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...free trade have supplanted earlier social democratic efforts to build mixed economy. IMF and World Bank structural adjustment policies have forced many developing countries to downsize their public sectors and abandon efforts to use public enterprise as a vehicle for domestic economic development. Moreover, one of the key objectives of recent international trade agreements has been to roll back the public sector and impose commercial disciplines on government enterprises.
Yet the prevailing view of neoclassical economists that public enterprise is invariably less efficient than private business is open to question for a variety of reasons. Recent failures of Enron, Nortel, WorldCom, and Andersen--to list just a few corporate disasters--suggest that the market does not always make the best economic decisions. So it may be timely to revisit the question of whether public enterprise is more, or less, efficient than its private counterparts.
Obviously this is a huge task. Those attempting to compare public and private enterprise encounter numerous methodological challenges. There is no single model for public enterprises. They operate in a wide range of different sectors of the economy and under varying regulatory and policy mandates. Changes in the scope and functions of public enterprises over time as well as recent privatization initiatives also make it more difficult to carry out long-term comparisons. Key data needed to make sound comparisons are often unavailable
In many cases, public enterprises operate in sectors with no comparable private competitors. They...
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