3.6 - Privatisation Flashcards
What does privatisation involve?
Sale of state assets into private ownership
What is privatisation often accompanied by?
Deregulation
What is the main efficiency benefit of privatisation?
Introduction of profit motive
Incentive to cut costs + increase productivity
How can the state benefit from privatisation?
Asset sale generates revenue
Reduced bureaucracy
Reduced borrowing + debt
What are the advantages of privatisation?
Market efficiency
Real competition
Creates shareholder democracy
Multipliers/Accelerator
What are the drawbacks of privatisation?
Social objectives neglected
Govt loses dividends
Positive externalities
Public sector operation
How are positive externalities a drawback of privatisation?
Free market will underconsume PE
State ownership can overcome market failure
Social efficiency prioritised
Why is public sector management a drawback of privatisation?
Many industries are public services
In consumer interest to be state owned
Profit maximising approach not socially optimal
