Structural adjustment: from privatization to PPPs

This chapter attempts to correct some common misperceptions about the modern origins of PPPs and PPP advocacy. It has become commonplace to distinguish PPPs from “privatization” involving the divestiture of government assets. In fact, World Bank documents confirm that modern PPP advocacy originated in the effort to privatize state-owned enterprises (SOEs) which was a key part of many “structural adjustment” lending programs implemented by the World Bank Group and IMF during the 1980s and 1990s. Among other things, these programs aimed at reducing the role of government in the economies of developing countries, often by selling or liquidating inefficient SOEs. PPPs allowed privatization of the management of SOEs that governments could not or would not sell, often in a way that was expected to be a first step in processes leading to full divestiture. It has been convenient to ignore this history because these privatization programs were eventually discredited and at least nominally abandoned by multilateral development banks (MDBs) in the early 2000s. The brief surge in the use of PPPs during the 1980s also led to claims by PPP advocates that PPPs had convincingly demonstrated their potential at that time and needed little additional justification.