Privatization morphs into 'publicization': businesses look a lot like government

Private companies become like public agencies because competition for contracts is keen and they must be perceived by the contacting agent, government, as being agreeable with the government's demands in order to be contracted with again. Government makes suggestions, sets requirements, and provides recommendations to private companies which, over time, cause the private companies/facilities to look more and more like government agencies – and company managers are left pressed between their need to re-contract and the business instincts and acumen for which they've presumably been contracted with in the first place.
This paper will briefly visit the common arguments for and against privatization. Additionally, the results of a limited study of the effect of publicization on private prison companies operating nationally in the US will be examined.     

Privatization in developing countries: ideal and reality

In both developed and developing countries, governments finance, produce, and distribute various goods and services. In recent years, the range of goods provided by government has extended widely, covering many goods which do not meet the purist's definition of “public” goods. As the size of the public sector has increased steadily there has been a growing concern about the effectiveness of the public sector's performance as producer. Critics of this rapid growth argue that the public provision of certain goods is inefficient and have proposed that the private sector replace many current public sector activities, that is, that services be privatized. Since Ronald Reagan took office greater privatization efforts have been pursued in the United States. Paralleling this trend has been a strong endorsement by international and bilateral donor agencies for heavier reliance on the private sector in developing countries.

However, the political, institutional, and economic environments of developing nations are markedly different from those of developed countries. It is not clear that the theories and empirical evidence purported to justify privatization in developed countries are applicable to developing countries.

In this paper we present a study of privatization using the case of Honduras. We examine the policy shift from “direct administration” to “contracting out” for three construction activities: urban upgrading for housing projects, rural primary schools, and rural roads. The purpose of our study is threefold. First, we test key hypotheses pertaining to the effectiveness of privatization, focusing on three aspects: cost, time, and quality. Second, we identify major factors which affect the performance of this privatization approach. Third, we document the impact of privatization as it influences the political and institutional settings of Honduras. Our main finding is that contracting out in Honduras has not led to the common expectations of its proponents because of institutional barriers and limited competitiveness in the market. These findings suggest that privatization can not produce goods and services efficiently without substantial reform in the market and regulatory procedures. Policy makers also need to consider carefully multiple objectives at the national level in making decisions about privatization.     

Regulation in an Episodic Policy-Making Environment: The Water Industry in England and Wales

This article describes and analyses the evolving regulatory game in the post-privatized water industry. It highlights a regulatory environment that is more complex than that which existed under public ownership, and an industry which is subject to heavier regulation in the private sector than it was in the public sector. There has been erosion of the strict public/private divide following privatization. The article highlights an episodic and seemingly incongruous policy-making environment that defies consistent characterization: sometimes private consensus is the main feature and sometimes it is public conflict. It also illustrates that while there are two broad-based constituencies of interest active in the water sector — cost and environmental — the composition of these coalitions mutates depending on the issue being considered. Indeed, there are occasions when core constituency participants 'defect' and join the 'opposing side'.     

Coalitions and corporate choices in Argentina, 1976–1994: The recent private sector support of privatization

After sabotaging almost every privatization since the 1970s, the Argentine private sector suddenly began to support privatizations in 1991. While public choice approaches that stress the cost impact of policy can explain the anti-privatization behavior of the private sector prior to 1991, they are less successful at explaining this recent shift in behavior. This article explains this shift by focusing on political coalitions. By expanding (or reducing) the set of attainable outcomes, political coalitions shape the political choices of firms. Prior to 1991, the rent-seeking private sector led a huge multi-sectoral anti-privatization coalition that repeatedly preempted the Executive from privatizing. In 1991, this coalition disintegrated as a result of a reordering of economic institutions. Devoid of its traditional allies, the private sector chose to acquiesce to privatizations. Thus, political coalitions can be more important in shaping firm behavior than economic considerations such as the cost-impact of public policy or the size of rent markets. This article also explains why, in many countries confronting comparable anti-privatization coalitions, privatizations are likely to emerge with an unexpected mixture of competition-enhancing and competition-restricting policies. Javier Corrales is assistant professor of political science at Amherst College, specializing in comparative and international politics of Latin America. He is currently writing a book on the effects of executive-ruling party relations on the implementation of market-oriented reforms in Latin America. Newspapers and magazines (from Buenos Aires)ámbito Financiero Clarín El Cronista Comercial La Nación Noticias The Review of the River Plate     

Crucial relationship between the privatized sector and the generic private sector in post-communist privatization: Determinants of economic performance

This article looks at the issue — largely neglected in the transition literature — of the relative weights of the privatized sector and the generic private sector (of de novo private firms) in the emerging private sector of post-communist economies in transition. The present writer posits that the relative weight of each in the aggregate share of a private sector (generally expanding over time as transition progresses) strongly influences economic performance, both during correctional recession and during recovery and expansion period. Another, interrelated issue considered here is the interaction between the evolving institutional framework and the expansion of the generic private sector, that is the most dynamic one in the transition economy. It is true that the interaction between institutions and performance has been a staple of a very large number of books, articles, and papers.However, this article concentrates on one component of a private sector only, that is the generic private sector. But at the same time it looks beyond the ‘Holy Trinity’ of transition (stabilization, liberalization, and privatization) towards a wider institutional framework of political liberty, law and order. The foregoing wider framework, and the emerging general trust, matters as much — if not more — for the present writer as the standard transition program.It is the relative dynamics of both components of the private sector, affected by both standard transition programs and the above-mentioned wider institutional framework, that is of primary importance for the economic performance in post-communist transition. In the last part of the article I will try also to answer, tentatively, the question under which circumstances the wider institutional framework may emerge in the transition process.     

Privatization,efficiency and market failure : transforming ecuador's public sector

Much of the privatization that is occurring in Latin America is leading to improved efficiency. However, privatization in areas where markets do not yield efficient solutions, for example of public goods, like light houses, natural monopolies, mainly utilities, and goods with externalities, like education, can lead to lower output and higher costs in the long run. This paper first presents an outline of the shift in development theory with respect to the role of the public sector. It then examines the growth of Ecuador's public sector and its current debate on how privatization should proceed. It concludes that while careful privatization can be positive, privatizing natural monopolies like the electric utility and/or quasi-public goods, like highways are likely to be detrimental to long run economic development. In order for Ecuador's economy to continue to develop, the public sector still needs to play a significant role in developing human capital and physical infrastructure.     

Private Water,Public Good: Water Privatization and State Capacity in Chile

In the global policy debate over whether water services in developing countries should remain public or be privatized, advocates for privatization call for reducing the role of the state in water services, while civil society groups argue that privatization violates the human right to water. This article examines water privatization in Chile, a crucial case in the debate over the role of markets and states in water services. Chile is known as a water privatization success story due to its high coverage of drinking water and sanitation under a fully privatized system. The article addresses two questions: How effectively does Chile meet the standard for fulfilling the human right to water within the privatized system? To what extent has privatization in Chile reduced the role of the state in water service provision? I find that the human right to water, narrowly defined, is fulfilled in Chile; however, this outcome is not attributable to the merits of privatization. Chile’s strong state capacity to govern the water sector in the public interest by embedding reforms in state interventions explains the relative success of the Chilean water sector. These findings support the argument that a strong state role is necessary to fulfill the human right to water, even in a privatized water sector.     

REPRESENTING CUSTOMERS’INTERESTS: THE CASE OF THE PRIVATIZED WATER INDUSTRY IN ENGLAND AND WALES

Privatization has been one of the most important and controversial policy initiatives to emerge in the UK over the last decade. However, to date there has been little attempt to assess the impact of privatization on customers, despite the fact that much of the justification for the privatization of the public utilities was couched in terms of the benefits it would bring for customers. In the case of the water industry opportunities for competition are virtually non-existent, and the ten regional water authorities were privatized with their monopoly position intact. Consequently customers’interests have been represented and protected through new regulatory arrangements operated by the Office of Water Services. The purpose of this article is to offer some provisional assessment of the effectiveness of these new regulatory arrangements. In doing so, the article regards the model of private sector consumer sovereignty as inappropriate given the continued absence of competitive arrangements for the representation of customers’interests against some of the criteria currently being discussed in the development of more consumer-oriented approaches to the delivery of public services.     

THE ARCHITECTURE OF THE BRITISH CENTRAL STATE, PART I: FRAMEWORK FOR ANALYSIS

In the bureau-shaping model of bureaucracy rationally self-interested officials are primarily concerned to maximize their agencies' core budgets, equivalent to their running costs. They are much less interested in those parts of their overall budget which are allocated as transfer payments to the private sector or passed on to other public sector bodies. The varying importance of core budgets and other spending yields a typology of public sector organizations into delivery, transfer, contracts, regulatory and control agencies. In addition, the bureau-shaping model is developed in this article to provide an exhaustive classification of government agencies, and to refine the analysis of spending over and above core budgets.
The methodological issues involved in applying this typology empirically to the central state apparatus in Britain are explored. Previous attempts at 'bureaumetrics' have failed to mesh with 'ordinary knowledge' views of Whitehall. By contrast, the bureau-shaping model provides a framework which is theoretically sophisticated, easily operationalizable, and intuitively understandable. The scale of prospective hiving off from the UK civil service organization over the next decade indicates the value of adopting a framework which can respond methodologically to such changes, and offers a powerful theoretical account of their dynamic. Part II of the paper [next issue] presents the empirical data demonstrating that the bureau-shaping model is highly effective in systematizing and extending our knowledge of how Whitehall and its attached agencies are structured.     

Privatizing state owned enterprises in Latin America: A research agenda

This paper identifies major areas related to the privatization of state owned enterprises in Latin America that could very well be applied to other regions of the world, as more countries try to allow the private sector to play a larger role in their economies.     

A mesolevel comparative approach to maxi and mini strategies of public enterprise reform

Large-scale privatization is an unfamiliar area of public policy. The practice and study of property reforms and privatization needs to include mesolvel phenomena such as laws, regulations, institutions and standard operating procedures. There has been little comparative analysis of privatization programs around the world. The author argues that analysts should compare the most immediately relevant institutional environment of the enterprise. Conceptually, this mesolevel system is situated between the firm and the macroeconomy. This system of action is especially fruitful for cross-national comparisons of privatization programs because it is at this level that privatization strategies are designed. The problem for Eastern Europe and for less-developed countries is lack of experience with the relatively light economic regulation that characterizes industrial countries. Government leaders must also decide how much effort to devote to privatization of state-owned enterprises and how much to fostering private sector investment in new firms. Ernest J. Wilson, III is affiliated with the National Security Council, Washington, D.C.     

Ownership or Competition? An Evaluation of the Effects of Privatization on Industrial Relations Institutions, Processes and Outcomes

This paper examines whether privatization and exposure to product market competition leads to changes in labour management and industrial relations. Three sets of propositions are examined: privatization will lead to lower changes in industrial relations institutions and processes; privatization will lead to lower average levels of remuneration relative to public sector firms; and privatization will lead to relatively higher levels of efficiency. In each instance it is hypothesized that competition will add to ownership effects. These propositions are examined drawing on data derived from the UK bus industry.     

Ownership or Competition? An Evaluation of the Effects of Privatization on Industrial Relations Institutions,Processes and Outcomes

This paper examines whether privatization and exposure to product market competition leads to changes in labour management and industrial relations. Three sets of propositions are examined: privatization will lead to lower changes in industrial relations institutions and processes; privatization will lead to lower average levels of remuneration relative to public sector firms; and privatization will lead to relatively higher levels of efficiency. In each instance it is hypothesized that competition will add to ownership effects. These propositions are examined drawing on data derived from the UK bus industry.     

THE COSTS AND RETURNS OF THE PRIVATIZATION OF NATIONALIZED INDUSTRIES

The sale of public sector industry has become a central plank of UK public policy. This paper concentrates upon the most contentious area of the opportunity cost of share sales. The nature of these costs is related to the revealed objectives of the policy, and the extent to which they differ from expected costs is identified. The nature of the benefits forecast for privatization is explod and questions posed concerning the balance of costs and benefits in current policy. Particular attention is paid to the distribution of returns on the share issues in privatized businesses and parallels are drawn with issues in the private sector.     

Preparing public service agencies for strategic planning

This paper examines the reasons why public sector organizations may not be ready for traditional private sector strategic planning techniques and suggests a typology for diagnosing the CBO's position in relation to planning efforts. It identifies the need for interventions appropriate to the organization climate and begins to explore mechanisms which can be used to facilitate the strategic planning process in public service agencies.     

Does privatization make a difference? the impact of private contracting on municipal efficiency

This paper focuses on a public administration issue of continuing significance: the privatization of public services. Specifically, the study compares efficiency indicators across two groups of cities. One of the groups is comprised of cities that make extensive use of privatization while the other provides services through traditional municipal departments staffed with public employees. Most privatization studies focus on specific services and compare the relative efficiency of public and private production. Very little attention has been given to the impact privatization has on the larger functional areas of cities. This paper expands the conventional paradigm by attempting to determine whether the functional areas of contractual cities operate more efficiently than a comparable group of full- service cities.

Efficiency indicators were compared between two groups of cities using a variety of statistical techniques including analysis of the variance (ANOVA) and multiple regression. Six major functional areas were examined. In addition, relative productivity rankings were analyzed. No convincing support was found to indicate that the functional areas of contractual cities were more efficient than their full- service counterparts.     

Nyerere's Road to Socialism

The privatisation of Ashanti Goldfields Company (AGC) was an important part of Ghana’s neo-liberal reforms. Privatisation is explicitly intended to alter the balance of power between the public and private sector, and the process revealed much about the relationship between the state and the country’s business community. A close examination of the process confirms widely-held perceptions of the Rawlings government and its reform process as highly state-driven and subject to the personal idiosyncrasies of the country’s president. By contrast, Kufuor’s New Patriotic Party (NPP) demonstrated a less equivocal commitment to boosting the role of the private sector in the economy and employed a more routinely institutionalised set of interactions. While the outcome of these processes was sometimes counterintuitive, overall the privatization of AGC is likely to have shifted power out of the hands of the state and into the hands of an international set of shareholders.     

How Networks Explain Unintended Policy Implementation Outcomes: The Case of UK Rail Privatization

How a government secures the implementation of its policies is one of the most interesting processes in public administration. The tendency of scholars is to ignore implementation and how it impacts on the form of policy, something which invariably changes once resources have been allocated to implementing agencies and the policy detail is addressed. Traditional 'top-down' (Pressman and Wildavsky 1984, Mazmanian and Sabatier 1981) and 'bottom-up' (Elmore 1979, Hjern and Porter 1981, Hull and Hjern 1983) analytical frameworks give only a partial explanation of outcomes. In making the case for a netwrok approach, a typology of implementation networks is presented. The utility of this typology is evaluated in the context of one of the most complex privatization programmes attempted by any government: the privatization of British Rail (BR) between 1992 and 1997. In the case of the sale of one BR subsidiary train operating company, ScotRail, a variety of agencies with competing interests and acting in a politically-charged climate exchanged essential resources to deliver the policy, though not without generating unintended outcomes in the form of significant change to the policy and the agencies charged with implementing it.     

Latin America’s think tanks: The roots of nonprofit privatization

Conventional development models refer to two sectors, public and for-profit private. Massive growth of nonprofit private activity undermines that picture. Latin American tyink tanks exemplify a nonprofit privatization that has an enormous impact on development and remolds inter-sectoral relationships overall. Four major dynamics account for the spectacular growth of the region’s nonprofit think tanks. Three push factors are state repression, state weakness, and public university problems, and, as epitomized by financial supply, a pull factor is also crucial to attract nonprofit growth. To conceptualize its findings, this article considers public failure theory. Unhelpful regarding the pull factor, the theory otherwise works reasonably well, especially where there is visible movement from the public to the nonprofit sector. Beyond that, the evidence suggests ways to broaden the theory. Even a broadened formulation cannot fully capture the remarkable diversity and vitality of the growth in Latin America’s think tanks. But we are able to identify and analyze the key growth factors that blend together to produce particular institutional and national configurations. Daniel C. Levy is a professor at SUNY-Albany. After earning his Ph.D. in political science at the University of North Carolina-Chapel Hill, he was research associate for five years at Yale University. He has published five books and roughly seventy articles on politics and higher education, especially on Latin America, and on Mexican politics. Levy has done field research in most Latin American countries and has presented lectures and been published on five continents.     

WILL THE PRIVATIZATION OF PUBLIC ENTERPRISES SOLVE THE PROBLEM OF CONTROL?

The Government's privatization programme has acquired such momentum that hardly any public enterprise is exempt from action or proposals. Evaluation of the programme must recognize the diversity of privatization policies, and the tensions inherent within their objectives. Ideological motivation has been supported by the inability of policymakers to design a viable framework of economic and financial control over public enterprises. This has led to a view that it is impossible to manage business efficiently within the public sector, the constraints of which can only be escaped by ‘setting the enterprise free’. However, decisions now will close future options, only be escaped and may be prohibitive to reverse. A list of unanswered questions remain about future relationships between hybrids and governments, the costs and benefits of the regulatory systems which will replace public ownership, and the balance between public policy and private interests. Can the market succeed where the state has been judged to have failed?