Tuesday, July 5, 2022
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Privatisation, a complex phenomenon difficult to define

Andrés Sanz . Institute for Fiscal Studies. Complutense University

Entitled "Privatisations. Some general aspects ", in a documented and reasoned article Andrés Sanz addressed the issue of privatisation, highlighting its importance, complexity and the need to continue deepening his study. Here we reproduce excerpts from the article, some of whose conclusions "revolve around the idea of questioning and relativising the generally accepted perception of the need to tackle the widespread privatisation of public sector," in his own words.

As others have considered, among them Brugué and Goma (1996), there is no single definition of privatisation, the concept is eminently polysemic, that is with a wide range of meanings, which are perhaps summarized in the generic idea of privatizing as a concept and as stated in the Dictionary of the Royal Academy, "transferring a company or public activity to the private sector." Because it is not only the sale of property rights of public companies with corporate form, or what is the same, the of placing shares on the stock market that formerly belonged to the public sector, but the definition itself also includes transfers of public activities to the private sector.

We understand that there is privatisation when the transfer occurs to the private sector, be it with or without profit. This implies that we cannot speak of the existence of a privatisation process if an activity is transferred from one level of government to another, for example from central to local levels, or if a change occurs in the form of the activity.

For example, when a municipal company or an independent body is created and directs the organization of the production of certain goods or services that were previously provided by units of local government, privatisation of the service is not being produced, but you are using an organizational formula that can enable more effective and efficient use of public resources and therefore give a better service to citizens. Obviously, in many cases, and especially at this time when much of the Spanish administration is directed by the Popular Party, the change in organizational model may have the ultimate goal of privatizing the service.

Privatisation is often called "liberalization"

First, the transfer of regulatory activity from public to private sector. The regulation implies the existence of a set of incentives or penalties established by the public sector to promote, hinder or prohibit certain activities of citizens or institutions. We can distinguish between three types of regulations: economic, social and administrative. As for the economic regulation, it aims to increase market efficiency, trying to penalize for example, the existence of monopoly conditions, avoid practices that reduce competition, etc. Social regulation aims to ensure shared values and social rights of different groups (consumers, workers, etc.). The administrative regulation relates to how the public sector manages its resources and properties. The tax system, the rules of economic and financial management, etc. is included in it. In these three facets of regulation, we can observe an extensive privatisation, which in this aspect is often called liberalization and the European case has been enhanced by the process of European Union, especially with the signing of the Single Act.

Secondly, generalised forms of private production of public services whose provision remains the responsibility of the public sector. This has gradually produced a crisis of the traditional concept that started from the premise that public provision implies public production. Questioning the role of the public sector in many sectors should not be the approach to suppress public activity that guarantees citizens access to certain goods or services (health, education, etc.). At issue is whether these services should be produced by the public sector itself or by private institutions.

Thirdly, the introduction of market mechanisms in public production. This aims to create competition between public bodies. The various attempts to create internal markets in different sectors, the buyer separation provider, etc., are intended for to governance takes place in a medium as close as possible to the alleged market conditions.

Fourthly, they are conducting a series of processes of unquestionable originality. We find privatisation process in which a service or activity in a public institution is suppressed and the employees are supported to constitute a company or cooperative to provide the service. In this case, the privatisation process affects production of the service that is carried out by a private entity that sells this production the public sector. The aim of this type of privatisation is to lower personnel costs and therefore the end result is a reduction in salaries of public employees (which ceases be so) and increased job insecurity.



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