Challenges Of Liberalisation, Privatisation And Globalisation – Paper I

Challenges Of Liberalisation, Privatisation And Globalisation

Liberalisation, Privatisation And Globalisation are the three most important phenomena in the history of the Indian subcontinent. However, all of it did not happen overnight and there are different challenges of liberalization privatisation globalisation in public administration. Here is an article discussing various problems of LPG in India, the impact of liberalisation, privatisation, globalisation on Indian Economy and the conclusion of LPG.

The last few decades have seen encompassing and far-reaching changes all over the world. What is distinctive of the phenomenal change unfolding is that the elements driving it or from which it emerges have affected almost all countries in all sectors affecting entire masses in one manner or the other. The dynamism of the processes of change and particulars of the phenomenon is explained by three related concepts of Liberalization, Privatization and Globalization.

Public policies are directly linked with these phenomenal changes as they define and underline the various ways the state and government have been affected by and in turn, changed the functioning of the system. State as the governing authority, its capability and capacity, its apparatus and environment of functioning and the very course of governing have underørina radical transformation due to the onslaught of globalization and its related concepts.


Liberalisation, in general, refers to “weakening or total rejection of the state control over all types of economic activities and commercial parameters such as the freeing of trade, investment and capital flows between countries, opening up of markets to competition, relaxation of government restrictions, usually in areas of ‘social or economic policy) In the arena of social policy, it may refer to a relaxation of laws restricting, for example, divorcé, abortion, homosexuality or drugs? Most often, the term is used to refer to economic liberalization especially traded liberalization or capital market liberalization, policies often referred to as neoliberalism. Neoliberalism is associated with the contemporary era of globalization, the seeds of which were planted after the Second World War. The term neoliberalism is used to describe a political-economic philosophy that de-emphasises or rejects positive government intervention in the economy.

It focuses on free-market methods, fewer restrictions on business operations, and property rights and the opening of foreign markets by political means, using economic pressure, diplomacy and or military intervention. Opening of markets refers to free trade and an international division of labour. Neo-liberalism generally favours multilateral political pressure through international organizations or treaty devices such as the WTO and World Bank.) It promotes reducing the role of national governments to a minimum and favours laissez-fáire over direct government intervention and measures success in overall economic gain.

The slow and quantitative development of neo-liberalism after World War II became more rapid in the 1970s which culminated with the Reagan government in the United States and that of Margaret Thatcher in Britain- along with the fall of the Soviet Union and the fading of social democracy and new liberalism as counterbalances or alternatives to unbridled capitalism. The Reagan and Thatcher governments not only shifted their own countries policies toward laissez-faire but used their influence’ to impose their policies on the rest of the world.

In effect then, due to the efforts of the national governments and market processes, markets integrated to such an extent that the various national markets of products and financial services had become almost one single market. The same process within the developing countries took place much later.


Privatisation as a concept defining the economic and political style of functioning of both politics and markets did not gain wide circulation until the late 1970s and early 1980s. However, post-1990 privatisation as liberalization and globalisation has become a worldwide phenomenon. The terms ‘private’ and ‘public’ have generally been used to identify the commercial and governmental styles of approaching specific tasks. It was the rethinking of the style of functioning of the public sector that had become big, unwisely, inefficient, unaccountable and difficult to manage, led to the incorporation of efficient, commercial and business-like private sector management techniques by the public sector that redefined boundaries set within the two sectors.

Privatisation is also defined as the act of reducing the role of government or increasing the role of the private sector, in an activity or the ownership of assets. The spread of the privatization movement is grounded in the fundamental belief that market’ competition in the private sector is a more efficient way of providing these services and allows for greater citizen choice. In practice, however, concerns about service quality, social equity and employment conditions raise scepticism of privatization. Although empirical studies do not provide clear evidence on the costs and benefits of privatization, public perception and pressure for improved government efficiency kept privatization on the government agenda all over the globe.

Reasons For Privatization

Privatisation was the domestic incorporation of the neo-liberals fundamental belief that market competition in the private sector is a more efficient way of providing services. The private sector allowed to provide some of the services that were ordinarily provided by governments emerged as the accepted solution to basic lacuna plaguing governments that had become big, inefficient and seeking to reduce costs and overheads. ( Governments around the world commonly share three objectives in their privatization programs:

  • To promote efficiency by exposing business and services to the greatest possible competition, to the benefit of the consumer.
  • To spread share ownership as widely as possible among the population, and
  • To obtain the best value for each industry or service the government sells.

Types And Techniques Of Privatization

Some of the commonly accepted techniques used for privatization can be listed as follows:

Contracting Out (also called outsourcing)

The government competitively contracts with a private organization, to provide a service or part of a service. It is one of the most frequently used options by governments to augment their service delivery mechanisms and make the service accountable and responsive to market pressures.

Management Contracts

The operation of a facility is contracted out to a private company. Facilities, where the management is frequently contracted out, include airports. wastewater plants, arena and convention centres.

Public-Private Competition

Public-Private competition is also called ‘managed competition’, or market testing. When public services are opened up to competition, in house public organizations are allowed to participate in the bidding process.


A private firm is given the exclusive right to provide a service within a certain geographical area.

Internal Markets

Departments are allowed to purchase support services such as printing, maintenance, computer repair and training from in-house providers or outside suppliers. In-house providers of support services are required to operate as independent business units competing against outside contractors for the department’s business. Under such a system, market forces are brought to bear within an organization. Internal customers can reject the offerings of internal service providers if they don’t like their quality or if they cost too much.


The government pays for the service, however, individuals are given redeemable certificates to purchase the service in the open market. These subsidise the consumer of the service, but services are provided by the private sector. In addition to providing greater freedom of choice, vouchers bring consumer pressure to bear, creating incentives for consumers to shop around for services and for service providers to supply high-quality, low-cost services.


Commercialisation is also referred to as service shedding. Government stops providing services and lets the private sector assume the function.


Self Help is also referred to as transfer to the non-profit organizations, community groups and neighbourhood organisations take over a service or government asset such as a local park. The new providers of the service, also are directly benefiting from the service. Governments increasingly are discovering that by turning some non-core services such as ‘zoos’, ‘museums’, ‘fairs’, ‘parks’ and some recreational programs over to non-profit organizations, they can ensure that these institutions don’t drain the budget.


Volunteers are used to providing all or part of government service. Volunteer’ activities are conducted through a government volunteer program or a non-profit organization.


Government organizations are reorganized along business lines. Typically they are required to pay taxes, raise capital on the market (with no government backing – explicit or implicit ), and operate according to commercial principles. Government corporations focus on maximising profits and achieving a favourable return on investment. They are freed from government procurement, personnel and budget systems.

Asset Sale Or Long-term Lease

The government sells or enters into long-term leases for assets such as airports, gas utilities or real estate to private firms, thus turning physical capital into financial capital. In a sale-leaseback arrangement, the government sells the asset to a private sector entity and then leases it back. Another asset sale technique is the employee buyout. Existing public managers and employees take the public unit private, typically purchasing the company through an Employee StockOwnership Plan (ESOP).

Private Infrastructure Development and Operation

The private sector builds finances and operates public infrastructure such as roads and airports costs through user charges. Several techniques commonly are used for privately building and operating infrastructure. Some of the popular techniques are used for privately building and operating infrastructure. Some of the popular techniques are:

  • In the Build-Operate-Transfer (BOT) arrangements, the private sector finances to build and operate the facility over the life of the contract. of this period, ownership reverts to the government.
  • A variation of this is the Build-Transfer-Operate (BTO) model, under which transfers to the government at the time construction is completed.
  • Finally, with Build-Own-Operate (B00) arrangements, the private sector retains permanent ownership and operates the family on contract.

These techniques or a combination of one or more of these techniques of functioning is supposed to lead to greater efficiency and productivity of enterprises.

Liberalisation and Privatization are in fact levers that are augmenting the globalization process that has gained currency and varied connotations providing explanations and used as a source, cause, catalyst, motivation and structure of the changes and the changing world that we have encountered in the past fifteen years.


The term globalization is used to explain this accelerated exchange of ideas and commodities and the various manifestations of interconnectedness in the world that is affecting people and places. The term came into common usage since the 1980s, reflecting technological advances that made it easier and quicker to complete international transactions – manifest in the extremely intricate interconnectedness of human life across the planet.

Globalization consists of processes that lead toward global interdependence and the increasing rapidity of exchange across vast distances. It is regarded as a historical process the result and culmination of human innovation and technological progress. In economic terms, globalization refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term also refers to the movement of people (labour) and knowledge ( technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity – village markets, urban industries, or financial centres.

Globalisation is understood as the process of increasing interdependence among countries and their citizens, is understood differently by different people. For the economist, globalization is essentially the emergence of global markets. For the historian, it is an epoch dominated by global capitalism. For the sociologist, globalization at once underscores the celebration of diversity as well as the convergence of social preferences in matters of lifestyle and social values. While for political scientists it is a phenomenon that ‘is gradually eroding state sovereignty.

The technological and financial advances had a direct impact on the state and its functioning radically transforming its capacities and capabilities. The emergence of global issues such as nuclear proliferation, environmental concerns, human rights, transnational crimes, peace, weapons, health concerns drugs, illegal immigration requires the state to coordinate policy-making at levels beyond the nation-state. Moreover, liberalization and privatization have incorporated radical changes that require varied and different forms of regulation.

Regional and international institutions and organizations addressing almost all aspects of socio-economic and political issues are redefining how the state functions. The interaction pattern between states has also transformed with communications and interactions increasing at the individual, association, group and institutional level. Increasing linkages between international actors such as multinational corporations, non-governmental organizations, sub-national groups and the recent penchant for strengthening local level governance encouraged both supra and sub-national decision making that impinged directly on the original role that the state enjoyed both within and outside its boundaries. In essence, the state is no longer the sole governing or decision-making authority as several alternative centres of power have emerged to take up the role and share the responsibilities.

Globalisation has set in motion a process of far-reaching change that is affecting everyone, New technology, supported by more open policies, has created a world more interconnected than ever before. (This spans not only growing interdependence in economic relations- trade, investment, finance and the organization of production globally but also social and political interaction among organizations and individuals across the world. The potential for good is immense. The growing interconnectivity among people across the world is nurturing the realization that we are all part of a global community.

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