Privatization in Post-Conflict or Fragile Countries: a Speculation on Long-Term Market Stabilization

I. Introduction/Research Question

In any post-conflict or failed states, major reform of most aspects of governance is typically a top priority. In particular, economic reform is what a state will turn to in order to begin the rebuilding process. Generally, there are two paths a state can choose to take when rebuilding its economy, either a shift toward privatization or a shift toward nationalization. While privatization tends to be a more efficient means of production due to specialization, it is also a profit driven entity, sometimes sacrificing the people’s needs for the extra dollar. Public ownership also has its appeals. The main appeal is that unlike private ownership, public ownership is not profit driven. It is first and foremost a service to the people. On the downside, it tends to be less efficient as it may lack specialization. It is clear that powerful countries have benefitted greatly from both types of ownership. The United States saw a huge increase in wealth due to privatization in a capitalistic society. On the other hand, many European countries have made an effort to nationalize, and have also seen improved productivity and peace. Then, there are countries that have recently come out of turbulent times. They may have undergone civil or foreign conflict, or been a victim of market failure due to inefficiency or corruption. Often we see these countries continue to fail or struggle, if not immediately, eventually. So many times the rebuilding process is a shortsighted one. International aid is often used to start the process, but it is not nearly enough to reach stabilization; and it dwindles over time. People call for a timely reform, while the government wants to regain legitimacy, which is vital to economic growth. There is not one case of an illegitimate government finding long-term economic success. To accomplish this, it must allocate resources. While the state did fail or was the problem, it is now the main actor in promoting growth and...