nationalisation & privitisation

Question 1

nationalisation

Answer 1

•refers to the government buying shares and taking control of privately owned businesses
•e.g gov taking ownership of Anglo Irish Bank

Question 2

privatisation

Answer 2

•refers to the sale of state owned companies to private investors
•e.g gov selling ownership in Aer Lingus to private shareholders

Question 3

benefits of privatisation

Answer 3

•gov revenue
•efficiency
•accès to finance
•competition

Question 4

gov revenue
(benefit of privatisation)

Answer 4

•provides gov with large sum of money
•e.g selling Aer Lingus
•revenue can be used to build infrastructure/repay the national debt

Question 5

efficiency
(benefit of privatisation)

Answer 5

•state owned enterprises are often perceived as inefficient as they can rely on gov for funding & have little competition
•private firms are driven by profit and should therefore be more efficiently run

Question 6

accès to finance
(benefit of privatisation)

Answer 6

•privitised companies able to take out loans and shares and generally have greater accès to sof than state enterprises
•makes it easier to find expansion, creating wealth and employment in ecoconmy

Question 7

competition
(benefit of privatisation)

Answer 7

•elimination of state monopoly can lead to open market competition & lead to greater choice and lower prices for consumers
•eg Aer Lingus/Eircom

Question 8

challenges of privatisation

Answer 8

•loss of state assets
•increased unemployment
•lack of social commitments
•loss of control

Question 9

lots of state assets
(challenges of privatisation)

Answer 9

•no longer can receive revenue from the company
•state protects industries of strategic interest to the country e.g transport network

Question 10

increased unemployment
(challenges of privatisation)

Answer 10

•private company may want to cut costs and fire employees, higher social welfare spending

Question 11

lack of social commitments
(challenges of privatisation)

Answer 11

•non profit essential services may be discontinued due to private business wanting to reduce costs
•e.g postal and telecommunications service

Question 12

loss of control
(challenges of privatisation)

Answer 12

•shares of privitised company may end up with foreign investors
•privatized companies must maximize returns to shareholders, could result in increased prices for customers