Introduction: The Aims of Privatization

Abstract

Privatization refers to the shift from government provision of functions and services to provision by the private sector. At base, privatization is a set of strategies for making government more effective. Put in these terms, privatization should-and I predict will-come to command widespread popular and political support; which of our politicians has the nerve to advocate less effective government? For similar reasons, privatization has become the central policy instrument of political interests as diverse as the Thatcher government in Great Britain and the (formerly) socialist Labour Party in New Zealand. At the simplest level, privatization refers to the introduction of incentives into the government production of services in order to increase productive effectiveness. Most commonly, this means the introduction of increased competition, not as an end in itself, but to better focus the attention of individuals providing the government service toward the ends that the service was meant to achieve. In many cases, government ends can be achieved more effectively by the substitution of a profit motive for the amorphous motives of a government bureaucracy. Students of government have always had difficulty identifying the motivational ethic of government bureaucracy. But if direct costs can be reduced or service enhanced, it makes sense to substitute private for public management. Privatization in this sense is hardly novel; the only issue is how far the policy can be extended. For example, just as the U.S. Postal Service currently contracts rural delivery routes to private entrepreneurs in order to increase efficiency, it may make sense to shift management of military commissaries from civil service employees to large grocery and appliance chains.