Professional Documents
Culture Documents
Introduction LPG: Economic Liberalization
Introduction LPG: Economic Liberalization
India opened up the economy in the early nineties following a major crisis that led by a foreign
exchange crunch that dragged the economy close to defaulting on loans.The country ran out of
foreign exchange reserves. To face the crisis situation, the government decided to bring about
major economic reforms to revive Indian economy. These reforms were popularly known as
'structural adjustments' or 'liberalization' or 'globalization’. The government announced a New
Economic Policy on July 24, 1991.This new model of economic reforms is commonly known as
the LPG or Liberalisation, Privatisation and Globalisation model. Liberalisation refers to process
of making policies less constraining of economic activity and also reduction of tariff or removal
of non-tariff barriers. The term “Privatisation” refers to the transfer of ownership of property or
business from a government to a private owned entity.Globalisation refers to the expansion of
economic activities across political boundaries of nation states. More importantly perhaps it
refers economic interdependence between countries in the world economy. Prime Minister of the
country, P V NarasimhaRao initiated ground breaking economic reforms.Dr.Manmohan Singh
was the Finance Minister at that time he assisted NarasimhaRao and played a key role in
implementing these reform policies.The reforms did away with the License Raj, reduced tariffs
and interest rates and ended many public monopolies, allowing Prime International Research
Journal Double Blind, Peer Reviewed, Indexed Journal ISSN : 2349-2139 Prime International
Research Journal, Vol. I, Issue 4, December, 2014 Page 22 automatic approval of foreign direct
investment in many sectors.The primary objective of this model was to make the economy of
India the fastest developing economy in the globe with capabilities that help it match up with the
biggest economies of the world.
Economic liberalization
Economic liberalization (or economic liberalisation) is the lessening of government regulations and
restrictions in an economy in exchange for greater participation by private entities; the doctrine is associated
with classical liberalism. Thus, liberalization in short is "the removal of controls" in order to
encourage economic development.[1] It is also closely associated with neoliberalism.
Most high-income of the countries have pursued the path of economic liberalization in the recent decades with
the stated goal of maintaining or increasing their competitiveness as business environments. Liberalization
policies include partial or full privatisation of government institutions and assets, greater labour market
flexibility, lower tax rates for businesses, less restriction on both domestic and foreign capital, open markets,
etc. In support of liberalization, former British Prime Minister Tony Blair wrote that: "Success will go to those
companies and countries which are swift to adapt, slow to complain, open and willing to change. The task of
modern governments is to ensure that our countries can rise to this challenge."[2]
In developing countries, economic liberalization refers more to liberalization or further "opening up" of their
respective economies to foreign capital and investments. Three of the fastest growing developing economies
today; Brazil, China, and India, have achieved rapid economic growth in the past several years or decades, in
part, from having "liberalized" their economies to foreign capital.[3]
Many countries nowadays, particularly those in the third world, arguably have no choice but to also
"liberalize" their economies in order to remain competitive in attracting and retaining both their domestic and
foreign investments. This is referred to as the TINA factor, standing for "there is no alternative". For example,
in 1991, India had little choice but to implement economic reforms.[4] Similarly, in the Philippines, the
contentious proposals for Charter Change include amending the economically restrictive provisions of
their 1987 constitution.[5]
The total opposite of a liberalized economy would be North Korea's economy with their "self-sufficient"
economic system that is closed to foreign trade and investment (see autarky). However, North Korea is not
completely separate from the global economy, since it receives aid from other countries in exchange for peace
and restrictions in their nuclear programme. Another example would be oil-rich countries such as Saudi
Arabia and the United Arab Emirates, which see no need to further open up their economies to foreign capital
and investments since their oil reserves already provide them with huge export earnings.
The adoption of economic reforms in the first place and then its reversal or sustenance is a function of certain
factors, presence or absence of which will determine the outcome. Sharma (2011) explains all such factors.
The author's theory is fairly generalizable and is applicable to the developing countries which have
implemented economic reforms in the 1990s.[6]
This article may require cleanup to meet Wikipedia's quality standards. The specific
problem is: repeated information and poor organisation Please help improve this
article if you can. (August 2014) (Learn how and when to remove this template message)
The economic liberalisation in India refers to the liberalisation, initiated in 1991, of the country's economic
policies, with the goal of making the economy more market- and service-oriented, and expanding the role of
private and foreign investment. Specific changes include a reduction in import tariffs, deregulation of markets,
reduction of taxes, and greater foreign investment. Liberalisation has been credited by its proponents for the
high economic growth recorded by the country in the 1990s and 2000s. Its opponents have blamed it for
increased inequality and economic degradation. The overall direction of liberalisation has since remained the
same, irrespective of the ruling party, although no party has yet solved a variety of politically difficult issues,
such as liberalising labour laws and reducing agricultural subsidies.[1] There exists a lively debate in India as to
whether the economic reforms were sustainable and beneficial to the people of India as a whole.[2]
Indian government coalitions have been advised to continue liberalisation. Before 2015, India grew at a slower
pace than China, which had been liberalising its economy since 1978.[3] In 2015, India's GDP growth outpaced
that of China.[4] The McKinsey Quarterly stated that removing major obstacles "would free India's economy to
grow as fast as China's, at 10% a year".[5]
There has been significant debate, however, around liberalisation as an inclusive economic growth strategy.
Income inequality has deepened in India since 1992, with consumption among the poorest staying stable while
the wealthiest generate consumption growth.[6] India's gross domestic product (GDP) growth rate in 2012–13
was the lowest for a decade, at just 5.1%,[7] at which time more criticism of India's economic reforms surfaced;
it apparently failed to address employment growth, nutritional values in terms of food intake in calories, and
also export growth—and thereby was leading to a worsening current account deficit compared to the period
prior to reform.[8] However, in the financial year 2013–14
Pre-liberalisation policies[edit]
Indian economic policy after independence was influenced by the colonial experience (which was seen by
Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended
towards protectionism, with a strong emphasis on import substitution industrializationunder state
monitoring, state intervention at the micro level in all businesses especially in labour and financial markets, a
large public sector, business regulation, and central planning.[9] Five-Year Plans of India resembled central
planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and
electrical plants, among other industries, were effectively nationalised in the mid-1950s.[10] Elaborate licences,
regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up
business in India between 1947 and 1990.[11]
Before the process of reform began in 1991, the government attempted to close the Indian economy to the
outside world. The Indian currency, the rupee, was inconvertible and high tariffs and import licensing
prevented foreign goods reaching the market. India also operated a system of central planning for the
economy, in which firms required licences to invest and develop. The labyrinthine bureaucracy often led to
absurd restrictions—up to 80 agencies had to be satisfied before a firm could be granted a licence to produce
and the state would decide what was produced, how much, at what price and what sources of capital were
used. The government also prevented firms from laying off workers or closing factories. The central pillar of
the policy was import substitution, the belief that India needed to rely on internal markets for development, not
international trade—a belief generated by a mixture of socialism and the experience of colonial exploitation.
Planning and the state, rather than markets, would determine how much investment was needed in which
sectors.
— BBC[12]
The low annual growth rate of the economy of India before 1980, which
stagnated around 3.5% from 1950s to 1980s, while per capita income
averaged 1.3%.[16] At the same time, Pakistan grew by 5%, Indonesia by
9%, Thailand by 9%, South Korea by 10% and Taiwan by 12%.[17]
Only four or five licences would be given for steel, electrical power and
communications. Licence owners built up huge powerful empires.[12]
A huge private sector emerged. State-owned enterprises made large
losses.[12]
Income Tax Department and Customs Department became inefficient in
checking tax evasion.[citation needed]
Infrastructure investment was poor because of the public sector
monopoly.[12]
Licence Raj established the "irresponsible, self-perpetuating bureaucracy
that still exists throughout much of the country"[18] and corruption
flourished under this system.[19]
The fruits of liberalisation reached their peak in 2006, when India recorded its highest GDP growth rate of
9.6%.[20] With this, India became the second fastest growing major economy in the world, next only to
China.[19] The growth rate has slowed significantly in the first half of 2012.[21] An Organisation for Economic
Co-operation and Development (OECD) report states that the average growth rate 7.5% will double the
average income in a decade, and more reforms would speed up the pace.[22] The economy then rebounded to
7.3% growth in 2014–15.
Economic liberalisation in India was initiated in 1991 by Prime Minister P. V. Narasimha Rao and his then-Finance
Minister Dr. Manmohan Singh.[23] Rao was often referred to as Chanakya for his ability to steer tough economic and
political legislation through the parliament at a time when he headed a minority government.[24][25]
Crisis[edit]
By 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of
currencies of major trading partners. India started having balance of payments problems since 1985, and by the
end of 1990, the state of India was in a serious economic crisis. The government was close to default,[26][27]its
central bank had refused new credit and foreign exchange reserves had reduced to the point that India could
barely finance three weeks’ worth of imports. It had to pledge 20 tonnes of gold to Union Bank of Switzerland
and 47 tonnes to Bank of England as part of a bailout deal with the International Monetary Fund (IMF). Most
of the economic reforms were forced upon India as a part of the IMF bailout.[28]
A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout,
gold was transferred to London as collateral, the rupee devalued and economic reforms were forced upon
India. That low point was the catalyst required to transform the economy through badly needed reforms to
unshackle the economy. Controls started to be dismantled, tariffs, duties and taxes progressively lowered, state
monopolies broken, the economy was opened to trade and investment, private sector enterprise and
competition were encouraged and globalisation was slowly embraced. The reforms process continues today
and is accepted by all political parties, but the speed is often held hostage by coalition politics and vested
interests.
Liberalisation of 1991[edit]
In response, Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated
the economic liberalisation of 1991. The reforms did away with the Licence Raj, reduced tariffs and interest
rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many
sectors.[29] Since then, the overall thrust of liberalisation has remained the same, although no government has
tried to take on powerful lobbies such as trade unions and farmers, on contentious issues such as reforming
labour laws and reducing agricultural subsidies.[30] By the turn of the 21st century, India had progressed
towards a free-market economy, with a substantial reduction in state control of the economy and increased
financial liberalisation.[31] This has been accompanied by increases in life expectancy, literacy rates and food
security, although urban residents have benefited more than rural residents.[32]
Later reforms[edit]
This list is incomplete; you can help by expanding it.
Impact[edit]
This section needs additional citations for verification. Please help improve this
article by adding citations to reliable sources. Unsourced material may be challenged
and removed. (December 2015) (Learn how and when to remove this template message)
The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct
investment, portfolio investment, and investment raised on international capital markets) in India grew from a
minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96.[39]Poverty was 46.1% in 1991 has came
down to 21.3% in 2016.
Annual growth in GDP per capita has accelerated from just 1¼ per cent in the three decades after
Independence to 7½ per cent currently, a rate of growth that will double average income in a decade.... In
service sectors where government regulation has been eased significantly or is less burdensome—such as
communications, insurance, asset management and information technology—output has grown rapidly, with
exports of information technology enabled services particularly strong. In those infrastructure sectors which
have been opened to competition, such as telecoms and civil aviation, the private sector has proven to be
extremely effective and growth has been phenomenal.
— OECD[22]
Election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was a welcome change. His
prescription to speed up economic progress included solution of all outstanding problems with the West (Cold
War related) and then opening gates for FDI investment. In three years, the West was developing a bit of a
fascination to India's brainpower, powered by IT and BPO. By 2004, the West would consider investment in
India, should the conditions permit. By the end of Vajpayee's term as prime minister, a framework for the
foreign investment had been established. The new incoming government of Dr. Manmohan Singh in 2004
further strengthened the required infrastructure to welcome the FDI.
Today, fascination with India is translating into active consideration of India as a destination for FDI. The A T
Kearney study put India second most likely destination for FDI in 2005 behind China. It has displaced US to
the third position. This is a great leap forward. India was at the 15th position, only a few years back. To quote
the A T Kearney Study, "India's strong performance among manufacturing and telecom & utility firms was
driven largely by their desire to make productivity-enhancing investments in IT, business process outsourcing,
research and development, and knowledge management activities".
— OECD[22]
Though recently labour law reforms have been enacted at the state level[50][51][52][53]
Reforms at the state level[edit]
According to an OECD survey of the Indian economy [22] states that had more liberal regulatory regimes had
better economic performance. The survey also concluded that were complementary measures for better
delivery of infrastructure, education and basic services implemented, they would boost employment creation
and poverty reduction.
Introduction LPG
India opened up the economy in the early nineties following a major crisis that led by a foreign
exchange crunch that dragged the economy close to defaulting on loans.The country ran out of
foreign exchange reserves. To face the crisis situation, the government decided to bring about
major economic reforms to revive Indian economy. These reforms were popularly known as
'structural adjustments' or 'liberalization' or 'globalization’. The government announced a New
Economic Policy on July 24, 1991.This new model of economic reforms is commonly known as
the LPG or Liberalisation, Privatisation and Globalisation model. Liberalisation refers to process
of making policies less constraining of economic activity and also reduction of tariff or removal
of non-tariff barriers. The term “Privatisation” refers to the transfer of ownership of property or
business from a government to a private owned entity.Globalisation refers to the expansion of
economic activities across political boundaries of nation states. More importantly perhaps it
refers economic interdependence between countries in the world economy. Prime Minister of the
country, P V NarasimhaRao initiated ground breaking economic reforms.Dr.Manmohan Singh
was the Finance Minister at that time he assisted NarasimhaRao and played a key role in
implementing these reform policies.The reforms did away with the License Raj, reduced tariffs
and interest rates and ended many public monopolies, allowing Prime International Research
Journal Double Blind, Peer Reviewed, Indexed Journal ISSN : 2349-2139 Prime International
Research Journal, Vol. I, Issue 4, December, 2014 Page 22 automatic approval of foreign direct
investment in many sectors.The primary objective of this model was to make the economy of
India the fastest developing economy in the globe with capabilities that help it match up with the
biggest economies of the world.
Globalization
Globalization or globalisation is the process of interaction and integration between people, companies, and
governments worldwide. Globalization has grown due to advances
in transportation and communication technology. With increased global interactions comes the growth of
international trade, ideas, and culture. Globalization is primarily an economic process of interaction and
integration that's associated with social and cultural aspects. However, conflicts and diplomacy are also large
parts of the history of globalization, and modern globalization.
Economically, globalization involves goods and services, and the economic resources of capital, technology,
and data.[1][2]The steam locomotive, steamship, jet engine, and container ships are some of the advances in the
means of transport while the rise of the telegraph and its modern offspring, the Internet and mobile
phones show development in telecommunicationsinfrastructure. All of these improvements have been major
factors in globalization and have generated further interdependence of economic and cultural activities around
the globe.[3][4][5]
Though many scholars place the origins of globalization in modern times, others trace its history long before
the EuropeanAge of Discovery and voyages to the New World, some even to the third millennium
BC.[6][7] Large-scale globalization began in the 1820s.[8] In the late 19th century and early 20th century, the
connectivity of the world's economies and cultures grew very quickly. The term globalization is recent, only
establishing its current meaning in the 1970s.[9]
In 2000, the International Monetary Fund (IMF) identified four basic aspects of
globalization: trade and transactions, capitaland investment movements, migration and movement of people,
and the dissemination of knowledge.[10] Further, environmental challenges such as global warming, cross-
boundary water, air pollution, and over-fishing of the ocean are linked with globalization.[11] Globalizing
processes affect and are affected by business and work organization, economics, socio-cultural resources, and
the natural environment. Academic literature commonly subdivides globalization into three major
areas: economic globalization, cultural globalization, and political globalization.[12]
Held and his co-writers' definition of globalization in that same book as "transformation in the spatial
organization of social relations and transactions—assessed in terms of their extensity, intensity, velocity and
impact—generating transcontinental or inter-regional flows" was called "probably the most widely-cited
definition" in the 2014 DHL Global Connectiveness Index.[22]
Swedish journalist Thomas Larsson, in his book The Race to the Top: The Real Story of Globalization, states
that globalization:
is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the
increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody
on the other side of the world.[23]
Paul James defines globalization with a more direct and historically contextualized emphasis:
Globalization is the extension of social relations across world-space, defining that world-space in terms of the
historically variable ways that it has been practiced and socially understood through changing world-time.[24]
Manfred Steger, professor of global studies and research leader in the Global Cities Institute at RMIT
University, identifies four main empirical dimensions of globalization: economic, political, cultural,
and ecological. A fifth dimension—the ideological—cutting across the other four. The ideological dimension,
according to Steger, is filled with a range of norms, claims, beliefs, and narratives about the phenomenon
itself.[25]
James and Steger stated that the concept of globalization "emerged from the intersection of four interrelated
sets of 'communities of practice' (Wenger, 1998): academics, journalists, publishers/editors, and
librarians."[9]:424 They note the term was used "in education to describe the global life of the mind";
in international relations to describe the extension of the European Common Market; and in journalism to
describe how the "American Negro and his problem are taking on a global significance".[9] They have also
argued that four different forms of globalization can be distinguished that complement and cut across the
solely empirical dimensions.[24][26] According to James, the oldest dominant form of globalization is embodied
globalization, the movement of people. A second form is agency-extended globalization, the circulation of
agents of different institutions, organizations, and polities, including imperial agents. Object-extended
globalization, a third form, is the movement of commodities and other objects of exchange. He calls the
transmission of ideas, images, knowledge, and information across world-space disembodied globalization,
maintaining that it is currently the dominant form of globalization. James holds that this series of distinctions
allows for an understanding of how, today, the most embodied forms of globalization such as the movement
of refugees and migrants are increasingly restricted, while the most disembodied forms such as the circulation
of financial instruments and codes are the most deregulated.[27]
The journalist Thomas L. Friedman popularized the term "flat world", arguing that globalized
trade, outsourcing, supply-chaining, and political forces had permanently changed the world, for better and
worse. He asserted that the pace of globalization was quickening and that its impact on business organization
and practice would continue to grow.[28]
Economist Takis Fotopoulos defined "economic globalization" as the opening and deregulation
of commodity, capital, and labor markets that led toward present neoliberal globalization. He used "political
globalization" to refer to the emergence of a transnational élite and a phasing out of the nation-state.
Meanwhile, he used "cultural globalization" to reference the worldwide homogenization of culture. Other of
his usages included "ideological globalization", "technological globalization", and "social globalization".[29]
Lechner and Boli (2012) define globalization as more people across large distances becoming connected in
more and different ways.[30]
Globophobia is used to refer to the fear of globalization, though it can also mean the fear of balloons.[31][32][33]
Early modern[edit]
Main article: Proto-globalization
"Early modern-" or "proto-globalization" covers a period of the history of globalization roughly spanning the
years between 1600 and 1800. The concept of "proto-globalization" was first introduced by historians A. G.
Hopkins and Christopher Bayly. The term describes the phase of increasing trade links and cultural exchange
that characterized the period immediately preceding the advent of high "modern globalization" in the late 19th
century.[40] This phase of globalization was characterized by the rise of maritime European empires, in the 16th
and 17th centuries, first the Portuguese and Spanish Empires, and later the Dutch and British Empires. In the
17th century, world trade developed further when chartered companies like the British East India
Company (founded in 1600) and the Dutch East India Company (founded in 1602, often described as the
first multinational corporation in which stock was offered) were established.[41]
Early modern globalization is distinguished from modern globalization on the basis of expansionism, the
method of managing global trade, and the level of information exchange. The period is marked by such trade
arrangements as the East India Company, the shift of hegemony to Western Europe, the rise of larger-scale
conflicts between powerful nations such as the Thirty Years' War, and the rise of newfound commodities—
most particularly slave trade. The Triangular Trade made it possible for Europe to take advantage of resources
within the Western Hemisphere. The transfer of animal stocks, plant crops, and epidemic diseases associated
with Alfred W. Crosby's concept of the Columbian Exchange also played a central role in this process.
European, Muslim, Indian, Southeast Asian, and Chinese merchants were all involved in early modern trade
and communications, particularly in the Indian Ocean region.
Economic globalization[edit]
conomic globalization is the increasing economic interdependence of national economies across the world
through a rapid increase in cross-border movement of goods, services, technology, and capital.[58] Whereas the
globalization of business is centered around the diminution of international trade regulations as well as tariffs,
taxes, and other impediments that suppresses global trade, economic globalization is the process of
increasing economic integration between countries, leading to the emergence of a global marketplace or a
single world market.[59] Depending on the paradigm, economic globalization can be viewed as either a positive
or a negative phenomenon. Economic globalization comprises: Globalization of production; which refers to the
obtention of goods and services from a particular source from different locations around the globe to benefit
from difference in cost and quality. Likewise, it also comprises globalization of markets; which is defined as
the union of different and separate markets into a massive global marketplace. Economic globalization also
includes[60] competition, technology, and corporations and industries.[58]
Current globalization trends can be largely accounted for by developed economies integrating with less
developed economies by means of foreign direct investment, the reduction of trade barriers as well as other
economic reforms, and, in many cases, immigration.
International standards have made trade in goods and services more efficient. An example of such standard is
the intermodal container. Containerizationdramatically reduced transport of its costs, supported the post-war
boom in international trade, and was a major element in globalization.[43] International Organization for
Standardizationis an international standard-setting body composed of representatives from various
national standards organizations.
A multinational corporation or worldwide enterprise[61] is an organization that owns or controls production of
goods or services in one or more countries other than their home country.[62] It can also be referred as an
international corporation, a transnational corporation, or a stateless corporation.[63]
A free-trade area is the region encompassing a trade bloc whose member countries have signed a free-
trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade
barriers – import quotas and tariffs – and to increase trade of goods and services with each other.[64] If people
are also free to move between the countries, in addition to a free-trade agreement, it would also be considered
an open border. Arguably the most significant free-trade area in the world is the European Union, a politico-
economic union of 28 member states that are primarily located in Europe. The EU has developed European
Single Market through a standardised system of laws that apply in all member states. EU policies aim to ensure
the free movement of people, goods, services, and capital within the internal market,[65]
Trade facilitation looks at how procedures and controls governing the movement of goods across national
borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding
legitimate regulatory objectives.
Global trade in services is also significant. For example, in India, business process outsourcing has been
described as the "primary engine of the country's development over the next few decades, contributing broadly
to GDP growth, employment growth, and poverty alleviation".[66][67]
William I. Robinson's theoretical approach to globalization is a critique of Wallerstein's World Systems
Theory. He believes that the global capital experienced today is due to a new and distinct form of globalization
which began in the 1980s. Robinson argues not only are economic activities expanded across national
boundaries but also there is a transnational fragmentation of these activities.[68] One important aspect of
Robinson's globalization theory is that production of goods are increasingly global. This means that one pair of
shoes can be produced by six different countries, each contributing to a part of the production process.
Cultural globalization[edit]
Cultural globalization refers to the transmission of ideas, meanings, and values around the world in such a way
as to extend and intensify social relations.[69] This process is marked by the common consumption of cultures
that have been diffused by the Internet, popular culturemedia, and international travel. This has added to
processes of commodity exchange and colonization which have a longer history of carrying cultural meaning
around the globe. The circulation of cultures enables individuals to partake in extended social relations that
cross national and regional borders. The creation and expansion of such social relations is not merely observed
on a material level. Cultural globalization involves the formation of shared norms and knowledge with which
people associate their individual and collective cultural identities. It brings increasing interconnectedness
among different populations and cultures.[70]
Cross-cultural communication is a field of study that looks at how people from differing cultural backgrounds
communicate, in similar and different ways among themselves, and how they endeavour to communicate
across cultures. Intercultural communication is a related field of study.
Cultural diffusion is the spread of cultural items—such as ideas, styles, religions, technologies, languages etc.
Cultural globalization has increased cross-cultural contacts, but may be accompanied by a decrease in the
uniqueness of once-isolated communities. For example, sushi is available in Germany as well as Japan,
but Euro-Disney outdraws the city of Paris, potentially reducing demand for "authentic" French
pastry.[71][72][73] Globalization's contribution to the alienation of individuals from their traditions may be modest
compared to the impact of modernity itself, as alleged by existentialists such as Jean-Paul Sartre and Albert
Camus. Globalization has expanded recreational opportunities by spreading pop culture, particularly via the
Internet and satellite television.
Religions were among the earliest cultural elements to globalize, being spread by force, migration, evangelists,
imperialists, and traders. Christianity, Islam, Buddhism, and more recently sects such as Mormonism are
among those religions which have taken root and influenced endemic cultures in places far from their
origins.[74]
Globalization has strongly influenced sports.[75] For example, the modern Olympic Games has athletes from
more than 200 nations participating in a variety of competitions.[76] The FIFA World Cup is the most widely
viewed and followed sporting event in the world, exceeding even the Olympic Games; a ninth of the entire
population of the planet watched the 2006 FIFA World Cup Final.[77][78][79][80]
The term globalization implies transformation. Cultural practices including traditional music can be lost or
turned into a fusion of traditions. Globalization can trigger a state of emergency for the preservation of musical
heritage. Archivists may attempt to collect, record, or transcribe repertoires before melodies are assimilated or
modified, while local musicians may struggle for authenticity and to preserve local musical traditions.
Globalization can lead performers to discard traditional instruments. Fusion genres can become interesting
fields of analysis.[81]
Music has an important role in economic and cultural development during globalization. Music genres such
as jazz and reggae began locally and later became international phenomena. Globalization gave support to
the world music phenomenon by allowing music from developing countries to reach broader
audiences.[82] Though the term "World Music" was originally intended for ethnic-specific music, globalization
is now expanding its scope such that the term often includes hybrid subgenres such as "world fusion", "global
fusion", "ethnic fusion",[83] and worldbeat.[84][85]
Bourdieu claimed that the perception of consumption can be seen as self-identification and the formation of
identity. Musically, this translates into each individual having their own musical identity based on likes and
tastes. These likes and tastes are greatly influenced by culture, as this is the most basic cause for a person's
wants and behavior. The concept of one's own culture is now in a period of change due to globalization. Also,
globalization has increased the interdependency of political, personal, cultural, and economic factors.[87]
A 2005 UNESCO report[88] showed that cultural exchange is becoming more frequent from Eastern Asia, but
that Western countries are still the main exporters of cultural goods. In 2002, China was the third largest
exporter of cultural goods, after the UK and US. Between 1994 and 2002, both North America's and
the European Union's shares of cultural exports declined while Asia's cultural exports grew to surpass North
America. Related factors are the fact that Asia's population and area are several times that of North America.
Americanization is related to a period of high political American clout and of significant growth of America's
shops, markets and objects being brought into other countries.
Some critics of globalization argue that it harms the diversity of cultures. As a dominating country's culture is
introduced into a receiving country through globalization, it can become a threat to the diversity of local
culture. Some argue that globalization may ultimately lead to Westernization or Americanization of culture,
where the dominating cultural concepts of economically and politically powerful Western countries spread and
cause harm to local cultures.[89]
Globalization is a diverse phenomenon which relates to a multilateral political world and to the increase of
cultural objects and markets between countries. The Indian experience particularly reveals the plurality of the
impact of cultural globalization.[90]
Transculturalism is defined as "seeing oneself in the other".[91] Transcultural[92] is in turn described as
"extending through all human cultures"[92] or "involving, encompassing, or combining elements of more than
one culture".[93]
Political globalization[edit]
In general, globalization may ultimately reduce the importance of nation states. Supranational institutions such
as the European Union, the WTO, the G8 or the International Criminal Court replace or extend national
functions to facilitate international agreement.[94] This could ultimately lead to a global union, based on
the European Union model.[95]
Intergovernmentalism is a term in political science with two meanings. The first refers to a theory of regional
integration originally proposed by Stanley Hoffmann; the second treats states and the national government as
the primary factors for integration.[96] Multi-level governance is an approach in political science and public
administration theory that originated from studies on European integration. Multi-level governance gives
expression to the idea that there are many interacting authority structures at work in the emergent global
political economy. It illuminates the intimate entanglement between the domestic and international levels of
authority.
Some people are citizens of multiple nation-states. Multiple citizenship, also called dual citizenship or multiple
nationality or dual nationality, is a person's citizenship status, in which a person is concurrently regarded as a
citizen of more than one stateunder the laws of those states.
Increasingly, non-governmental organizations influence public policy across national boundaries,
including humanitarian aidand developmental efforts.[97] Philanthropic organizations with global missions are
also coming to the forefront of humanitarian efforts; charities such as the Bill and Melinda Gates
Foundation, Accion International, the Acumen Fund (now Acumen) and the Echoing Green have combined
the business model with philanthropy, giving rise to business organizations such as the Global Philanthropy
Group and new associations of philanthropists such as the Global Philanthropy Forum. The Bill and Melinda
Gates Foundation projects include a current multibillion-dollar commitment to funding immunizations in some
of the world's more impoverished but rapidly growing countries.[98] The Hudson Institute estimates total private
philanthropic flows to developing countries at US$59 billion in 2010.[99]
As a response to globalization, some countries have embraced isolationist policies. For example, the North
Koreangovernment makes it very difficult for foreigners to enter the country and strictly monitors their
activities when they do. Aid workers are subject to considerable scrutiny and excluded from places and regions
the government does not wish them to enter. Citizens cannot freely leave the country.[100][101]
Measurement[edit]
One index of globalization is the KOF Index of Globalization, which measures three important dimensions of
globalization: economic, social, and political.[118] Another is the A.T. Kearney / Foreign Policy
Magazine Globalization Index.[119]
Measurements of economic globalization typically focus on variables such as trade, Foreign Direct
Investment (FDI), Gross Domestic Product (GDP), portfolio investment, and income. However, newer indices
attempt to measure globalization in more general terms, including variables related to political, social, cultural,
and even environmental aspects of globalization.[120][121]
Globalisation in India
Globalization is a process that encompasses the causes, courses, and consequences
of transnational and transculturalintegration of human and non-human activities.[1] India had the distinction of
being the world's largest economy in the beginning of the Christian era, as it accounted for about 32.9% share
of world GDP and about 17% of the world population. The goods produced in India had long been exported to
far off destinations across the world;[2] the concept of globalisation is hardly new to India.
India currently accounts for 2.7% of world trade (as of 2015), up from 1.2% in 2006 according to the World
Trade Organisation(WTO).[3] Until the liberalisation of 1991, India was largely and intentionally isolated from
the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign trade was subject to
import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by
upper-limit equity participation, restrictions on technology transfer, export obligations and government
approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector.[4] The restrictions
ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the
capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[5]
India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and
cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted
predominantly of machinery, equipment and raw materials, due to nascent industrialisation. Since
liberalisation, the value of India's international trade has become more broad-based and has risen
to 63,0801 billion in 2003–04 from 12.50 billion in 1950–51.[citation needed] India's trading partners are China,
the US, the UAE, the UK, Japan and the EU.[6] The exports during April 2007 were $12.31 billion up by 16%
and import were $17.68 billion with an increase of 18.06% over the previous year.[7]
India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor,
the World Trade Organisation. While participating actively in its general council meetings, India has been
crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the
inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO
policies.[8]
Despite reducing import restrictions several times in the 2000s,[9][10] India was evaluated by the World Trade
Organisation in 2008 as more restrictive than similar developing economies, such as Brazil, China, and Russia.
The WTO also identified electricity shortages and inadequate transportation infrastructure as significant
constraints on trade.[11][12][13] Its restrictiveness has been cited as a factor which isolated it from the global
financial crisis of 2008–2009 more than other countries, even though it experienced reduced ongoing economic
growth.[14]
Payments[edit]
Since independence, India's balance of payments on its current account has been negative. Since liberalisation
in the 1990s (precipitated by a balance of payment crisis), India's exports have been consistently rising,
covering 80.3% of its imports in 2002–03, up from 66.2% in 1990–91. Although India is still a net importer,
since 1996–97, its overall balance of payments (i.e., including the capital account balance), has been positive,
largely on account of increased foreign direct investment and deposits from non-resident Indians; until this
time, the overall balance was only occasionally positive on account of external assistance and commercial
borrowings. As a result, India's foreign currency reserves stood at $285 billion in 2008, which could be used in
infrastructural development of the country if used effectively. In September 2017 India's foreign exchange
reserves crossed $400 billion.[15]
India's reliance on external assistance and commercial borrowings has decreased since 1991–92, and since
2002–03, it has gradually been repaying these debts. Declining interest rates and reduced borrowings
decreased India's debt service ratio to 4.5% in 2007.
In India, external commercial borrowings (ECBs) are being permitted by the government for providing an
additional source of funds to Indian corporates. The Ministry of Finance monitors and regulates these
borrowings (ECBs) through ECB policy guidelines.
Economy[edit]
India's economy has grown drastically since it integrated into the global economy in 1991. Its average
annual rate has grown from 3.5% (1950–1980) to 7.7% (2002–2012). That rate peaked at 9.5% from 2005–
2008. Economic growth has also led to increases in the per capita gross domestic product (GDP), from $1,255
in 1978 to $3,452 in 2005, and finally to $3,900 in 2012.[16]
Jobs in the technology and business sectors have many benefits. However, only people in those sectors are
benefiting. The overall employment rate for the country has decreased, while the number of job seekers is
increasing at a yearly rate of 2.5%. Despite those statistics, the GDP is increasing every year. Growth is limited
to some states, including Gujarat, Maharashtra, Karnataka, Andhra Pradesh, and Tamil Nadu. Other states
like Bihar, Uttar Pradesh (UP), Orissa, Madhya Pradesh (MP), Assam, and West Bengal remain poverty-
stricken.[17]
Investment[edit]
Foreign direct investment (FDI) in India has reached 2% of GDP, compared with 0.1% in 1990, and Indian
investment in other countries rose sharply in 2006.[20]
As the third-largest economy in the world in PPP terms, India is a preferred destination for FDI;[21] India has
strengths in information technology and other significant areas such as auto components, chemicals, apparels,
pharmaceuticals, and jewelry. Despite a surge in foreign investments, rigid FDI policies resulted in a
significant hindrance. However, due to some positive economic reforms aimed at deregulating the economy
and stimulating foreign investment, India has positioned itself as one of the front-runners of the rapidly
growing Asia-Pacific region.[21] India has a large pool of skilled managerial and technical expertise. The size of
the middle-class population stands at 50 million and represents a growing consumer market.[22]
India's liberalised FDI policy as of 2005 allowed up to a 100% FDI stake in ventures. Industrial policy reforms
have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated
easy access to foreign technology and FDI. The upward moving growth curve of the real-estate sector owes
some credit to a booming economy and liberalised FDI regime. In March 2005, the government amended the
rules to allow 100 per cent FDI in the construction business.[23] This automatic route has been permitted in
townships, housing, built-up infrastructure and construction development projects including housing,
commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, and city- and
regional-level infrastructure.
A number of changes were approved on the FDI policy to remove the caps in most sectors. Fields which
require relaxation in FDI restrictions include civil aviation, construction development, industrial parks,
petroleum and natural gas, commodity exchanges, credit-information services and mining. But this still leaves
an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance
and retailing. FDI inflows into India reached a record US$19.5bn in fiscal year 2006/07 (April–March),
according to the government's Secretariat for Industrial Assistance. This was more than double the total of
US$7.8bn in the previous fiscal year. The FDI inflow for 2007-08 has been reported as $24bn[24] and for 2008-
09, it is expected to be above $35 billion.[25] A critical factor in determining India's continued economic growth
and realising the potential to be an economic superpower is going to depend on how the government can create
incentives for FDI flow across a large number of sectors in India.[26] In September 2012 the government
approved 51% FDI in multi-brand retails despite a lot of pressure from coalition parties.[27]
Remittances[edit]
Main article: Remittances to India
Remittances to India are money transfers from Indian workers employed outside the country to friends or
relatives in India. Since 1991, India has experienced sharp remittance growth, and it is now is the world's
leading receiver of remittances. In, 1991 Indian remittances totaled 2.1 billion USD;[28][29] in 2006, they were
estimated at between $22 billion[30] and $25.7 billion,[31] about 3% of India's GDP.[31][28] India claimed more than
12% of the world's remittances in 2007.[32]
Culture[edit]
IT industry[edit]
The integration of technology in India has transformed jobs which required specialized skills and lacked
decision-making skills to extensively-defined jobs with higher accountability that require new skills, such as
numerical, analytical, communication and interactive skills. As a result of this, more job opportunities are
created for people. Technology has also influenced many firms to give their workers more freedom
inworkplace. For instance, workers who perform non-routine tasks benefit more than workers who do not.[33]
One event that helped India immensely was when Netscape went public on 9 August 1995. Netscape provided
globalization through technology in three major ways. First, Netscape made it possible for the browser to
display images from websites. Second, the investment of billions in fiber-optic telecommunications influenced
by the dot-com boom and the dot com bubblepoured a great deal of hard currency into the Indian economy.
Last, the over-investment in technology made it cheaper by creating a global fiber network, which made it
easier and faster to transmit data (5).[34]
As a result of the Netscape IPO, more job opportunities were created for Indians, including ones outsourced
from other countries. One of the milestones in job opportunities was when thousands of Indian engineers were
hired to fix the Y2K bug. The job could have been given to many other companies, but it was outsourced to
India. India was now seen in a different light, as being ready to join the workforce as well as able to compete
against first-world countries for jobs.[35]
Agriculture[edit]
Although India has had immense economic growth, not all sectors of the country have benefited. The funds
that should have been directed to the agriculture sector were directed to private-sector enterprises. For instance,
growth in the agricultural sector dropped from 3.8% in 2007 to 2.6% in 2008. This decline in growth has
greatly affected farmers because production costs are very high, while commodity costs are low. This has
resulted in over 150,000 peasant suicides since 1997.[36]
Another way globalization has affected the agricultural sector is through biofuel and medicinal cultivation.
There is a food security crisis in India because a significant portion of the land has been designated to grow
crops for biofuel. Crops like rice and wheat are often harvested in large quantities. However, the amount of
crops that are used for biofuel is largely unregulated, with an inadequate amount going to the poor and needy.
Women[edit]
Technology has also increased access to education in India, especially to women. This has decreased the gap
between men and women which was created by stratified gender roles. It has also empowered women in two
ways. Technology has influenced more women to pursue advanced degrees in computer science and
engineering instead of their traditional degrees in social sciences and the humanities. This has resulted in an
increase in the number of women in competitive professions. Globalization expanded the need for higher
education for both men and women. This, in turn, has had a tremendous impact on the life of the single
woman in India.
The stigmatization and expectations on single women have decreased. For example, it is easier for single
women to find living accommodations in cities like Kolkata. Society then puts less pressure on women to
marry at a certain age because higher education is now more acceptable. India is promoting higher education
for youth as well. New universities are being built, and advertisements on billboards have gone up around
Kolkata to attract the growing population of high school graduates.[37]
Education[edit]
India has also promoted higher education through the propagation of universities; however, funding to
elementary education has declined. Sixty-three million children age 6 to 14 are out of school due the reduced
education budget.[38]
The Indian government has invested a lot in promoting higher education in the country, but more progress
could be made with the help of private interests. The private sector has more than enough financial power to
increase the literacy rate and access to higher education. It can be done through private universities and
learning centers. In addition, global universities might be established in India so the global perspective can be
fixed into the curriculum. Four aspects of global education that universities in India might focus on are a
global curriculum, global faculty, global degrees, and global interaction. These aspects would not only help
promote higher education, but would help prepare India for the growing global competition that globalization
is creating.[39]
Health[edit]
Another sector the government has neglected is public health. India has one of the lowest ratios of public to
private health expenditure. The infant mortality rate for the richest 20% of the population is only 38 per 1000
live births, while the rate for the poorest 20% is 97 per 1000. In addition, the rate of epidemics among the poor
is increasing; it is common for outbreaks of contagious diseases like human immunodeficiency virus/acquired
immunodeficiency syndrome (HIV/AIDS) and malaria to occur.[40]
Historical context[edit]
Thomas Friedman, an American journalist, columnist, and author of "It's a Flat World After All" separates
globalization into three stages; globalization 1.0, 2.0 and 3.0. According to Friedman, globalization 1.0, which
dates to 1492, involved countriesglobalizing for natural resources. In globalization 2.0 (1800–2000),
companies globalized for labor and markets. In 3.0, the current stage, companies are seeking to globalize down
to small groups of people, or even individuals.
Friedman first described the world's economy as being macroscopic. He explains that only countries interacted
with each other, not individuals or small groups. Friedman then focused on how this has changed and
improved within globalization 3.0. Under globalization 3.0, the world turned flat and individuals now had the
opportunity to work and collaborate with other individuals from varying and diverse backgrounds. In addition,
Friedman discussed how countries like India are using globalization to their advantage. The economies of
countries similar to India are now blooming as the world is flattening and shrinking due to globalization.
Fifty years ago, countries such as India did not have a say in the global market and trade. America and other
European powers who were once top players in the international market are now getting competition from
countries like India, which is experiencing tremendous economic growth. Technology has played a major role
in the advancement of globalization within India.
Privatization
Privatization (also spelled privatisation) can mean different things including moving something
from the public sector into the private sector. It is also sometimes used as a synonym
for deregulation when a heavily regulated private company or industry becomes less regulated.
Government functions and services may also be privatized; in this case, private entities are tasked
with the implementation of government programs or performance of government services that had
previously been the purview of state-run agencies. Some examples include revenue collection, law
enforcement, and prison management.[1]
Another definition is the purchase of all outstanding shares of a publicly tradedcompany by private
investors, or the sale of a state-owned enterprise to private investors. In the case of a for-profit
company, the shares are then no longer traded at a stock exchange, as the company became
private through private equity; in the case the partial or full sale of a state-owned enterprise to
private owners shares may be traded in the public market for the first time, or for the first time since
an enterprise's previous nationalization. The second such type of privatization is
the demutualization of a mutual organization or cooperative in order to form a joint-stock company.[2]
Etymology[edit]
The Economist magazine introduced the term "privatization" (alternatively "privatisation" or
"reprivatization" after the German "Reprivatisierung") during the 1930s when it covered Nazi
Germany's economic policy.[3][4]
Definition[edit]
The word privatization may mean different things depending on the context in which it is used. It can
mean moving something from the public sphere into the private sphere, but it may also be used to
describe something that was always private, but heavily regulated, which becomes less regulated
through a process of deregulation. The term may also be used descriptively for something that has
always been private, but could be public in other jurisdictions.[5]
There are also private entities that may perform public functions. These entities could also be
described as privatized. Privatization may mean the government sells state-owned businesses to
private interests, but it may also be discussed in the context of the privatization of services or
government functions, where private entities are tasked with the implementation of government
programs or performance of government services. Gillian E. Metzger has written that: "Private
entities [in the US] provide a vast array of social services for the government; administer core
aspects of government programs; and perform tasks that appear quintessentially governmental,
such as promulgating standards or regulating third-party activities." Metzger mentions an expansion
of privatization that includes health and welfare programs, public education, and prisons.[6]
History[edit]
Pre-20th century[edit]
The history of privatization dates from Ancient Greece, when governments contracted out almost
everything to the private sector.[7] In the Roman Republic private individuals and companies
performed the majority of services including tax collection (tax farming), army supplies (military
contractors), religious sacrifices and construction. However, the Roman Empire also created state-
owned enterprises—for example, much of the grain was eventually produced on estates owned by
the Emperor. Some scholars[who?] suggest that the cost of bureaucracy was one of the reasons for
the fall of the Roman Empire.[7]
Perhaps one of the first ideological movements towards privatization came during China's golden
age of the Han Dynasty. Taoism came into prominence for the first time at a state level, and it
advocated the laissez-faire principle of Wu wei (無為), literally meaning "do nothing".[8] The rulers
were counseled by the Taoist clergy that a strong ruler was virtually invisible.
During the Renaissance, most of Europe was still by and large following the feudal economic model.
By contrast, the Ming dynasty in China began once more to practice privatization, especially with
regards to their manufacturing industries. This was a reversal of the earlier Song dynasty policies,
which had themselves overturned earlier policies in favor of more rigorous state control.[9]
In Britain, the privatization of common lands is referred to as enclosure (in Scotland as the Lowland
Clearances and the Highland Clearances). Significant privatizations of this nature occurred from
1760 to 1820, preceding the industrial revolutionin that country.
20th century onwards[edit]
The first mass privatization of state property occurred in Nazi Germany between 1933-37: "It is a fact
that the government of the National Socialist Party sold off public ownership in several state-owned
firms in the middle of the 1930s. The firms belonged to a wide range of sectors: steel, mining,
banking, local public utilities, shipyard, ship-lines, railways, etc. In addition to this, delivery of some
public services produced by public administrations prior to the 1930s, especially social services and
services related to work, was transferred to the private sector, mainly to several organizations within
the Nazi Party."[10]
Great Britain privatized its steel industry in the 1950s, and the West German government embarked
on large-scale privatization, including sale of the majority stake in Volkswagen to small investors in
public share offerings in 1961.[7] However, it was in the 1980s under Margaret Thatcher in the United
Kingdom and Ronald Reagan in the United States that privatization gained worldwide momentum.
Notable privatization attempts in the UK included privatization of Britoil (1982), Amersham
International PLC (1982), British Telecom (1984), Sealink ferries (1984), British Petroleum (gradually
privatized between 1979 and 1987), British Aerospace (1985 to 1987), British Gas (1986), Rolls-
Royce (1987), Rover Group (formerly British Leyland, 1988), British Steel Corporation (1988), and
the regional water authorities (mostly in 1989). After 1979, council house tenants in the UK were
given the right to buy their homes (at a heavily discounted rate). One million purchased their
residences by 1986.
Such efforts culminated in 1993 when British Rail was privatized under Thatcher's successor, John
Major. British Rail had been formed by prior nationalization of private rail companies. The
privatization was controversial, and the its impact is still debated today, as doubling of passenger
numbers and investment was balanced by an increase in rail subsidy.[11]
Privatization in Latin America flourished in the 1980s and 1990s as a result of a Western liberal
economic policy. Companies providing public services such as water management, transportation,
and telecommunication were rapidly sold off to the private sector. In the 1990s, privatization revenue
from 18 Latin American countries totaled 6% of gross domestic product.[12]Private investment in
infrastructure from 1990 and 2001 reached $360.5 billion, $150 billion more than in the next
emerging economy.[12]
While economists generally give favorable evaluations of the impact of privatization in Latin
America,[13] opinion polls and public protests across the countries suggest that a large segment of the
public is dissatisfied with or have negative views of privatization in the region.[14]
In the 1990s, the governments in Eastern and Central Europe engaged in extensive privatization of
state-owned enterprises in Eastern and Central Europe and Russia, with assistance from the World
Bank, the U.S. Agency for International Development, the German Treuhand, and other
governmental and nongovernmental organizations.
Ongoing privatization of Japan Post relates to that of the national postal service and one of the
largest banks in the world. After years of debate, the privatization of Japan Post spearheaded
by Junichiro Koizumi finally started in 2007. The privatization process is expected[by whom?] to last until
2017. Japan Post was one of the nation's largest employers, as one-third of Japanese state
employees worked for it. It was also said to be the largest holder of personal savings in the world.
Criticisms against Japan Post were that it served as a channel of corruption and was inefficient. In
September 2003, Koizumi's cabinet proposed splitting Japan Post into four separate companies: a
bank, an insurance company, a postal service company, and a fourth company to handle the post
offices and retail storefronts of the other three.
After the Upper House rejected privatization, Koizumi scheduled nationwide elections for September
11, 2005. He declared the election to be a referendum on postal privatization. Koizumi subsequently
won the election, gaining the necessary supermajority and a mandate for reform, and in October
2005, the bill was passed to privatize Japan Post in 2007.[15]
Nippon Telegraph and Telephone's privatization in 1987 involved the largest share offering in
financial history at the time.[16]15 of the world's 20 largest public share offerings have been
privatizations of telecoms.[16]
In 1988, the perestroika policy of Mikhail Gorbachev started allowing privatization of the centrally
planned economy. Large privatization of the Soviet economy occurred over the next few years as
the country dissolved. Other Eastern Bloc countries followed suit after the Revolutions of
1989 introduced non-communist governments.
The United Kingdom's largest public share offerings were privatizations of British
Telecom and British Gas during the 1980s under the Conservative government of Margaret
Thatcher, when many state-run firms were sold off to the private sector. The privatization received
very mixed views from the public and the parliament. Even former Conservative prime
minister Harold Macmillan was critical of the policy, likening it to "selling the family silver".[17] There
were around 3 million shareholders in Britain when Thatcher took office in 1979, but the subsequent
sale of state-run firms saw the number of shareholders double by 1985. By the time of her
resignation in 1990, there were more than 10 million shareholders in Britain.[18]
The largest public shares offering in France involved France Télécom.
Egypt undertook widespread privatization under Hosni Mubarak. He was later overthrown in
the 2011 revolution, the public called for re-nationalization as the privatized firms were accused of
practicing crony capitalism with the old regime.[19]
Medicare and Medicaid managed care[edit]
In the United States, under the Medicare managed care the government pays a managed care
organization (MCO) a fixed amount called the "capitated rate" for all medical services received by a
beneficiary in a given period. Enrollment in the programs has increased substantially since 1990; in
2002 60% of Medicaid beneficiaries and 12% of Medicare beneficiaries were being treated by
MCOs. Private sector involvement in Medicare and Medicaid is not limited to MCOs; private doctors,
hospitals, nursing homes provide medical care; reimbursement claims are processed by private
intermediaries; and peer review organizations, utilization review committees and accreditation
organizations like JCAHO are staffed by private medical personnel.[6]
Welfare privatization[edit]
Homeless shelters and food banks are run by private organizations, who also provide treatment
services, operate Head Start programs and work with child welfare agencies. Privatization of welfare
system expanded in 1996, when the Aid to Families with Dependent Child (AFDC) program was
replaced with the Temporary Aid to Needy Families (TANF) program. Welfare services that are often
privatized include workforce development, job training and job placement are often privatized.[6]
Public education[edit]
There is also some private sector involvement in the public education system including charter
schools, Educational Management Organizations (EMOs), and school voucher programs. EMOs are
usually for-profit and manage charter schools and sometimes traditional public schools as well. The
United States Supreme Court upheld school voucher programs against an Establishment
Clause challenge in Zelman v. Simmons-Harris.[6]
Private prisons[edit]
See also: Private prison
In the US in 2001, private prison facilities housed 12.3% of all federal prisoners and 5.8% of state
prisoners. Contracts for these private prisons regulate prison conditions and operation, but the
nature of running a prison requires a substantial exercise of discretion. Private prisons are more
exposed to liability than state run prisons.[6]
Foreign affairs[edit]
Both for-profit and non-profit entities are tasked with various responsibilities related to the US foreign
aid budget such as providing emergency humanitarian relief, development assistance, as well
as post-conflict reconstruction efforts. Similarly, private entities have started to perform tasks that
have traditionally been regarded as falling within the government's diplomatic and military authority
like participating in peace negotiations, military training, intelligence gathering and other security
services or combat-related missions. Many of the military interrogators at Abu Ghraib prison were
provided by a private contractor and lacked formal military training; this was subsequently identified
as a contributing factor to detainee abuse at the prison by the Fay report.[20]
The United Nations uses private subcontractors as well, and in some cases, "failed states" have
relied on private entities extensively for a range of tasks including building critical infrastructure,
managing social services programs and using private military companies during the course of armed
conflicts.
Forms of privatisation[edit]
There are five main methods[citation needed] of privatization:
Opinion[edit]
Support[edit]
Studies show that private market factors can more efficiently deliver many goods or service than
governments due to free market competition.[25][26][27] Over time this tends to lead to lower prices,
improved quality, more choices, less corruption, less red tape, and/or quicker delivery. Many
proponents do not argue that everything should be privatized. According to them, market
failures and natural monopolies could be problematic. However, anarcho-capitalists prefer that every
function of the state be privatized, including defense and dispute resolution.[38]
Opposition[edit]
Opponents of certain privatizations believe that certain public goods and services should remain
primarily in the hands of government in order to ensure that everyone in society has access to them
(such as law enforcement, basic health care, and basic education). There is a positive
externality when the government provides society at large with public goods and services such
as defense and disease control. Some national constitutions in effect define their governments' "core
businesses" as being the provision of such things as justice, tranquility, defense, and general
welfare. These governments' direct provision of security, stability, and safety, is intended to be done
for the common good (in the public interest) with a long-term (for posterity) perspective. As
for natural monopolies, opponents of privatization claim that they aren't subject to fair competition,
and better administrated by the state.