PRIVATIZATION Chapter 10 Lecture 2

How Does Government Influence Private Enterprise? Government can own productive factors such as airlines, rail service, television, telecommunication Government can influence business decisions through regulations, subsidies, taxes, tariffs and the like

Private v. Public Ownership For various reasons, some countries nationalize companies (keep them from private hands) –To preserve a common good –To protect an industry –To build an industry advantage

Private v. Public Ownership More recently, governments have privatized government-owned businesses –Raise capital or reduce expenses –To make them more efficient Improves quality; reduces cost –Preserve the company and jobs –To remain competitive on a global level

Recent Privatization Has created a dynamic tension between public and private that has resulted in much privatization

Defining Privatization The transfer of a company from ownership by either a government or a few individuals to the public via the issuance of stock

The Dominoes of Privatization—1970s 1974—General Pinochet begins world’s largest privatization in Chile 1979—Margaret Thatcher announces plans to privatize British firms

The Dominoes of Privatization—1980s –1981 British Aerospace privatized –1984 British Telecom privatized –1986 France privatizes Saint-Gobain –1987 New Zealand privatizes telecommunications, air, rail, forestry, petroleum, and computer holdings –1988 Japan privatizes Nippon Telegraph & Telephone

The Dominoes of Privatization—1990s Hungary privatizes Izbusz Germany privatizes Deutsche Telekom; Deutsche Bank Czech Skoda is privatized and sold to VW Mexico privatizes Teléfonos de México Italy begins campaign to privatize banking with sale of San Paolo Bank Russian privatization oil companies Netherlands privatizes Koninklijke PTT

The Results of Privatization— 2000 and beyond Telecommunications Television Air travel Banking and investments Utilities