Recipients use their vouchers to purchase these services in the marketplace. Thus, instead of subsidizing producers as grants do, vouchers subsidize eligible consumers. The final form of privatization by delegation is a government mandate requiring private agencies to provide a service at their expense. Thus, if a government-run social security system were replaced by mandatory individual retirement accounts, this would be privatization by mandate, a form of delegation. In contrast to the first two methods, which require active efforts by government, displacement is a somewhat more passive process that leads to a government's being displaced more or less gradually by the private sector as markets develop to satisfy needs.
Displacement occurs by default, by withdrawal, and by deregulation.
When the public finds that government service is inadequate, and the private sector recognizes the demand and steps in to satisfy it, this can be termed displacement by default. Gradually, the public begins to look to the private sector for the service. One example of this phenomenon is the growth of private transportation where government-provided surface systems are deemed inadequate by the public. Whereas default is unintended, government can engage in deliberate load-shedding, or withdrawal. His government, he says, deprives state-owned enterprises of expansion moneys and operating funds, thereby retarding their growth.