Political Determinants of Privatisation Reforms: A Comparative Analysis in Europe
| DOI | http://doi.org/10.1177/1478929919868071 |
| Published date | 01 May 2020 |
| Date | 01 May 2020 |
| Subject Matter | Articles |
https://doi.org/10.1177/1478929919868071
Political Studies Review
2020, Vol. 18(2) 204 –227
© The Author(s) 2019
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DOI: 10.1177/1478929919868071
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Political Determinants of
Privatisation Reforms: A
Comparative Analysis
in Europe
Noemí Peña-Miguel1 and
Beatriz Cuadrado-Ballesteros2
Abstract
This article analyses the effect of political factors on privatisation reforms and considers the
practical implications of such policy from a comparative point of view in Europe. According to
a sample of 25 countries in 1995–2013, our findings suggest that privatisation reforms could be
impeded by veto players, fragmentised governments and political competition. These reforms tend
to be used less by politicians who have been in power for a long period of time and implemented
at the start of an office term, except in the case of right-wing governments. Our findings support
greater privatisation in concentrated conservative governments, especially when the next elections
are about to be held.
Keywords
privatisation, policy analysis, political economy, comparative policy
Accepted: 15 July 2019
Introduction
Traditionally, privatisation has been defined as the partial or complete transfer of func-
tions from the public to the private sector (Butler, 1991), addressing a wide range of poli-
cies designed to reduce the scope, limit the functions and generally weaken the influence
of the public sector (Vickers and Wright, 1989). Such transfers of functions have occurred
in different forms, however, leading to different definitions of privatisation. This article
uses the ‘material’ approach of Obinger et al. (2016): privatisation is the sale of the shares
of a state-owned enterprise (SOE) to private investors, resulting in a transfer of ownership
or voting rights from the state to the private sector.1
1Faculty of Economics and Business, University of the Basque Country (UPV/EHU), Leioa, Spain
2
Faculty of Economics and Business, Multidisciplinary Institute for Enterprises (IME), University of Salamanca,
Salamanca, Spain
Corresponding author:
Beatriz Cuadrado-Ballesteros, Campus Unamuno, FES, ES-37007 Salamanca, Spain.
Email: u77171@usal.es
868071PSW0010.1177/1478929919868071Political Studies ReviewPeña-Miguel and Cuadrado-Ballesteros
research-article2019
Article
Peña-Miguel and Cuadrado-Ballesteros 205
Privatisation reforms began in the 1970s with the Thatcher Government in the United
Kingdom, due to the government’s belief in the greater efficiency of the private sector
(Parker and Saal, 2003). Following the United Kingdom, other countries implemented
privatisation programmes, but these programmes were not homogeneous and depended
on diverse factors, such as institutional, political, financial and economic factors (Obinger
et al., 2016). Privatisation has sometimes also been required by external forces, such as
international organisations (e.g. World Bank and the International Monetary Fund (IMF)),
as a condition for the receipt of grants to finance an economic adjustment programme
(Gonzalo et al., 2003). In other cases, privatisation has been encouraged as part of a pro-
gramme of market liberalisation, as in the case of the Washington Consensus during the
1980s and 1990s, or the market reforms implemented by the European Commission (EC)
for the sake of European integration (Clifton et al., 2006).
Among the numerous reasons given when explaining privatisations, this article focuses
on political factors. It specifically deals with the design of government and privatisation,
specifically in Europe. As privatisation decisions are taken by politicians, such reforms
depend on the incentives of the political leadership and public managers. Adopting a
political economy approach (Bortolotti and Pinotti, 2003; Li and Xu, 2002; Opper, 2004),
we could therefore expect that political conditions (e.g. electoral competition, political
ideology, veto players, electoral cycles, etc.) affect privatisation decisions.
Bienen and Waterbury (1989) were (among) the first scholars to explain privatisation
reforms from a political economy viewpoint. They suggested factors to explain privatisa-
tion in developing countries during the 1980s, such as ideological rationales, dominant
coalitions and an interest in the maintenance of power. From that moment, a substantial
amount of literature has explained privatisation reforms through the political conditions,
but there is a lack of agreement on the driving factors of privatisation from the empirical
point of view.
Some scholars found that right-wing governments had a greater predisposition to pri-
vatise (e.g. Belke et al., 2007; Belloc et al., 2014; Bortolotti et al., 2001, 2003; Bortolotti
and Pinotti, 2003, 2008; Breen and Doyle, 2013; Obinger et al., 2014, 2016; Schmitt,
2013; Schneider and Häge, 2008), but this is not corroborated by others (e.g. Fink, 2011,
2019; Opper, 2004; Roberts and Saeed, 2012; Schmitt, 2011). Some studies noted that
majoritarian political systems positively affect privatisation (e.g. Bortolotti and Pinotti,
2003, 2008), but others do not support this (e.g. Opper, 2004; Zohlnhöfer et al., 2008).
Some scholars found negative effects from veto players on privatisation (Breen and
Doyle, 2013; Opper, 2004), but others did not find relevant evidence (Belke et al., 2007;
Li and Xu, 2002; Roberts and Saeed, 2012). The electoral cycle is also relevant in some
studies for explaining privatisation (e.g. Breen and Doyle, 2013; Opper, 2004) and not
relevant in others (Bortolotti et al., 2003).
This article contributes to the literature on the political economy of privatisation,
whose results are inconclusive. Most of the cited studies are also focused on the
Organisation for Economic Co-operation and Development (OECD) countries, develop-
ing and transition economies or mixed samples of developed and developing countries;
we add evidence in the European context, to explain privatisation through political condi-
tions. Others are focused on specific sectors, such as telecommunications or public utili-
ties, while this article considers all activity sectors and also extends the period to 2013,
while most of previous studies have focused on the 1980s and 1990s. This is essential
since privatisation reforms are again a subject of debate after the Troika pushed through
privatisation programmes in European Union (EU) countries suffering from financial
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