Going Private: The International Experience with Transport Privatization. By José A. Gómez- Ibáñez and John R. Meyer. Washington, D.C.: The Brookings Institution, 1993. 310 p. $36.95 ©, $16.95 (p).

In the 1980's many countries experimented with privatization of previously publicly-owned enterprises in an effort to stretch the limited public funds available for the transportation sector. Whether by selling off existing state-owned companies, contracting out specific services to private vendors, extensive deregulation, or attracting private financing for new infrastructure investment, governments sought private help to enhance efficiency, increase investment and decrease the need for new taxes and new public spending on transportation problems. How successful have these often-controversial efforts been?

This new study by two well-known Harvard transportation policy experts gives us the most thorough and extensive overview of transportation privatization to date. Gómez- Ibáñez, a professor of public policy and urban planning and Meyer, a professor of capital formation and economic growth, combine a thorough knowledge of the economic arguments and evidence surrounding the privatization debate with an acute awareness that politics, interest groups activity, and organizational dynamics are as important to the success of privatization plans as economic models and analysis. Their keen insight into the political dimension is evident throughout the book, but is most striking in the chapter on "The Political Economy of Profitability and Pricing," written with Arnold M. Howitt. This chapter is a superb fusion of economic concepts and political stakeholder analysis that should be read by every economist or free market ideologue before he or she ventures to wax poetic about how simple a solution privatization is.

The authors draw on a wide variety of privatization experiences from the U.S., Europe, Asia, and Latin America. But it should be noted that ten of the fifteen chapters focus on just two modes, urban bus transit, and high performance highways; a chapter each is devoted to airport privatization in the U.S. and Britain, and the U.S. experience with private rail transit.

Their wide-ranging case studies lead the authors to identify five prerequisite conditions for successful privatization in the transport sector. Competition should exist in some form and be enhanced by privatization. The ability to realize large efficiency gains when the private sector operation is more efficient than public sector operation make it easier to "buy out" other problems such as environmental or social equity concerns. There should be minimal transfers or redistribution of income from winners to losers; uneven sharing of benefits among stakeholder groups can create insuperable political barriers to implementing privatization. There should be limited environmental problems raised by a proposed privatization; too much controversy in this area will torpedo the project politically. Finally, privatization is easier when the service approximately covers its costs, neither requiring a large public subsidy nor generating significant profits; large deficits make the operation unattractive to private investors and large surpluses stimulate fears of monopoly and political pressures for regulation.

The authors recognize that privatization is not a policy panacea. Applying their five conditions to the different modes, they conclude that the overall prospects for successful privatization are strongest in international air transport; while chances for domestic airlines and even for airport privatization are at least medium. Intercity bus privatization looks strong in developing countries. The British bus privatization of the 1980s shows that it can succeed in some developed countries. But Gómez-Ibáñez and Meyer note that the benefits of bus privatization would not be as great in the U.S., because of Britain's significantly higher level of bus ridership and more favorable pattern of transit use. Private toll roads may find some success in developing countries such as Mexico, but their prospects in more developed countries such as France and the U.S. are distinctly limited. Finally, attempts to privatize intercity passenger rail lines and urban rail transit are likely to fail. They cannot be funded from passenger fares alone, they have large environmental externalities, and competition within the same mode is almost impossible.

Earlier policy studies of transportation privatization (e.g. Charles A. Lave, ed. Urban Transit: The Private Challenge to Public Transportation, 1985), while usefully calling attention to the phenomenon, tended to be rather one-sided and proselytizing, and to dismiss political problems as of little consequence. Gómez- Ibáñez and Meyer have given political factors their due and have struck the right balance between optimism and caution in evaluating the prospects for transport privatization. Their book will be the starting point for further studies of privatization for years to come.

James A. Dunn, Jr.
Rutgers University - Camden