Economic policy has taken an anti-market turn in recent years, with many nations increasing regulation, running large deficits, and embracing repeated stimulus actions by central banks. There is, however, one good-news story in economic policy that is often overlooked: the ongoing privatisation revolution that has swept the world since the 1980s.
Governments in more than 100 countries have moved thousands of state-owned businesses to the private sector. Airlines, railroads, postal services, electric utilities, and many other types of businesses, valued at more than $3.3 trillion, have been privatised over the past three decades.
The revolution was launched by Margaret Thatcher. She came to power determined to revive the stagnant British economy with market-based reforms. Her government deregulated, cut marginal tax rates, repealed exchange controls, and tamed militant labour unions.
But it was privatisation that became her most important and enduring economic legacy. Thatcher popularised the word privatisation, and she oversaw the sale of many major businesses, including British Airways, British Telecom, British Steel, and British Gas.
Spurred by the success of Thatcher’s reforms, privatisation swept through developed and developing nations in Europe, Latin America, and elsewhere. Other nations followed Britain’s lead because of “disillusionment with the generally poor performance of state-owned enterprises and the desire to improve efficiency of bloated and often failing companies”, noted a report on privatisation by theOrganisation for Economic Cooperation and Development
Privatisation has had a huge effect on the global economy. It has spurred economic growth and improved living standards as privatised businesses cut costs, increased service quality, and innovated. The reforms also “massively increased the size and efficiency of the world’s capital markets”, argues William Megginson in his book,The Financial Economics of Privatisation
. Many of the largest share offerings in world history have been privatisations, and a large share of global stock market capitalisation is from privatised companies.
It is inspiring to look back at Margaret Thatcher’s privatisation triumph. But for US policymakers, there are practical lessons as well. Many types of businesses that Britain privatised are still partly or wholly in government hands in America, including airports, seaports, postal services, air traffic control, electric utilities, and passenger rail. To tackle lacklustre US growth, policymakers should pursue privatisation in order to increase productivity and inject more dynamism into the economy. (…)