joining EMU implied a move toward more independence. On central bank independence and the performance of inflation see also Alesina and Summers (1993). The IMF, for example, has placed more emphasis on the adoption of fiscal policy rules by member countries. See for example Kopies and Craig (1996) and Kopies and Symansky(1998).
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© 2001 Springer-Verlag Berlin Heidelberg
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Schipke, A. (2001). The Politics of Privatization. In: Why Do Governments Divest?. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-56682-0_3
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DOI: https://doi.org/10.1007/978-3-642-56682-0_3
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