The paper discusses possible interpretations of the fall of the public enterprise in the economic ideology of the European left-wing parties. The first section rejects the claim that a technological shift has weakened the case for the nationalization of natural monopolies. Economies of scale in network industries are not so different in the 1990s as they were in the 1950s. The efficiency case for nationalization should n, ot be exaggerated, but cannot be simply dismissed. Budgetary considerations appear also scarcely convincing. The first public enterprises to be privatized have been the telecoms, usually net contributors to the public sector budget. Ideology has played a role in Thatcher’s Britain, and in Pinochet’s Chile, but not elsewhere. The key change is probably the new global financial dimension of capitalism. This has motivated an exchange of financial rents againts political rents. In the second section, some effects are reviewed. While the welfare effects are modest, large scale privatization changes the political-economic equilibria in a dangerous way, because it splits society between net-contributors to and net-beneficiaries of public funds, with the state transformed in machinery that redistributes and does not produce anything of importance. The third section concludes that a new fiscal constitution is needed, that establishes a set of ‘citizenship goods’. A democratic planning mechanism should be established to provide these goods, with both public and private firms concurring to their procurement, under a system of incentive-based contracts
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Paper provided by Department of Economics University of Milan Italy in its series Departemental Working Papers with number
2007-14.
Find related papers by JEL classification: H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out