Privatization: Third World Moves Slowly

October 7, 1988

Report Outline
Special Focus


There have been repeated claims in recent years about a dramatic shift toward free markets in less developed countries. But so far the figures do not back up the rhetoric. In fact, international lenders are now putting less pressure on Thrid World countries to privatize state-owned enterprises. Dogma is on the wane with both the lenders and the developing countries, and the watchwords of the late 1980s are pragmatism and reform.

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For the past two or three years, some of the more zealous proponents of free enterprise have proclaimed that a tidal wave of democratic capitalism has been rolling over the developing world. From Africa to Asia to Latin America, they say, countries are renouncing the socialist leanings of their past. They are selling off flabby, inefficient state-owned enterprises to the private sector—privatizing them—because they believe the private sector, with its profit motive, is much more capable of managing the economy. And a free economy, the argument goes, inevitably will lead to a free society.

Newspaper headlines regularly tout this Third World phenomenon: “In Libya, Marketplace Is Making a Comeback”; “Industrial Shift in India Stresses Free Enterprise”; “Chile Develops ‘Stockholders’ Culture.'” But the shift from government-run economies to private enterprise has been much less than those headlines imply. Despite notable successes of privatization in the industrialized world—in Great Britain, France and Canada—the economies of developing nations continue to be dominated by state-owned enterprises (SOEs). According to a World Bank survey of 60 developing nations released in July 1988, fewer than 350 SOEs were privatized in the 1980s. The report says that an additional 168 privatizations are under way and 391 more are planned. Those numbers seem to be extremely small; many individual countries have more SOEs than the 350 enterprises privatized worldwide. But no one knows the current size of the state-owned sector in the developing world—the World Bank's own report warns about serious data inadequacies—so there is no way to get a meaningful measure of the rate and size of those privatizations.

ISSUE TRACKER for Related Reports
Dec. 08, 2017  Privatizing Government Services
Aug. 09, 1996  Privatizing Government Services
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Oct. 07, 1988  Privatization: Third World Moves Slowly
Jul. 26, 1985  Privatizing Public Services
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