Reason Foundation

Reason Foundation

Ten Principles of Privatization

Best practices in privatization to lower the costs of government

Leonard Gilroy and Adrian Moore
July 9, 2010

Privatization means shifting some or all aspects of service delivery from government to private-sector providers. It is a strategy to lower the costs of government and achieve higher performance and better outcomes for tax dollars spent.

Policymakers in many jurisdictions in the U.S. and around the world use privatization to better the lives of citizens by producing higher-quality services at lower costs, delivering greater choice, and ultimately providing more efficient and effective government.

In recent decades, privatization has gone from a concept viewed as radical and ideologically based to a popular and well-proven public management tool. Thousands of national, state, and local government agencies in the United States have successfully privatized scores of services. Researchers have documented the successful privatization of airports, electric and telecommunications utilities, prisons, schools, transportation, and many other services.

Why Privatize?

As this is written in 2010, a recession is causing fiscal trauma in many states. The 50 states face a combined budget gap of approximately $200 billion. Many local governments are in desperate straits due in part to declining property tax revenues. "Creative budgeting" is no longer sufficient to hide the need to cut spending.

Government managers and concerned citizens can use privatization to achieve a number of other goals:

If badly executed, privatization like any other policy can fail. Taxpayers are no better off, and may be worse off, if a service is moved from a government agency to an incompetent or inefficient private business. But we have the experiences of governments in the United States and around the world to learn from. The 10 principles of privatization that follow in this report capture the best practices that have emerged from those experiences.

Leonard Gilroy is Senior Managing Director, Pension Integrity Project &
Director of Government Reform

Adrian Moore is Vice President, Policy

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