K20200724
NIANGRAH HAMDADOU DILANE AMON
Privatization is the process of transferring ownership of a business,
enterprise, public service, etc. from a government to the private sector.
It can also mean complete deregulation with no controls on entry,
prices, and levels of service.
Advantages of Privatization
Immunity from political influence When a public service is privatized,
it can be immune from political influence. Instead of corporations and
interest groups competing for the service's favor by making strategic
campaign contributions and providing vocal support, the private
provider focuses on profit. This does not mean that there is no chance
of corruption.
Privatization creates more competition, which is beneficial in the
business world. Competition drives entrepreneurs and service
providers to innovate the products and services they offer and to strive
to make their offerings more attractive to consumers than those of
their competitors. When the government is the sole provider of a
service, it has no incentive to constantly innovate or to serve the
consumer a resident of the government's jurisdiction better than it did
before. Competition pushes service providers to reduce their operating
costs, which can mean that savings are passed on to consumers.
Greater efficiency reduces operating costs, which benefits consumers
by serving them quickly.
Investment Attraction. Private companies are more easily able to gain
the confidence of investors because of their strong financial and
economic infrastructure. This business supports the economy with a
strong influx of investment, both domestically and internationally.
To illustrate the benefits of privatization, consider the 2001
privatization of the regional electricity companies in England and
Wales, which produced significant net social benefits, with the
government gaining £56 million in sales revenue and taxes.
Privatization disadvantages
A natural monopoly occurs when the most efficient number of firms in
an industry is one. For example, tap water has very high fixed costs.
There is therefore no possibility of competition between several firms.
In this case, privatization would only create a private monopoly that
could seek to set higher prices to exploit consumers. It is therefore
better to have a public monopoly than a private monopoly that can
exploit the consumer.
The Public Interest. Many industries provide important public
services, such as health care, education, and public transportation. In
these sectors, the profit motive should not be the primary objective of
the companies and the sector. For example, in the case of health care,
there is concern that privatization of health care will lead to a greater
focus on profit rather than patient care. On the other hand, in a sector
such as health care, it can be argued that the profit motive is not
necessary to improve standards. When physicians treat patients, they
are unlikely to try harder if they receive a bonus.
The government loses potential dividends. Many privatized
companies in the UK are highly profitable. This means that the
government is not entitled to their dividends, which go instead to
wealthy shareholders.
For example, recently a significant proportion of the British railroads
have been privatized in the transport sector. The effects have been
somewhat less desirable, however, with steadily rising train fares and
disruptions caused by labor disputes. this illustrates the drawbacks of
privatization.
To sum up, privatization is a highly beneficial solution for some
countries in terms of revitalizing their economies and certain sectors,
as well as attracting a large number of investors. However, it should
not be used in certain sectors, particularly health, transportation, and
other social services, because private companies are only interested in
profit and care little for the population.
