Introduction: The Political Economy of Privatization

Abstract

Privatization of state-owned assets became a major economic policy of many countries in the 1980s, and in some cases amounted to a conscious attempt to roll back the frontiers of the state and return to the market. This was part of a reconsideration of the nature and role of the state sector in developed and less developed market economies that was resolved in favour of the view that government involvement had been excessive. At the end of the 1980s the demise of central planning in Eastern Europe led to an attempt to create markets there and, in a sense, to privatize whole economies. It is tempting to conclude from these developments that state or government failure is the norm, and that the free play of market forces is the solution to such government failures. Much of the neo-liberal theory and ideology, which received wide acclaim and influence during the 1980s, makes exactly this point. However, careful consideration of the theory and evidence of the ‘market versus government’ issue makes this belief less self-evident.