Marketization

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Marketization (or Marketisation) is a restructuring process that enables state enterprises to operate as market-oriented firms by changing the legal environment in which they operate.

This is achieved through reduction of state subsidies, organizational restructuring of management (Corporatization), decentralization and in some cases partial privatization. These steps, it is argued, will lead to the creation of a functioning market system by converting the previous state enterprises to operate under market pressures as state-owned commercial enterprises.

Aspects

Marketized solutions of government and market externalities

Here the government seeks to solve market and government externalities with market-based solutions rather than through direct administrative means. Supporters argue that the market externality of pollution can be addressed through the sale of pollution permits to companies and corporations, thus allowing the market to "see" the information and "realize" the harm done by allowing the market to transmit pollution costs to society. This is presented as an alternative to direct administrative means, whereby the government would use command and control means to direct state enterprises and private firms to comply with the guidelines.

Marketization of government branches

This is often described as "competitive federalism" or "limited government". Proponents argue that markets perform better than government administration. Therefore, marketization seeks to make government agencies and branches compete with each other when government branches and agencies are absolutely necessary (i.e. remaining agencies and branches not privatized or liberalized away). For example, supporters argue that a voucher system for public education would make public schools compete with one another thus making them more accountable and efficient.

Theory

Critics of globalization, privatization, and liberalization have deemed that it is unworkable without major government regulations to balance the forces involved. They argue that marketization can result in market failure.

Free Market thinkers like Hayek, Friedman and von Mises believe markets can work with far less government regulation. As they see it, the combination of liberalization, privatization, and marketization ensure that globalization fulfills the promises of peace, prosperity, and cooperation that its liberal scholars and philosophers have promised. Without marketization, supporters argue that government created externalities can distort the information available to the market which in turn makes the market not work as well as it could.

Examples

Milton Friedman offers examples of what marketized government solutions can look like. Friedman's proposed education voucher system promotes competition between public schools (and private) thus creating a market based solution to educational issues. See Private prison.

References

Rolph van der Hoeven, György Sziráczki. Lessons from Privatization. (1997). International Labour Organization. ISBN 92-2-109452-9 p.101
Sarah Vickerstaff. The Transformation of Labour Relations. (1998). Oxford University Press. ISBN 0-19-828979-0 p.63

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