What is the privatization of companies

As privatization is known, in economics, the transfer or transfer of a company or activity that was in the hands of the State or public sector to the private sector.

Thus, the privatization of a sector that was the exclusive competence of the State allows other economic agents to participate in the financing, production of goods and provision of services.

The fundamental objective of privatization is, according to the free market economic system, to reduce State intervention in the economy, since it considers that in this way, thanks to the free exchange of goods and services, the market more efficiently and diligently satisfies the needs of consumers.

Privatization implies changes in the roles and responsibilities of public agencies and private companies, which is not limited only to the sale of public companies to the private sector.

Privatization is a process that can be carried out in three main ways:

  • Sale of state companies to the private sector.
  • Administration of public goods and services by private organizations.
  • Purchase of services from a private company by the State.

Historically, privatization has operated in three phases. In the first, he took over the cement factories, the sugar mills and the hotels.

Next, he focused on infrastructure, in areas such as electricity, ports, telecommunications, and roads.

Later, it has continued with social areas, such as social security, education, health or social housing.

Privatizations have always been a controversial issue, with its supporters and detractors.

Its defenders, the neoliberalists, argue that privatizations improve the performance of many public sector institutionsincreasing their efficiency and competence, resulting in satisfied users.

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His detractors point out that what privatization is proposed is the dismantling of the State to leave public affairs in the hands of private capital. And they accuse privatization of being a typical way of operating by right-wing governments to favor big business, to the detriment of the population.

See also Neoliberalism and Free market.