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Privatization: Successes and Failures Page xvii (17 of 255)
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FOREWORD xvii
po liti cal pro cess to ensure that his monopoly is maintained. By the same
token, those who have excelled at stripping assets out of the fi rm, taking
advantage of the lack of good corporate governance laws, have often not
been part of the constituency for the establishment of the rule of law. On
the contrary, they have benefi ted from the lack of good corporate gover-
nance laws, and they have especially benefi ted under the regime of capital
market liberalization, which has meant that they could strip assets, take
their money abroad, and enjoy strong property rights protection there,
even as they abuse the property rights of others at home.18
Privatization is a more complex subject than simple ideologues—including
the advocates of the Washington Consensus—thought a de cade ago. The
theoretical presumption is, at best, much weaker than they thought. At the
same time, the theoretical and practical problems in privatization are
greater than they thought.
There have been major government failures, and it is these that have
contributed to the demand for privatization. But there have also been ma-
jor market failures, especially in areas where market and social incentives
may markedly differ. And in these areas, ensuring that the private sector
acts in accordance with social needs and desires may not be easy.
N O T E S
1. For a discussion of these experiences, see, for instance, Stiglitz (1991b, 2000a,
2000b) and Ellerman and Stiglitz (2001).
2. See Stiglitz (2002) and Humphreys, Sachs, and Stiglitz (2007).
3. In personal conversations in 1983, not long after he assumed offi ce.
4. See Orszag and Stiglitz (2001) and references cited there.
5. Simon (1991).
6. Earlier, Berle and Means (1932) referred to the split between own ership and
control. This has given rise to the general problem of corporate governance. See, e.g.,
Stiglitz (1985).
7. For a more extensive discussion of these theoretical issues, see Stiglitz (1991a,
1995).
8. See for instance, Stiglitz (1982a) and Grossman and Hart (1979).
9. See, e.g., Stiglitz (1972) and Grossman and Hart (1980).
10. See Edlin and Stiglitz (1995).
11. See, e.g., Stiglitz (1982b).
12. Indeed, the lack of coincidence of interests became clear, as USEC worked hard
to keep out of the market the de- enriched warheads of deactivated Rus sian warheads;
even though doing so had obvious risks for nuclear proliferation. See Stiglitz (2002).
