Sharing the Wealth : Privatization Through Broad-Based Ownership Strategies Book

Privatization is a inherently political process. Because privatization typically involves a fundamental shift of economic power (always from the state to the private sector and sometimes from domestic owners to foreign owners), it produces political conflict, often assumes the characteristics of a zero-sum game, and sometimes involves such intense debate that, for the policy-maker, the perceived political costs of privatization can out-weigh the expected economic benefits. This paper illustrates a number of privatization strategies which address political and social concerns related to ownership and the distribution of wealth, and thus aims to expose policy-makers involved in privatization to a greater array of strategic options. It describes three basic privatization strategies for widely distributing ownership of state-owned enterprises: voucher-based programs, collective investment programs and public offerings. While these strategies, for the most part, were devised to accelerate the transition from socialism to capitalism throughout Eastern Europe, Central Asia and the former Soviet Union, the paper argues that these approaches can be successfully adapted to countries where progress on privatization has been hampered by political and social conflicts over ownership and the distribution of the benefits of reform.