Privatization

process of converting a publicly operated enterprise into a privately owned and operated entity. For example, many cities and states contract with private companies to run their prison facilities instead of managing them with municipal personnel. Many countries around the world have privatized formerly state-run enterprises such as banks, airlines, steel companies, utilities, phone systems, and large manufacturers. A wave of privatization swept through Russia and Eastern Europe after the fall of Communism in the 1990s, and through some Latin American countries such as Peru, as new, democratic governments were established. When a company is privatized, shares formerly owned by the government, as well as management control, are sold to the public. The theory behind privatization is that these enterprises run far more efficiently and offer better service to customers when owned by stockholders instead of the government.