Privatization in the European union: A critical assessment of its development, rationale and consequences

There is a long history of state ownership of industry in Europe. Since the 1980s, however, privatization has been promoted by economists as the solution to difficulties experienced in managing state-owned enterprises. This study reviews privatization in each of the member states of the European Union. It identifies differences in the levels of privatization activity between countries. It also emphasizes four reasons for the level of interest in privatization within the EU at the present time, with expected economic efficiency gains being but one reason. The study then explains why privatization may not lead to efficiency gains because of the form privatization is taking and the nature of capital markets within the EU. Finally, the study distinguishes between economic efficiency gains and social welfare. Privatization implies a redistribution of income and wealth and therefore of economic power.