A Property-Rights Perspective of Efficiency: Privatizing the Commons

Abstract

Low economic growth, on-going budget deficits and worries over the size the public debt in the 1970s and early 1980s provided an impetus for widespread reform of the public sector in a number of countries. Chile launched a major privatization program—the transfer of assets from state ownership to private ownership—in 1974, and the United Kingdom was the first developed economy to institute widespread public sector reforms characterized by both deregulation and privatization. Since the start of its privatization program in 1980, the United Kingdom government has raised over $100 billion in asset sales (Guislain, 1997). In the past two decades over 100 countries have, to a greater or lesser extent, privatized state-owned enterprises and sold state assets. The privatization programs in Russia and the former communist countries of eastern Europe have resulted in a fundamental shift in both the nature of their economies and societies. In mixed economies (such as New Zealand, Argentina, Mexico, Peru and Chile) privatization coupled with trade liberalization and financial and banking reforms have been nothing short of revolutionary in their scope and effect.