(review) Privatization in The Ashgate Research Companion to New Public Management

Privatization


This article aimed to give a general concept of privatization and discuss its causes and effects.


Concept of privatization


  1. Sale of state-owned enterprises
  2. Contracting out public services to private providers
  3. (Public provider > Private provider = Contracting out, Private provider > Public provider = Contracting in )
  4. Statutory body, also call “corporatization” and “marketization”
  5. Public-Private partnership refers to joint operation or collaboration between public and private organizations.
  6. Common forms of privatization are 
    • contracts - government contracts with private sector providers to deliver public services
    • franchises - government awards a private firm an exclusive right to provide a public service or operate a public asset in return for an annual lease payment or one-time upfront payment.
    • divestiture - when government is getting out of a service, activity or asset entirely, often through outright sales
  7. In academics, the most important forms of privatization are sale of state-owned enterprises and contracting out. 
  8. The government involved the privatization in three roles, regulatory, financing and producer role.


Why privatization 


Political - right-wing government (example Thatcher’s Conservative leadership, Adenauer’s sale of shares in Volkswagen in 1961)


Economic - pragmatic solution


Increasing efficiency of the public sector


sale of state-owned enterprises - raises short-term revenue, become taxable in the long run

contracting out - in the short run, it may even incur cost to set up contracting out regime, in the longer run can save the public purse.


Political cost - privatization may cause head cut on civil servant

Contracting out - easy to provide new service


Empirical Studies of the Political-Economic Dynamics of Contracting Out


Whether there is a general pattern or the determinants of contracting out are contingent on the specific setting. Three empirical studies :

One from Denmark (investigates Danish localities from 1985 to 1997),

Two from the leaner American public sector (American school districts in Texas and Washington, view contracting out as “purchased services”.


Result

No significant impact of partisan politics

contracted services have a buffer role in the public economy

Contracting out is a convenient buffer in a public sector that shrinks in time of fiscal stress and expands in time of public sector growth.Because it is easier to cut off privately delivered services than public sector employees. Contracting out is “politics of good times” 


Pallesen, T. (2011). Privatization. In T. Christensen, & P. Lægreid (Eds.), The Ashgate Research Companion to New Public Management (pp. 251-264). Ashgate.

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