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Definition

privatization

Privatization is the process of transferring an enterprise or industry from the public sector to the private sector

The public sector is the part of the economic system that is run by government agencies. Privatization may involve either sale of government-held assets or removal of restrictions preventing private individuals and businesses from participating in a given industry. 

Privatization is an ongoing trend in many parts of the developed and developing world. Proponents of privatization maintain that the competition in the private sector fosters more efficient practices, which eventually yield better service and products, lower prices and less corruption. On the other hand, critics of privatization argue that some services -- such as health care, utilities, education and law enforcement -- should be in the public sector to enable greater control and ensure more equitable access. 

The term has alternate meanings within business and finances. For example, if an individual or organization purchases all the stock in a publicly-traded company, that effectively makes it private, so that process is sometimes described as privatization. However, in contrast to the primary understanding of privatization, the company in question is in the private sector to begin with and remains there. 

This was last updated in August 2013

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