Essay on positive and negative effects of privatization

Free 500 words essay on positive and negative effects of privatization for school and college students.

Privatization is the process of transferring the managerial control of an enterprise or organization from a Government sector to a Private sector, partly or wholly. It may be done in terms of ownership or in terms of providing service. Privatization may involve sale or lease of the enterprise. No Country has remained immune to the idea of Privatization. This process has become the standard conservative method adopted by a Government in the state of financial crisis, owed to the belief that the competition in private sector helps increase performance substantially and yields lucrative market opportunity in a jiffy.

This may be an influence of new and dynamic ideas incorporated by the new private stakeholders. Some services of public utility like water, gas, electricity, roads, transport, etc are the examples that are now being operated in conjunction with the private organizations. Italy has served one of the earliest examples of privatization between 1922 and 1925 by privatizing either the ownership or functioning or both, of telephone networks, life insurances, production of metal machinery, building and operation of motorways.

free essay on effects of privatization

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Advantages of privatization:

  • It prevents or considerably reduces Government debts, added by the Government or Public Sector Units.
  • It helps reduce Political interference in the enterprise. The influential people from the Government tend to fill in their pockets by affecting the functioning and outcomes of the enterprise owned and operated by the Government. This political influence remains a major cause of fetching low outcomes from the subjected enterprises. The decision making body works becomes ineffective towards right moves and hence, adds to the degradation of the organization.
  • The new Private Stakeholders gain enormous incentives for improving the performance of failing organizations.
  • The taxes paid by the consumers mostly tend to reduce as an overall affect. This can be attributed to the increased competition with privatization.
  • The efficiency and effectiveness of the functions improve substantially.

A good example of privatization has been presented by Wexford County, Michigan who privatized their emergency medical services in 1994, resulting in improved service, lowered costs, saving taxpayers more than $300,000 in the first year itself.

Disadvantages of privatization:

  • Government remains unaffected by the profits made by the private enterprise.
  • The safety of the manpower or the consumers of the enterprise may get affected as the profit making becomes the top priority.
  • Sometimes, the Government does some functions providing subsidies alongside. In such cases, the prices may get raised with privatization.
  • Job security of the manpower involved in the organization gets compromised consequentially. The private stakeholders may call for laying off the servicemen as the first step of cost-cutting.
  • The public interest gets majorly compromised. The profit making private enterprise tends to neglect the needs and safety of consumers. Also, the quality of products or service may get compromised.
  • New roads of corruption or fraud may get laid down by the managers of private organizations.

Hence, it should not be considered as the final solution to financial crisis by the Union or State Governments as many other factors play inevitable roles while operating an enterprise. However, Privatization done with thoughtful terms and conditions by the Government does lead to improvement in all spheres of functioning.

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