Privatization: Clarifying the Term

Government, the media, and the private infrastructure industry use a variety of terms to describe efforts to transfer public services to the private sector. As one long-time scholar of infra-structure privatization at Harvard notes, privatization has been packaged under a variety of names.

Governments have experimented with many variants of privatization, often coining special terms-such as "Capitalization" (Sri Lanka), "capitalization" (Bolivia), or "equitization" (Viet-nam)-to distinguish them from the standard fare. And many consultants now prefer to use the term "public-private partnerships" to emphasize that a wide variety of forms of public-private collaboration is possible. Such changes in terminology may be useful, but they do not eliminate the basic problem of persuading the public that the terms of the partner-ship are fair.1

The term "public-private partnership" is particularly ubiquitous, and woefully imprecise. Virtually all public programs have always involved some kind of partner-ship between public and private sectors. Medicare is a partnership between public financing and services by private medical providers, for instance. All government departments of transportation likewise have a long tradition of using private vendors for various kinds of service provision. Even transactions between two private companies involve some kind of partner-ship with the public sector to underwrite risks, define property rights, and enforce contracts. Since "public-private partner-ship" can mean virtually anything, the term is of little descriptive value.

The term "privatization" is more precise, denoting the transfer of traditionally public services or property to the private sector.