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Corporatization

From Academic Kids

Corporatization is a form of economic reform which takes services from the direct control of the government, and places them in the control of government-owned corporations. This is often seen as a step towards full-scale privatization.

Contents

Overview

The move towards economic reform in the 1980s led to privatization of public functions in many countries. Corporatization was seen as a half-way house on the road to privatization. The effect of corporatization has been to convert state departments into public companies and interpose commercial boards of directors between the shareholding ministers and the management of the enterprises. These state-owned enterprises enable efficiencies to be gained without ownership of strategic organizations being transferred, but fall short of the full competitive model in that the company's shares are not traded on the stock market. Corporatization has been the policy of the People's Republic of China and has been used in New Zealand and most states of Australia in the reform of their electricity markets, as well as in many other countries and industries (eg Dutch water supply companies).

Although corporatization is to be distinguished from privatization (the former involves publicly-owned corporations, the latter privately-owned ones), once a service has been corporatised it is often relatively easy to privatise or part-privatise it, for example by selling some or all of the company's shares via the stock market. In some cases (eg the Netherlands in regard to water supply) there are laws to prevent this.

Major Areas

Some major areas of services which have been corporatized in the past include:

  • National railroads. The initial impetus to corporatization of functions that had belonged to national and local governing bodies began in the sphere of national railroad construction in mid-19th century.
  • Corporatized electricity.
  • Corporatized water. For example, the Dutch water supply companies are publicly-owned corporations (mostly municipalities, also regional government). For involvement of private corporations in water supply, see water industry and water privatization.

Reference

  • Maude Barlow and Tony Clarke, Blue Gold: The Fight to Stop the Corporate Theft of the World's Water 2002. Somewhat alarmist and partisan.

See also

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