Privatization is the transfer of government programs, assets, or responsibilities to private individuals or organizations. There are many different types and degrees of privatization. In the purest form of privatization, a government would completely sell a state-owned business to private investors. In a less strict form of privatization, a government might hire private organizations to deliver public services. The opposite of privatization is the process of nationalization, by which a government increases its ownership of a country’s industries and resources.
Many Western nations have privatized such functions as air travel and telephone service. Following the breakup of the Soviet Union in 1991, many former Soviet republics and Eastern European countries that had been dominated by the Soviet Union undertook large-scale privatization of their nationalized industries. Some other countries have hired private organizations to provide health care, airport management, and road construction.
When handled effectively, privatization can lower costs and increase flexibility in providing services. Privatization is not always successful, however. Some private buyers might lack the resources or expertise to manage public services effectively. Therefore, privatization efforts require careful planning and implementation to improve the chances for success.
