It is one of the most rapidly spreading and hotly debated phenomena of the global economy. It is lauded by supporters as a way to make government more efficient and to improve economic growth. It is attacked by opponents as a surrender of the legitimate functions of government and a call for a dog-eat-dog world in which people beg for charity. It is called privatization, the process by which governments and peoples rely more on the private sector and less on government to satisfy their needs.
In his opening essay, E.S. Savas, a professor at Baruch College of the City University of New York and a pioneer in privatization, describes four main forces behind the trend toward privatization: pragmatism, ideology, populism, and commercialism. Pragmatists have discovered that privatization is more efficient and cost-effective. Ideologues see it as a way to reduce the size and scope of government. Populists are against big government and for local institutions that are naturally strengthened when they take over government programs. And private entrepreneurs want to handle activities ranging from garbage collection to data processing and insist they can do them better than government.
The challenge of today, says Savas, is to achieve a better balance between government and the private sector. Privatization can help bring about that balance and in so doing lead to a better society.
Not even communist societies like the Soviet Union and the People's Republic of China are immune to privatization. Peter Young, U.S. director of the Adam Smith Institute, states that the results of Chinese deregulation are "impressive." Private markets for agricultural goods have been legitimated. Private ownership of small farms has been effectively allowed. Private ownership of trucks and production machinery has been permitted. Although changes in industry have been less far-reaching, cities like Chongqing allow hundreds of thousands of private entrepreneurs.
By contrast, Soviet privatization is gradual and timid, although many former black market enterprises are now legal. Foreign capitalists are allowed to establish joint ventures with Soviet concerns. Significantly, most Soviet satellite states are enthusiastically following the Russian lead, with the exception of Albania. Comments Young, "There is a strong case for preserving at least one communist country as a museum, a sort of late twentieth-century totalitarian horror show."
There are many faces of privatization in Asia. As in so many other areas, Japan leads the way. It is, for example, deregulating its financial sector, including the world's largest bank, Dai-Ichi Kangyo. Half of Nippon Telephone and Telegraph will be sold to private Japanese investors by 1989. Japan Air Lines has also been privatized, and Japanese National Railways will be next. South Korea is considerably behind Japan but seeking to close the gap by removing foreign exchange controls and requiring banks to set aside more loans for smaller companies as well as for the chaebols, or large private conglomerates that dominate the Korean economy. Singapore, Taiwan, and the Philippines are all stepping up their privatization efforts, while learning that the process may take longer than anticipated.
Long wedded to central planning, more and more Third World countries are turning to privatization to extricate themselves
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