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ADVANTAGES AND DISADVANTAGES 0F PRIVATISATION IN THE ECONOMY

18 Nov

The government has been criticised by so many critics as being a poor manager of business and we often hear statements like “the Government has no business in business”. Owing to such criticisms the government came up with the issue of privatisation whose benefits and shortcomings we shall be analysing critically in this paper. Privatisation goes beyond the mare activity of ownership transfer as this singular action is capable of determining the fate of the populace attached to such ventures either directly or indirectly.
Privatisation in the first place is the transfer of assets from the public (government) to the private sector. In other words it’s when the government transfer its authorities and control over a particular assets of his to a private body. This action arises not because the government is a “father Christmas”; it’s rather due to some expected benefits or existing inabilities by the governments. Knowing this we shall now discuss the advantages and disadvantages of privatisation briefly
ADVANTAGE
The first and basic advantage of privatisation is that of attaining efficiency. That is to say there is an improvement in the level of operation of the asset in question since the private bodies are after pure profit maximisation unlike the government who is more concerned with welfare.
Secondly privatisation provides an avenue for competition amongst the various firms in that in industry. This also is an unarguable benefit of privatisation as the purchasers of the assets (for example firms) will make all effort to boost their influence in the market and become the market leaders. Just as the neoclassical economist opined, competition promotes efficiency.
Also the transfer of ownership is not a price free action as the government is actually selling of the asset depending on the term of the contract. Therefore privatisation is a source of revenue to the government in question.
Finally for this paper privatisation helps in the reduction of mismanagement and corruption in the activities of firms. This is possible because the government may not be so keen with how effective the firm for instance may be operated at such everybody in such a firm could afford to mismanage and do things anyhow. But the private agency will ensure effectiveness and even sack any worker who may not be contributing marginally to the growth of the firm.
DISADVANTAGES
Privatisation is not devoid of disadvantages and shortcomings as they are obvious negative effects that come along with privatisation amongst which are;
Unemployment; this is one of the major negativities that arise from privatisation. This is due to the fact that at assumption of ownership by the private bodies, they run an evaluation on the existing work force in other to either retrench or retain. But as it’s the case, retrenchment is often the observed because this private individual are interested in minimising cost and maximising profit which they can attain with less labour and more capital. Benue Cement Company in Nigeria is a perfect example of this situation
Also there is bound to be an initial high cost of services and goods offered by the asset in the past. This arise because of the increase in the cost of production .
Finally privatisation is a good promoter of class in the society. This happens as a result of the fact that its only the rich that can really afford the price attached to these asserts. The resultant effect of this is,that the rich will keep getting richer while the poor will remain poor.
Now judge for yourself privatisation or no privatisation ???

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Posted by on November 18, 2014 in Economy with Julius

 

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