The committee met, pursuant to notice, at 9:40 a.m. room 2359-A, Rayburn House Office Building, Hon. John J. LaFalce, (chairman of the committee) presiding.

Chairman LaFalce. The Small Business Committee will come to order. We are convening this morning to examine the issue of privatization. I happen to think that this is an extremely important issue. Privatization is a phenomenon that has been taking place over the past 8 years at an accelerating pace. I think that it is important that it does take place. But by the same token, I think that the way in which it takes place is at least equally as important.

It is important because it can help foster and develop an entrepreneurial class. I think that it is important, too, because it can more equitably distribute the existing wealth of society, and most importantly the potential wealth of society. Or it can inequitably concentrate that existing and potential wealth too.

I think that the manner of the privatization will have profound societal impacts. I do not believe that policymakers have given adequate attention, sometimes any attention, to this very, very important issue. I intend to change that. This is the first step in that. You gentlemen are helping in this embryonic effort. Having said that, I will read the statement that has been prepared.

It is imperative that we achieve a better understanding of the policy implications of this important means of economic transformation. Privatization carries with it the hopes of the emerging democracies, for whom it is the primary vehicle for creating market economies under a rule of law, and facilitating economic growth and development

If accomplished successfully, privatization can legitimately be expected to increase economic efficiency, and provide broad based benefits to a country's citizens. However, if poorly implemented, privatization may only serve to channel resources to the same or different powerful elite groups. The issue this committee meets to consider is whether privatization in practice lives up to its promise.

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