Privatization as State Transformation

Privatization is an ambiguous term covering many loosely related phenomena. In this essay, I focus on one specific aspect of privatization-the privatization of governance. This sidesteps arguments about the presumed efficiency gains of, e.g., turning state-owned entities into for-profit corporations, and highlights the political consequences of privatization-how it takes decisions which had once been within the remit of democratic politics and hands them over to regulated private actors. Considered in this light, privatizing governance surely includes privatization in its narrow economic sense, especially given that the current trend towards privatized governance had its beginnings in economic privatization. Yet it also involves broader transformations. The key point, and key argument, of this essay is that privatization does not so much involve the shrinking of the state as its transformation. State control exercised through direct ownership (with associated relations of influence) is replaced by state control exercised through regulation (with associated relations of influence). In a very important sense, privatized entities typically remain imbricated with and embedded within the state. They are not abandoned to the vagaries of competitive markets. However, the politics of the state is transformed from one of ownership relations to one of politics mediated through regulators, which in part seek to turn privatized entities’ activities towards the purposes of the state, and in part look to protect these entities against external pressures.

Henry Farrell (2018), “Privatization as State Transformation,” Nomos 60.

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