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Published online by Cambridge University Press: 13 August 2021
Few phenomena in recent years have sparked as much fervent support and militant opposition as “privatization.” Narrowly defined, privatization means selling state owned assets to private buyers. Its proponents insist that privatization improves micro-economic efficiency and enhances macro-economic growth. Its opponents counter that privatization is a non-starter politically and impractical economically. One side tends to see privatization as a private sector panacea; the other an imperialist curse.
1. The World Bank and the IMF are among the strongest supporters of liberal reforms and privatization. The Lagos Plan of Action prepared by African heads of state is far more critical. (See Robert Browne’s article in this journal.) The U.S. has the most visible bilateral privatization programs; as is often the case, the French seem to talk less but do more privatization deals than the Americans.
2. The small universe of actual privatization deals makes generalizations about their impact extremely tentative and modest. Much of the argumentation begins with appeals to neo-classical economic logic. It then demonstrates that the public enterprise sector is a major drain on development funds. Proponants then argue, logically, that reducing the size of the sector will reduce the drain on resources. In fact, liquidating firms or privatizating them has helped reduce some state expenditures. The evidence is far more mixed as to whether the privatized firms have significantly improved their own performance. There is even less evidence linking company improvements to enhanced national economic performance.
3. Information on public enterprise is available in John Nellis, “Public Enterprises in Sub-Saharan Africa,” World Bank Discussion Paper No. 1, November 1986. For privatization generally, see Yarrow, G., “Privatization in Theory and Practice,” Economic Policy. Vol. 1, no. 1, 1986 CrossRefGoogle Scholar. For Africa, see Thomas Callaghy and Ernest Wilson, “Privatization in Africa,” in Raymond Vernon, ed., Privatization, N.Y., Council on Foreign Relations, forthcoming.
4. Mary Shirley discusses the impacts of the poor public enterprise performance in Managing State-Owned Enterprises, Washington, D.C., World Bank, 1983.
5. Hyden, Goran, No Shortcuts to Progress, Berkeley, University of California Press, 1983 Google Scholar.
6. Williams, Gavin, “Marketing Boards in Nigeria,” Review of African Political Economy, no. 34, December 1985, pp. 4–15 CrossRefGoogle Scholar.
7. Material on the cases is drawn from the author’s field work in Nigeria, Cote Id’Ivoire, Senegal, Zambia and Tanzania. While in Nigeria I concluded from my interviews that there was not a strong constituency for abolishing the Marketing Boards for the specifics of the national economic reforms. At the same time, the old, powerful constituency for the Boards had withered away. General Babangida recognized that tough decisions were required to restore the economic health of his country, but a positive, active constituency was not there. Nonetheless, he took a great leap beyond the limits this constituency would clearly support and tried to bring them along with him. In other words, he exercized leadership. Big reforms, by their nature, are risky business.
8. See my Privatization in Cote d’Ivoire: Three Case Studies, Cambridge, Mass. Harvard University, Kennedy School of Government, Center for Business and Government Working Paper, December 1987.
