Privatization: Way to go

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Privatization: Way to go

Privatization has got itself a bad name. Investors, burned by poorly-performing issues over the past two years, are no longer excited by it.

Most European governments have botched their privatization programmes by being too greedy and wanting to raise cash quickly. The British have run out of things to sell. In many developing countries, privatization is tainted with corruption.

The received wisdom of the moment is that privatization worldwide has reached the end of the line. But received wisdom is wrong. The wave of privatization, which started in 1984 with the sale of British Telecom, has only just begun.

Take the figures for the share of the public sector in GDP. In the US, according to the World Bank, state companies represent only 0.6% of GDP and in the UK 1.9%. It's a fair bet that most developed countries, over time, will tend to move towards those levels. But look how far they still have to go. The World Bank's statistics (published in October) are not as recent or accurate as might be desired. But they give an indication of the respective size of countries' state sectors. They show that the state sector in France (excluding banks and insurance companies, themselves a large chunk) equalled 10% of GDP, in Austria 13.9%, in Germany 6.4% and in Portugal 14.2%.

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