Th3.6: Disadvantages of Privatisation

Question 1

What are the four disadvantages of privatisation?

Answer 1

abuse their monopoly position
important industries
externalities and inequality
negatively affects the PSNCR

Question 2

Abuse their monopoly position

Answer 2

when there are natural monopolies it may be fairer for the government to own the firm since they won’t abuse their monopoly position

Question 3

Important industries

Answer 3

some people argue that industries such as electricity, water and transport are important because they directly affect the success of other industries, and so therefore it makes more sense for the government to own them in order to coordinate them properly

Question 4

Externalities and inequality

Answer 4

there are problems over externalities and inequality

Question 5

Negatively affects the PSNCR

Answer 5

some argue that it negatively affects the PSNCR as firms are under-priced when they are sold and the government no longer receives a firm’s profit