Effective Privatization Essay Example | Topics and Well Written Essays - 2000 words

Effective Privatization - Essay Example(Yarrow 1999, 157-168) graft f ownership makes credible the fact that the firm does not hire limitless government funding (although governments do bail out even private companies from time to time) for example it bailed out the plain companies and rail track because transport is vital to the economy. (Vickers 1991)Selling assets at a fair price leaves government wealth unaltered. If prospects f tougher treatment in the future lead to productivity improvements in state firms the government mothers break off off when the productivity improves not when (or if) the firm is sold. (Chang 1992, 31-32)Many privatised firms now face intense competition much from abroad. However, natural monopolies have aquired a new framework f regulation. This has favoured price capping, administered by independent manner agencies (quangoes) and subject to periodic review. (Shirley 1999, 115-136)Increasingly, the UK has been driven to regulate not merely conduct but structure. This presupposes that some part f a natural monopoly can be hived off and become suitable for competition. In practice, this has normally been down stream activities in a vertically related industry i.e. union f firms at different production stages in the same industry. (Vickers 1991)To asRecent privatisations include1British Rail (now taken backward into public ownership as a not for profit organisation) 2 British Air shipway3 Air Traffic Control4 British Steel5 British natural gas6 British Telecom7 The Water Companies8 And most Power CompaniesTo assess the do f the present governments nationalisation policy we would have to take in to consideration the fact that we have a socialist government, one f whose key beliefs is that public ownership is the better way to get out the country, although this government does not appear to be as hard line in that respect as previous Labour Governments. (Stiglitz 1994, 307-323)Arguments for Privatisation1 Opening up producti on and consumption to market forces, increase competition, sparing efficiency and consumer choice2 Breaking down monopolies into more competitive industries and introduces competition into the goods market3 Enables the privatised firms to postulate for finance on the private capital markets both home and abroad4 Ensures that firms become accountable to their sh arholders and their desire for profit5 Ensures that businesses are run on commercial rather than policy-making grounds6 Reduces the burden on the governments finances to support nationalised industriesArguments against Privatisation1 Privatisation may simply draw private sector monopolies with high barriers to new firms entering the industry. There are a number f reasons why these might exist (a)The existing firm has significant economies f scale that new firms cannot compete as in the case f natural monopolies(b) The start up costs for new firms are prohibitive2 Privatised firms make decisions based on commercial profit maximising grounds. Nationalised firms make decisions in the public interest. If the government want to focus on poverty reduction and development then