Privatization–The Road to Democracy?

Abstract

Since the fall of the Soviet Union, many governments around the world have adopted measures that are often described as "privatization." That label generally refers to governmentally sponsored efforts to move assets and economic decision-making away from the political arena and into the hands of individuals or private corporations. Some of these efforts have been part of the package of economic principles—the so-called "Washington Consensus"—urged by the International Monetary Fund and the World Bank since the early 1990s, and as such they have drawn criticism on a number of grounds. Influential proponents continue to advance privatization schemes over a great range of subjects, both at home and abroad. Why have they done so? The primary reasons are economic. The old Soviet Union and its satellites dramatically illustrated the manner in which dirigiste, state-centered economies can lapse into wasteful decrepitude. Drawing a lesson from those bad examples, privatizers have hoped to infuse their respective economic spheres with the efficiency, energy, and innovation that are thought to accompany decentralized individual initiatives. Nevertheless, over the last decade, critics have beaten the drums ever more loudly about the failings and lapses of privatization policies, particularly as represented by the Washington Consensus on international investment, and they have thus lent some intellectual support to the leaders of popular backlash, as well as to the political figures who wish to stage some kind of retreat. Many of these critiques point to the political costs of privatizations—their adverse impact on local sovereignty, their short-changing of less-well-off citizens, and their stirring of intergroup domestic strife.