In the 1980s and especially in the 1990s, privatization swept the world. This chapter seeks to explain why. In particular, it asks whether governments in advanced and in Latin American countries engaged in privatization as a result of learning.

From the late 1970s, and especially after 1983, privatization was pioneered by Prime Minister Margaret Thatcher in Britain. During the 1980s, this policy innovation was embraced hesitantly elsewhere. However, during the 1990s, privatization became an established policy in developed and developing countries. It was also a central issue in post-Communist societies (Stark and Brustz 1998).

Although this secular trend toward privatization exhibited important regional variations, there is no doubt that privatization has been a major phenomenon. Moreover, it has cut across the ideological divide: Socialist governments in Europe as well as populists in Latin America climbed aboard the privatization bandwagon.

Explanations of this wave of divestments have been widely canvassed but rarely tested. They range from pure efficiency considerations to more complex political rationales, with both domestic and international political factors playing some role. However, Kogut and McPherson (2008) correctly claim that some countries were heavily indebted and were governed by right-wing parties – two typical domestic explanations of privatization – but were not motivated to streamline their public sectors. Accordingly, I argue that international forces better explain why so many countries adopted privatization.