Privatisation means transferring the control of an enterprise from the government sector to the private sector. Generally, but not always, this also means transferring ownership of the Public sector enterprise as well as control. It can be accomplished by sale or lease. It can be accomplished by the government selling 100% of an enterprise, or selling 51%, or even by selling a minority stake - so long as the private sector is given full managerial control. Without transferring control to the private sector, the government can rise money by selling a smaller share, but that is not privatisation as such. PROS * Stops loss-making PSUs from adding to government debt; * Depoliticises PSUs, remove governmental pressures for over-manning and the sub-optimal use of resources; * Gives new owners a strong incentive to turn around failing PSUs into successful businesses; * Gives new businesses access to investment capital that government cannot provide; * Raises more money for government through taxing former PSUs; * Expands an enterprise and an industry, in the long run creating more jobs and generating wealth for the country. Enterprises need to be efficient and competitive or they lose money, and the government cannot afford to subsidise such losses. And governments anywhere are not very good at running businesses. Whether the private owner is an individual, or a corporation with thousands of shareholders, peoples' own money is at stake, so they have a strong incentive to work night and day to ensure that their enterprise becomes successful and profitable. Government lacks those incentives, so government-managed enterprises fail to perform across the world. privatizati... ... middle of paper ... ... enterprises. Lack of market discipline. Governments have chosen to keep certain companies/industries under public ownership because of their strategic importance or sensitive nature. Cuts in essential services. If a government-owned company providing an essential service (such as the water supply) to all citizens is privatized, its new owner(s) could lead to the abandoning of the social obligation to those who are less able to pay, or to regions where this service is unprofitable. Natural monopolies. Privatization will not result in true competition if a natural monopoly exists. Concentration of wealth. Profits from successful enterprises end up in private, often foreign, hands instead of being available for the common good. Political influence. Governments may more easily exert pressure on state-owned firms to help implementing government policy.
Municipal control or an alternative delivery method? This is the question that has intrigued all levels of local government and created intense debates between taxpayers across municipalities. The services that municipalities provide are often vital to the existence of a local area. The issues of accountability, cost savings, quality of service and democracy often arise when choosing the best options to deliver services to a municipal area. In recent years the concepts of privatization, alternative service delivery and public-private partnerships are often promoted as ways cut down on overburdened annual city budgets and promote a higher quality of service to citizens. Municipalities have historically always provided basic services such as fire protection, water purification/treatment and recreational facilities. However, would private companies or another municipality be able to better deliver the same services more efficiently or at a lower cost? The city or town often provides a political grass roots approach to most local problems. Municipalities are better positioned and have a wider scope to provide services to their constituents in order to ensure quality of service that does not erode accountability and transparency, or drive the municipality deeper into debt.
First the story of the Standard Oil Company briefly describes the limits of power. When Rockefeller was trying to take over the market he formed the “South Improvement Plan. When this occurred the public grew very angry with the price of trains, so nobody went on the railroads and Rockefeller eventually got the bill, until prices changed. This is an example of how the consumers, make the company run and when nobody wants to buy your product the individual must adjust. Another example would be when the Standard Oil Company was primarily the only oil company and was forced to split into thirty nine different independent companies. This shows that one business cannot control the entire market and interventions will need to be done accordingly so that a company does not have all the power.
Cuba has traditionally had many trade restrictions and trade barriers. There is some restructuring in state sector since 2010, but there are heavy regulations and tight state controls in the private sector. There are no open-market policies to improve growth in trade and investment, and the lack of competition continues to throttle dynamic economic expansion. Only government enterprises can enter into economic agreements with foreigners as minority partners; ordinary citizens cannot participate. Most of the means of production are owned by the government. Its planned economy discourages foreign trade and investment. The financial sector remains heavily controlled, and access to credit for entrepreneurial activity is seriously obstructed by the shallowness of the financial market. The government maintains strict exchange and capital controls.
After all, these corporations had to acquire their power and extensive business from somewhere, and that place is usually the vicious and ruthless cornering of competition. These companies would either attempt to buy out all of the competition as John D. Rockefeller did or corner and dominate a market with vertical integration as Andrew Carnegie. Vertical integration being one company owning every step of their products process, and John D. Rockefellers version called horizontal integration, where he owned all companies doing one step of his products process. Though John D. Rockefeller did incorporate vertical integration later into his own
Many think that big companies were good in every way. People who support monopolies say that they were good as the money was controlled by the people and not the government. This is true to some extent, as many wealthy businessmen funded public areas. However, they are wrong. As seen in document 7, the prices of essential goods greatly dropped over time, which allowed people to spend more money on personal goods and services. In the end, a government that strictly controls the public is no better than a government that controls its
Water privatization is putting water rights into private corporations. In developing countries privatization is acceptable but in developed countries water should be left to the public. In the developed countries like the US, France and Europe water is controlled by the public and private companies or corporations. Water remains a function of municipal government in 90% of cities around the US and Suez Environment and Veolia Water are the top two water companies.2 The consensus throughout the US is that water should be the publics responsibility because water in privately owned water facilities is more expensive and in some cases below standards and less desirable.6 People in the US want to keep their water in their hands because they feel better knowing that people like them control and consume the same water as they do and not people who do not. Putting water in the control of private companies has some less desirable effects on the public. These organizations have a profit motive with incentives that cause them to avoid conservation and efficiency measures since profits depend upon volu...
High barriers to entry that restrict new firms to enter the industry e.g. control of technology
Privatization of governmental functions has a direct relationship with the number of contract employees in government and an inverse relationship with the number of civil servants. As privatization has become more acceptable, contract employees are being hired to do the jobs, thus, replacing civil servants.
The government should regulate monopolies in the different monopolies like the prevent excess prices Without government regulation, monopolies could put prices above the competitive equilibrium. This would lead to allocative inefficiency and a decline in consumer welfare. According to Tejvan Pettinger, the professor of Economics at Oxford University UK and a online blogger. “If a firm has a monopoly over the provision of a particular service, it may have little incentive to offer a good quality
change the economy, and, the control is given to the people with the money, or,
Failing or profitable government? There are various types of economies in the the world, of the various types they can be narrowed down to the two most common which are capitalist and socialist economies. Capitalism is “a way of organizing an economy so that the things that are used to make and transport products are owned by individual people and companies rather than by the government” (Merriam Webster). Socialism is “a way of organizing a society in which major industries are owned and controlled by the government rather than by individual people and companies” (Merriam Webster). Every economic systems has pros and cons. Type of organization, individual or public benefit, and societal wealth are factors that distinguish between the two types of economy.
Contracting out is the process through which public organizations contract with private sector organizations to provide services normally provided by public agencies. It is a form of privatization, which is defined as any shift of activity or functions from the state to the private sector, more specifically, the shift of production of goods or services from public to private. (Starr, 5) Privatization reduces the role of government and increases the role of private sector agencies. However, public agencies maintain ultimate control over the provision of services and they control government funding.
Indeed economic rationalism tends to privatization of public utilities, like electricity, gas, airports, railways, telecommunications. Many other government bodies have been corporatized or required to operate on a pay-for-service basis. Privatization is not only an end in itself but also serves an educational function by transforming public attitudes toward ownership and economic responsibility. The result will be an increase in net economic welfare: the economy will become more dynamic and scarce resources will be allocated more efficiently. In capitalist theoretic, the profit motive is said to ensure that resources are being allocated
Generally speaking governments intervene in the market for two main reasons: "social efficiency and equity". [1] One does not expect to see a government intervene in the economy to favor a firm, or because the government would profit from such an intervention in the way a firm sees profit (except maybe voters positive perception of the intervention).
It is in my opinion that government intervention, though necessary in certain circumstances, should be largely limited to its role in protecting property rights, upholding the rule of law, and maintaining the value of the currency. The market itself is best at deciding how and when to manufacture its goods and it is unnecessary for the government to step in to try and improve the efficiency of the economy. One should look to the entrepreneurial creativity of millions who are willing to risk their own resources and reputations in order to progress our country. Before you place your trust in such entrepreneurs however, you should gain an understanding of the differences between political and market entrepreneurship as well as how government subsidies can undermine our economy in such a deceitful manner.