How to Privatise

Olivier Blanchard and Richard Layard

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Three main criteria should govern a privatisation plan: speed, fairness, and efficient control. From this view we derive our optimum scheme, though we recognise that in most countries it needs modifying to existing circumstances. 1. Privatisation should be by gift, not sale. But distribution by gift does not require distribution through vouchers. 2. To ensure efficient control of restructuring, there should be holding companies, each being the chief owner of enterprise drawn from a range of industries. Citizens should be given shares in each holding company. The holding company should be charged to restructure its enterprises and then sell all (or at least 50 per cent) of its shares within a 10-year period. The final pattern of owners would include citizens, workers, foreigners, and pension funds, but provision would be made for some 'stable core' of owners - either interlocking ownership among firms, or major holdings by foreigners, banks or holding companies. 3. For smaller companies a different approach would suffice, involving direct sale or leasing. 4. If mass unemployment is to be avoided, it is crucial to create a mass market in housing. The only way to do this quickly is to give all houses to their existing tenants.

Date: 1991-08
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