Today’s Warm Up

Answer on your warm up/exit ticket sheet:

Which economic system do you feel is the best and why – command, market or traditional?

METHODS OF PRIVATIZATION

Today’s LEQ: •How and why did many 20th century command economies move from a command economic system to market?

Methods of Privatization

There is no “one size fits all” with transition from command to market

Countries must decide how to shift from collectivization (gov’t ownership of productive resources) to privatization (private ownership) and whether the changes should be rapid, gradual, or somewhere in the middle

Four Methods We’ll Discuss… Restitution Equal Access Voucher Privatization Sales to Outside Owners Management-Employee Buyout

Restitution

Property is returned to former owners who can show clear ownership claimsFor example, showing

documents that prove you were the last owner before collectivization

Equal Access Voucher Privatization Vouchers or ownership shares are

evenly distributed across the population Citizens are free to invest their vouchers

as they see fitThey may directly invest in firms being

auctioned or may pool their vouchers to acquire larger firms

Management-Employee Buyout

Businesses are sold to existing management and employees

Sales to Outside Owners State enterprises are sold on a case-by-

case basis to people other than the current managers and employees – sometimes to foreign investors

Pros & Cons

What are the pros and cons of each method?

Review each method of privatization in the packet provided then summarize the pros and cons for each in the chart

Guide to Completing the Pros/Cons Chart Better corporate government = will the

business have access to better leadership? Speed = how quick is the transition? Better access to capital and skills = does

the business have access to better, more qualified employees and the tools it needs to succeed (i.e. new productive equipment)

More government revenue = does the government make money off the transition?

Greater fairness = is it a fair process?

Today’s Exit Ticket

Answer on your warm up/exit ticket sheet:

Which method of privatization do you think is best and why?