Privatisation – II

Definition of Privatisation


The Economist magazine introduced the term in the 1930s in covering Nazi German economic policy.


The history of privatization dates from Ancient Greece, when governments contracted out almost everything to the private sector.

In the Roman Republic private individuals and companies performed the majority of services including tax collection (tax farming), army supplies (military contractors), religious sacrifices and construction.

However, the Roman Empire also created state-owned enterprises—for example, much of the grain was eventually produced on estates owned by the Emperor. Some scholars suggest that the cost of bureaucracy was one of the reasons for the fall of the Roman Empire.

Perhaps one of the first ideological movements towards privatization came during China’s golden age of the Han dynasty. Taoism came into prominence for the first time at a state level, and it advocated the laissez-faire principle of Wu wei (無為), literally meaning “do nothing” The rulers were counseled by the Taoist clergy that a strong ruler was virtually invisible.

During the Renaissance, most of Europe was still by and large following the feudal economic model. By contrast, the Ming dynasty in China began once more to practice privatization, especially with regards to their manufacturing industries. This was a reversal of the earlier Song dynasty policies, which had themselves overturned earlier policies in favor of more rigorous state control.

In Britain, the privatization of common lands is referred to as enclosure (in Scotland as the Lowland Clearances and the Highland Clearances). Significant privatizations of this nature occurred from 1760 to 1820, coincident with the industrial revolution in that country.

In more recent times, Winston Churchill’s government privatized the British steel industry in the 1950s, and

West Germany’s government embarked on large-scale privatization, including selling its majority stake in Volkswagen to small investors in a public share offering in 1961.

In the 1970s General Pinochet implemented a significant privatization program in Chile.

However, it was in the 1980s under the leaderships of Margaret Thatcher in the UK and Ronald Reagan in the USA, that privatization gained worldwide momentum.

In the UK this culminated in the 1993 privatization of British Rail under Thatcher’s successor, John Major; British Rail having been formed by prior nationalization of private rail companies.

Significant privatization of state owned enterprises in Eastern and Central Europe and the former Soviet Union was undertaken in the 1990s with assistance from the World Bank, the U.S. Agency for International Development, the German Treuhand, and other governmental and nongovernmental organizations.

The New Economic Policy announced by the government of India in 1991 gave importance to the policy of privatization

A major ongoing privatization, that of Japan Post, involves the Japanese post service and the largest bank in the world. This privatization, spearheaded by Junichiro Koizumi, started in 2007 following generations of debate.

Egypt undertook widespread privatization under President Hosni Mubarak after the 2011 revolution.

Definition of Privatisation

According to D. R. Pendse, “Privatisation is a process which reduces the involvement of the state or public sector in a country’s economic activities”.

In 1969 Peter Drucker for the first time used the term “Privatisation”. He has stressed privatization in his book, “The Age of Discontinuity” According to Peter Drucker, “Disinvestment of public sector units by the government is called privatisation”.

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