Privatisation and Nationalisation

Question 1

Privatisation

Answer 1

the transfer of ownership from the public sector (government) to the private sector.

Question 2

Privatisation Advantages

Answer 2

• Profit motive encourages firms to increase efficiency (lower costs), better quality services, more innovation, more research and development (R&D)
• Government receives a large one-off payment when selling its companies.
• The business will be “stream-lined” and inefficient workers will be made redundant.

Question 3

Privatisation Disadvantages

Answer 3

• Prices may rise as private firms seek to maximise their profits, which might be too expensive for poorer people.
• Government misses out on future revenue from profits that might have been made.
• Job loss might occur as those workers that are not needed are dismissed.

Question 4

Nationalisation

Answer 4

the transfer of ownership from the private sector to the public sector (government).

Question 5

Nationalisation Advantages

Answer 5

• Can be done for strategic reasons e.g. to prevent a business from failing and will earn a government future revenue if profit is made.
• Jobs and employment are protected.
• The government can provide services that the private sector may not have been able to e.g. rural loss making train routes

Question 6

Nationalisation Disadvantages

Answer 6

• It is expensive and incurs opportunity costs and might occur for political reasons.
• Too many workers might be employed as government may wish to avoid redundancies for political reasons.
• Lack of profit motive motive can result in lower efficiency and poorer quality.