The
privatization revolution was launched by Margaret Thatcher's government in the
United Kingdom, which came to power in 1979. Prime Minister Thatcher
popularized the word privatization,
and her successful reforms were copied around the globe. She was
determined to revive the stagnant British economy, and her government
privatized dozens of major businesses, including British Airways, British
Telecom, British Steel, and British Gas. Other nations followed the British
lead because of a "disillusionment with the generally poor performance of
state-owned enterprises and the desire to improve efficiency of bloated and often
failing companies," noted a report on privatization by the Organization
for Economic Co-operation and Development (OECD).
Privatization
swept through other developed countries in the 1980s and 1990s, with major
reforms in Australia, Canada, France, Italy, New Zealand, Portugal, Spain, Sweden,
and other nations. A Labor government elected in New Zealand in 1984 privatized
dozens of state-owned companies, including airports, banks, energy companies,
forests, and the national airline and telecommunications companies. Australia
privatized dozens of companies between the mid-1990s and mid-2000s, generating
proceeds of more than $100 billion.
During
the 1980s and 1990s, Canada privatized more than 50 major businesses, including
electric utilities, a railway, an airline, and the air traffic control system.
France sold 22 major companies in 1986 and 1987 under the conservative Chirac
government. In the 1990s and 2000s, both conservative and socialist
governments continued to privatize. The number of companies in which the French
government holds a majority stake plunged from 3,000 in the early 1990s to
about 1,500 mainly smaller companies today.
Privatization
swept through many developing nations. In Latin America, Chile, Mexico, and
Panama had particularly large and successful privatization programs. Mexico,
for example, slashed the number of state-owned firms from 1,155 in the early
1980s to just 210 by the early 2000s. In Eastern Europe, huge
privatizations were pursued after the fall of communism, and the government
share of total economic output in that region fell from about three-quarters in
1990 to about one-quarter today.
Privatization
has gained support from both the political right and left. Left-of-center
governments in Australia, the United Kingdom, France, Canada, and New Zealand
all pursued privatization. Privatization has attracted opposition from the
public in many countries, but very rarely have reforms been reversed once put
in place. Privatization works, and so the reforms have lasted.
Privatization
has "massively increased the size and efficiency of the world's capital
markets," one finance expert found.11 As of 2005, the 10 largest share offerings in world
history were privatizations. By 2010, about half of the global stock
market capitalization outside of the United States was from companies that had
been privatized in recent years. Privatization has had a huge effect on
the global economy.
Today,
many countries have privatized the "lowest hanging fruit." But there
is much left to sell, and global privatization is continuing at a robust pace.
Over the past four years, governments worldwide have sold an average $203
billion of state-owned businesses annually. China is now the largest
privatizer, but Western nations continue to pursue reforms. The British
government, for example, sold a majority stake in Royal Mail in 2013 and then
unloaded the final block of shares in 2015.
Privatization
has been a very successful reform. An OECD report reviewed the research and
found "overwhelming support for the notion that privatization brings about
a significant increase in the profitability, real output and efficiency of
privatized companies. And a review of academic studies in the Journal of Economic Literature concluded
that privatization "appears to improve performance measured in many
different ways, in many different countries.
Despite
the success of privatization, reforms have largely bypassed our own federal
government. President Ronald Reagan's administration explored selling the U.S.
Postal Service, Amtrak, the Tennessee Valley Authority, the air traffic control
system, and federal land, but those efforts stalled. President Bill
Clinton had more success. His administration oversaw the privatization of the
Alaska Power Administration, the Elk Hills Naval Petroleum Reserve, the U.S.
Enrichment Corporation, and Intelsat.
Little
action on federal privatization has been pursued since then, but there are many
federal activities that should be turned over to the private sector. The United
States has a government postal system, but European countries are privatizing
their systems and opening them to competition. The United States has a
government air traffic control system, but Canada and the United Kingdom have
privatized their systems. Our federal government owns electric utilities and a
passenger rail service, but other countries have privatized those businesses.
The
first section of this study examines the path-breaking British privatizations
of recent decades. The second section discusses 12 advantages of privatization.
The third section describes six businesses and assets that federal policymakers
should privatize: the U.S. Postal Service, Amtrak, the Tennessee Valley
Authority, the air traffic control system, land, and buildings. That section
also highlights other businesses and assets to sell.
This
study mainly uses privatization in
a narrow sense to mean fully moving ownership of businesses and assets to the
private sector. The term is often used more broadly to include government
contracting, public-private partnerships, vouchers, and other forms of partial
privatization. Those are all worthy reforms, but they are not the focus here.
When
the next president comes into office in 2017, the time will be ripe for
privatization reforms. Privatization would help spur growth in our
underperforming economy and modestly reduce rising budget deficits.
Privatization would also create qualitative benefits, such as increasing
transparency and improving environmental stewardship. After decades of
privatization abroad, U.S. policymakers have a wealth of foreign experience to
guide their reform efforts.
Norb
Leahy, Dunwoody GA Tea Party Leader
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