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Privatisation

  • Date Submitted: 04/01/2010 07:15 PM
  • Flesch-Kincaid Score: 45.7 
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Privatization
Privatization, the selling off of state-owned assets to the private sector. Since nationalization went out of fashion, privatization has become all the rage. The United Kingdom under Margaret Thatcher, who was first elected prime minister in 1979, led the way. During the 1980s the British government sold off state assets worth about £29 billion, roughly halving the size of the public sector. Other countries have followed: in Europe, in Asia, and, more recently in Latin America and the former Communist countries of Eastern Europe. Some African states have taken tentative steps towards privatizing state assets or at least increasing private sector involvement. Since 1992, states in the United States have been allowed to privatize their infrastructure, and faced with budget problems many may be keen to sell off such things as airports and toll roads. Between 1985 and 1992 more than US$300 billion-worth of state assets were sold worldwide.
Governments choose to privatize for a number of different reasons. However, of their two main aims, one is to cut the size of the state sector in pursuit of greater economic efficiency, and the other is to raise cash. In the United Kingdom privatization receipts were counted as negative expenditure rather than a way to finance expenditure. It was this that led to Mrs Thatcher being accused by one of her (Conservative party) predecessors in office of “selling the family silver”.
There are three main methods of privatization:
1. Share issue privatization (SIP) - selling shares on the stock market - the most common type of privatization
2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model
3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price.
There are numerous ways to privatize companies. In Great Britain many publicly owned companies such as British...

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