In last few decades it has been observing the Nation's owned properties have been handing over to private sectors. Over the next decade, privatization is likely to be at the top of the economic agenda. Critics of widespread privatization contend that private ownership does not necessarily translate into improved efficiency. More important, they argue, private sector managers may have no compunction about adopting profit-making strategies or corporate practices that make essential services unaffordable or unavailable to large segments of the population.
Minaketan, privatisation has been an ongoing issue in many a state, especially in the West, where private companies are believed to be the engine of growth and wealth creation. Given 2008/9 global financial crash and the current challenges posed to such a system by COVID-19, I wonder how this situation will evolve over time. Interesting.
The question is relevant
But answers may not be forthcoming as expected
Dear Minaketan,
Privatization was very popular in the developed countries since late 1970 (see work by Savas), the efforts of the world bank moved it in early 1990s towards the second world (Chile, Israel), net there was a chaotic privatization in the former Soviet Block countries in 1992-1998.
For my knowledge, no new arguments towards privatization have appeared since late 1980s. You may look at an exemplary book by Vickers and Yarrow and at some reports of the World Bank of 1990-1993. Enclosed please also find my own paper which is a quarter century old but contains all currently used arguments towards privatization.
Well, COVID-19 has certainly shown us that there is no chance of being safe in a capitalist society.
Dear Mr. Minaketan:
Good question. In Latin America, very often you see that state owned companies are not as efficient as private ones. One reason is easy to understand: politicians use these companies to boost their political careers, hiring unnecesary personnel. It´s easy to see making benchmarking between public and private run companies in the same business, you´ll see the firsts have much more people inside (at least in this region).
An exception to this rule, as far as I know, was the state owned petroleum company in Venezuela BEFORE Chávez´s rule. PDVSA (Petróleos de Venezuela) although state owned was very efficient and one of the biggest and best companies of oil industry. It´s in ruins now.
Regards
Gustavo Concari
The Question is whether Privatization has become a symbol of National Development!
The existence of private resources is essential to decide the feasibility of privatization. Private companies are more efficient. Customers win. Higher profits represent higher taxes. The biggest factor, however, is another: any manager's agenda is limited in terms of time. If you have to look after banks, for example, the temptation for loans guided by political interests will be enormous. Attention to social problems will inevitably be less.
📷
It is a very interesting discussion, like a pendulum, at this moment in Argentina, it is being discussed about the nationalization of companies.
Government ownership of enterprises often negates performance. Politicians have other objectives such as to create employment opportunities in such enterprises. Thus management of such enterprises pursue objectives other than profit and such pursuits often stifles firm survival. In contrast, private enterprises pursue profit objectives. The market has a mechanism to discipline poor managers through corporate takeovers and the concomitant managerial job losses.
I agree with Gustavo Concari 's response above and won't repeat it here. I have worked in privatized companies both in the UK and Australia and observed the same features. Illustrated in the following:
Article Payroll internal audit: On the hunt for payroll fraud
Article Improving the bottom line: Achieving material cost recoverie...
Good question. Essential resources and services like land and housing should be owned by government. No one should seek profit from these resources and services, so that they are always affordable and available to the people in the nation. For non-essential services, privatisation should be encouraged to improve efficiency and profit. That's the practice in China and Singapore.
This is an interesting question that is always likely to spark debate as - from a healthcare perspective - it crosses the multi-dimensional relationships between "Public, Politicians and Professions".
I guess I would make a few observations, from my research, that I hope are helpful to you...
- If you are going to have a market for public service delivery, you must of course plan for the successes that marketisation can bring about. That said, you need to recognise that markets bring failure too - some companies and therefore services, will be compromised as they struggle to thrive in a more competitive environment.
- If the budget for this market is pressured, providers will often try to cut costs to retain or secure contracts and this can lead to poorer access or service standards for the population.
- You may may also find that whilst under public provision, professionals are open to a sense of community, collaboration and openess in their practice. They will often share research, information and plans. Once marketisation starts to take effect, they will be less willing to share and collaborate - in case it compromises their advantage in the market.
- Someone (the state) has to contract and regulate any such market - these costs need to be taken into account.
As I say, great question....I hope this is helpful and I wish you well with your work.
Has privatization become a symbol of Development?
We should not rush to conclusions, I feel.
That's a very interesting discussion and points to learn. The reality is what happening now in every country around the world, which becomes unacceptable because the citizens will suffer from all circumstances and this will not alleviate poverty but a graft and corruption practices. The consequences do not serve for the public interest but for the Oligarchs, definitely.
To privatize or not sometimes depends on other forces outside the market. Privatization gives citizens an opportunity to invest and grow their wealth. But sometimes privatizing some public entities considered core to a country's economy is discouraged. This is so especially if possible beneficiaries are foreign owned multinationals. Sometimes citizens might campaign against such a move out of the fear that service provision might be more expensive than expected. Also, If you revisit the John Pierpont Morgan scenarios in USA in 1800s, monopolies and monopolistic tendencies might hold countries to ransom.
It´s a good topic, that has many sides and has had many different examples, so I would say that there is not a general rule.
In some countries, private companies work better than public ones, in others, it´s the other way round. In France for instance, Gaz, electricity and Water used to be state owned and they really worked well. In my country (Uruguay, South America), it´s quite the same but only the electricity utility works fine, the other two having no to good services, from an economic point of view.
So, probably the problem is not who owns the company, but rather how it is managed. Good managers are scarce and many times they are found in private companies, and that is so because they are controlled by the owners. In public companies, that does not happen often, since politicians control the things they need to have the voters happy, something that may not always be economically wise.
Regards
Gustavo Concari
- Badges
- Science topic
- Similar topics
- Social Psychology
- Attitude