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Definition: (top of wiki page) for Privatization- Privatization can also be called denationalization or disinvestment. All three terms describe a situation where a government decides to transfer control of a government, and thus public owned, resource to the private business sector, either partially or totally. Sometimes, the government continues to exert a certain amount of control over the industry or service, called municipalization. For example the government may be able to limit prices and make certain demands through contracts, but private companies perform the work for a municipalized industry or service. The reverse process of privatization is called nationalization, when a government takes control of an industry or service from the private sector. Types: Share Issue Privatization (SIP): Selling shares on the stock market. Share issue privatization is the most common type of privatization. Share issues can broaden and deepen domestic capital markets, boosting liquidity and potentially economic growth, but if the capital markets are insufficiently developed it may be difficult to find enough buyers and transaction costs (e.g. under pricing required) may be higher.

Asset Sale Privatization: Selling the entire firm or part of it to a strategic investor, usually by auction. As a result of higher political and currency risk deterring foreign investors, asset sales are more common in developing countries. A substantial benefit of asset sale privatizations is that bidders compete to offer the highest price, creating income for the state in addition to tax revenues.

Privatization from below (releasing and deregulation), which provides the possibility of private sector cooperation in those activities which were previously public. This leads to competition between actors of private and public sectors and thereby it can be prior to privatization. So, the public sector is urged to gain a favorable level of efficiency to survive in the market. Releasing can be a good alternative for privatization, such as sale of state properties, since it can lead to competition with lower costs. It can also be done in cases such as entering to market and establishing new firm in the industry, transacting in the market, exporting and importing products, deregulating in firms’ establishment and their activities, and release of financial and employment system and other relevant markets.

Havrylyshyn and McGettigan (2000) stress the importance of this type of privatization in the transition economies. Differing views: Primary demand, derived demand and the relationship between the two are important concepts in agricultural markets. Primary demand is the demand by the final user (consumer) for the product. For example, the primary demand for pork is the consumer who buys the product and consumes it. All other pork demands within the pork supply chain are derived from this primary demand.

For example, the food store’s demand for pork from the supplier depends on how much pork the store can sell to the consumer. The supplier’s demand for pork from the pork processor depends on the supplier’s demand for pork from the food store. The pork processor’s demand for pork from the pork producer is based on the supplier’s demand for pork. History: One of the first instances of a public stock issue may well have been that of a London firm going by the mellifluous name of The Mysteries and Compagnie of the Merchant Adventurers for the Discoverie of Regions, Dominions, Islands and Places Unknown in 1553. The industrial project consisted in discovering a seaway leading to Russia. No such "privatization" had previously taken place. Up to then, exploration had been a public service ensured by the Portuguese marines under the aegis of King Henry the Navigator; it was a matter of discovering a passage to India via the African coast. Prince Henry of Portugal (also known as "The Navigator") instigated the finding of new ocean-based routes to the Orient. It was in Sagres (Portugal) that he founded a navigation school and sent out reconnaissance expeditions towards the West African coast in search of an itinerary culminating in the Far East. In 1492 the kings of Spain "outsourced" such activities to none other than Christopher Columbus. That said, the discovery of America was also financed by the royal Treasury, not by private investors. The "Russia" project financed by a consortium of London-based merchants turned out famously well: one of the three ships managed to reach the court of Ivan the Terrible and returned home with a treaty granting England the right to trade with Russia. The enterprise went on to rename itself the Muscovy Company and made a killing on the stock market.

In 1717 a Scottish adventurer, John Law, was given permission by the Due d'Orldans, the Regent of France during the minority of Louis XV, to establish the Company of the West (Compagnie d'Occident). The company was given extensive trade monopolies in the French colony of Louisiana, which covered an area of the present-day United States much greater than the present Louisiana. Following a series of takeovers, a large holding company commonly known as the Mississippi Company was established. In the autumn of 1719, the company was given additional rights to issue shares. The money raised from the new issues was used to repay French government bonds and pay government annuities, a financial burden bequeathed to the French state by the wars and magnificence of the Sun King Louis XIV. In return, the holding company was given extensive trading monopolies, minting rights and tax farms from Senegal to Louisiana, This 'privatization' was therefore of the first type described above, i.e., it involved replacing debt by the obligations of the new company, without increasing government expenditure. The success of the Mississippi Company invited emulation, even in the country which was to pioneer capital markets, England. The South Sea Company, which had been formed in 1711 to exploit trading monopolies in the South Seas, granted by the Crown, started to issue additional shares. In 1720, following the huge and apparent success of the Mississippi Company in relieving the debts and financial obligations of the French government, the South Sea Company was allowed to take over the major share of the British national debt. As in France, the possibilities for managing government debts bloated by the expensive War of Spanish Succession from 1702 to 1713, gave the company an influence out of all proportion to its actual trading prospects. The Bank of England, which had been established in 1694 to manage the government's debt, gave important support and an aura of respectability which common stock promoters lacked. Both the Mississippi Company and the South Sea Company pioneered a prototype of privatization in France and Britain. They collapsed in 1720, not because of that aspect of their activities, but because they became in effect pyramid banking operations, with new finance being raised to finance the buying in of stock to support its price. Had the proceeds of selling government stocks to these companies been used for additional expenditure, creating business and profits for French and British companies, the companies may perhaps have obtained some increase in profits if an unfortunate sense of geography (otherwise so apt for arousing imagined prospects of gain) had not placed their main trading operations in areas where the French and the British governments were not spending money. This may have enabled them to support a more modest stock issue. But insofar as financial success breeds excess, such a policy may merely have encouraged an even greater stock issue and an even more calamitous subsequent collapse. The fact that these companies promoted a form of privatization does not of course mean that the privatized companies of the 1990s are similar Ponzi structures. Arguably, the latter have been far more careful in their issue of stock. Although Ponzi elements are present in all financial inflations, successive inflations are different. The change of economic circumstances and financial innovation alter the form of financing arrangements as well as justifying that sanguine optimism which reassures the participants in capital market inflation and the construction of fragile financial structures. The essential difference between today's privatizations and those of the Mississippi and South Sea Companies is that Ponzi structures were developed in those companies themselves. At the end of the twentieth century, the Ponzi structure lies not in the privatized companies but in the capital markets and the pension funds that have effectively bought the privatized companies.

Arguments against privatization include the following: Privatization proposals in key public service sectors such as water and electricity in many cases meet with strong resistance from opposition political parties and from civil society groups, many of which regard them as natural monopolies. Proponents(citation needed) argues privatized industries are most concerned with profit, so while initial benefits to the consumer may occur, the industry may not be induced to keep prices low unless government controls are exerted. Privatization may limit access to certain industries for people who cannot afford them. The public has little control over a private industry, and decisions in that industry may adversely affect those in the public sector. The competition fostered in privatized industries may result in dirty or unsavory business practices. Campaigns typically involve demonstrations and democratic political activities; sometimes the authorities attempt to suppress opposition using violence (e.g. Cochabamba protests of 2000 in Bolivia and protests in Arequipa, Peru, in June 2002). Opposition is often strongly supported by trade unions. Opposition is usually strongest to water privatization — as well as Cochabamba, recent examples include Haiti, Ghana and Uruguay (2004). In the latter case a civil-society-initiated referendum banning water privatization was passed in October 2004. Reversion: In the US, people point to problems encountered when certain industries have been privatized. When utility companies were privatized, problems began to occur, and higher prices have been noted. There’s consideration of privatizing various industries: education, public transportation, social security, and a slew of others. Some people, especially on the left side of the political spectrum, feel that other industries in the private sector should be nationalized.

Creating a national health plan has been proposed for several decades. In some countries, medical care is nationalized, and has both problems and benefits. In a nationalized health care plan, no one does without basic health care, access to immunizations, or emergency room services when needed. Funding for such a plan is largely through increased taxes, but people don’t pay additional money to health insurance companies. Critics of nationalized health plans say that one of the biggest problems is people may have to wait for several months to several years for elective surgeries, like gallbladder removal. Yet, privatized health plans, especially large ones, may have so many members that the same wait time exists; thus this criticism may not be applicable.

Privatization continues to be a matter of much debate, especially in the US where capitalism, choice, and free market economies are valued. Right wing politicians tend to favor denationalizing many of the current government services or industries. Left wing politicians conversely support nationalizing several of the industries currently run in the private sector.