Privatizing the Public Business Sector in the Eighties: Economic Performance, Partisan Responses and Divided Governments

Abstract

From the late 1970s on, after several decades characterized by relatively interventionist patterns of economic policy making, most advanced states began questioning and, in some instances, abandoning active industrial policies and privatizing public businesses. Examining the evolution of the public business sector in all nations included in the Organization for Economic Co-operation and Development (OECD) from 1979 to 1993, this article shows that the sale of public firms did not mechanically derive from either declining growth rates, growing budget deficits or the increasing internationalization of domestic economies. Although the economic slowdown of the 1970s had the effect of breaking down the so-called Keynesian post-war consensus, the strategies towards the public business sector eventually adopted were shaped by the partisan composition of office – conservatives privatized while social democrats opted for the status quo – and by the internal structure of the cabinet – divided governments produced little change in either direction. From a theoretical point of view, this analysis broadens the current political-economic literature by showing that, although parties have a limited impact on the standard macroeconomic policies employed to manage the business cycle – a point widely confirmed in the literature – they do play a central role in designing policies, such as the level of public ownership of the business sector, that shape the supply side of the economy.