Privatization refers to a process in which the government directly sells companies to private investors or, in a broader sense, loosens its control over the economy. Privatization in Western Europe and the USA gained prominence in the late 1970s and 1980s, under the ideological influence of neoliberalism and political support of US president Ronald Reagan and UK prime minister Margaret Tacher. Industries that were most influenced by privatization are steel, railroads, oil, aerospace, postal services, telecommunications, and natural monopolies such as electricity, gas, and water. Apart from direct selling of companies, privatization can take the form of concessions, leases, public-private partnerships, subcontracting, etc.

Arguments for privatization were: 1) money from selling of public componies would contribute to decreasment of budgetary spending and public debt, 2) selling underperforming companies would bring new investments and better management and ultimately lead to better outcomes, not only for the owners, but also for the consumers and the whole country (higher gdp growth), 3) economic efficiency would improve, 4) encouragement of capitalist spirit and competition, and 5) reducement of taxes.  

On the other hand, critics of privatization argue that privatization led to a decrease in output and efficiency, a rise of prices, while most companies were sold for lower than their actual value. Public-private partnerships are similarly criticized for high costs and low return in the form of efficiency or lowering of the costs.

The transfer of state property to private property (privatization) in post-socialist countries of Eastern Europe in the early 1990s happened in two basic ways: through formal privatization, most often in the form of distribution of shares to all citizens or direct selling of the companies, in a minority of cases, and through non-ownership privatization. Non-proprietary privatization refers to abuses by the political and management elite in the state sector, which illegally transfer property from the state to private property. The very economy of post-socialist countries has become deformed. At the beginning of the transition, there was a decline in production (especially industrial), a decline in national income, and living standards. After the first wave of privatization, there was a sudden accumulation of capital in the hands of a small number of individuals, who are most often associated with organized crime. The result is a synergy of corrupt political elites, emerging tycoons, and organized crime, which ultimately leads to a completely perverted form of economy. All this ultimately leads to the inclination of the new states towards authoritarian political power. The social structure is experiencing a huge economic stratification, so that the majority of the population is experiencing a decline in economic status.

Although the majority of post-socialist countries have completed all the necessary reforms required by the transition (macroeconomic stabilization, privatization, and liberalization), only Hungary, the Czech Republic, and Poland received significant foreign investments, both from corporations and international organizations (IMF, World Bank, European Union). The IMF implements the "Washington Consensus" and the "Structural Adjustment Programs". All countries, in order to adapt to this, must meet the following requirements: 1) mass privatization and deregulation, 2) abolition of import tariffs, 3) abolition of controls over foreign investments, 4) lowering of corporate income taxes, 5) elimination of price controls and introduction of wage controls, 6) drastic reduction of social and health care expenditures. In order to achieve the priority of absolute profitability, privatization and deregulation are forced, while reducing the welfare state. The economic policy was aimed at increasing private capital, while there were no economic development and job creation projects because most of the money from privatization was already spent.

References:

Beck. Power in the Global Age (2005, in German 2002);

Fitzgerald, R. When Government Goes Private: Successful Alternatives to Public Services (1988);

Ghobadian, Abby, Nicholas O’Regan, David Gallear, and Howard Viney, eds. Public-Private Partnerships: Policy and Experience (2004);

Gupta, A. Beyond Privatization (2000);

Newbery, David. Privatization, Restructuring, and Regulation of Network Utilities (1999);

Parker, David, and David Saal, (eds.). The International Handbook on Privatization (2003);

Sclar, E. D. You Don’t Always Get What You Pay For: The Economics of Privatization (2000);

Stanbury, P. W., W. T., Yarrow, G., and Zeckhauser, R. J. Privatization and State Owned Enterprises: Lessons from the United States, Great Britain and Canada (1989);

Therborn. „Class in the 21st Century“, in New Left Review (2012);

Vickers, John, and George Yarrow. Privatization: An Economic Analysis (1989);

Weizsa¨cker, E. U. von, Young, O. R., Finger, M., and Beisheim, M. (Eds.) Limits to Privatization: How to Avoid Too Much of a Good Thing (2005);

Yarrow, G. and Jasiski, P. (Eds.) Privatization: Critical Perspectives on the World Economy, 4 vols. (1996).