Unit (4)

- The public sector is made up of organization which accountable to central or local government.

- They are funded by government.

- They tend to supply public service rather than produce products.

- They have a separate legal identity to their owners, government.

- A government minister will appoint a chair person and a board to run the organization.

- The board will have responsibility for policy and will be a countable to the minister.

Business in the public sector

Public organization can take a number of forms like incorporated bodies in the private sector:

- Nationalized industries are previously private businesses, which were taken into state ownership.

- Public utilities, refers to the organization which supply important services like water, gas ect.

Most of them have been transferred to the private sector.

-The BBC is a unique organization, it’s chairperson is accountable to the home office.

- The bank of England, is headed by a governor who is a countable to the chancellery of the exchequer.

The difference between local and central government:

- Local government supply's a variety of services which are stated in parliamentary Acts, such as education and housing.

- Central government, is accountable for administering the policy of the government ministries.

Quan GOS :

-These supply specialist services which are politically non-controversial.

- They are accountable to different government departments depending on their area of specialist research councils, advisory bodies, tribunals and marketing boards.

Which goods an services does the public sector provide?

Public goods have two features:

(1)Non-rivalry, consumption the good by some one does not reduce the amount available by others.

(2) Non-excludability, it is impossible to exclude others from benefiting from their use.

Merit goods :

- It is argued that some merit goods should be provided by the public sector, such as education, health and libraries.

- Merit goods should be provided in greater quantities.

- It is argued that the state should provide these services and pay for it from taxation.

- The provision of merit goods and services aims at raising society’s standard of living.

Privatization : is the transfer of public sector resources to the private sector:

- The sale of part of nationalized industries. The government choose to break up some nationalized industries by selling parts of them.

- Deregulation, This involves lifting restrictions that prevent private sector competition.

- Contracting out many government and local authority. This is where private contractors are given the chance to bid for services which used to be supplied by public sector .

- The sale of land and property, development corporation were given the rights to buy their own homes.

The reason for privatization :

Most of thinkers believed that businesses should be owned and ran by individuals:

- The sale of state assets generates a great deal of income for the government.

- Nationalized industries were inefficient, public sector cost, are high and they often made losses. And if you were in the private sector, you would be forced to cut cost, improve services and make more profit.

- As a result of deregulations, Organizations would be forced to improve their services and competition price in order to achieve more profit.

- Privatization increases share ownership, and this would lead to democracy in which more people have a stoke in role the success of economy.

- Privatization improves accountability, in the private sector organization would be accountable to shareholders and customers.

Impact of privatization on business:

- Profit has become a more important objective.

- Prices may change.

- Some companies have reorganized their internal structure.

- Privatized organizations have attempted to improve their image and have become more consumer orientated.

- Many companies have increased investment since privatization.

- Some of companies have begun to offer new services and to diversify.

Reasons of nationalization: - Supply services which are unprofitable. In the private sector,

goods and services are provided if profit can be made.

- To avoid wasteful and duplication, if there was just one firm in the industry, it is possible to benefit from the economies of scale which results in reducing costs and prices.

- To protect employment, some firms have been nationalized to maintain their existence and save jobs.

- To control strategic industries. It is raged that certain industries should remain under government control, because they are vital for the country.

- To prevent exploitation. It is argued that consumers can be easily protected from exploitative firms if they are under government control.

- Political ideology, It is argued that the reward from business activity should be controlled by the government rather than individuals, Because this profit is passed on to the government, and use it to improve the level of welfare.

Arguments against privatization:

Most of the criticisms below are from the consumer’s point of view:

- It has been too expensive to advertise selling the public companies governments were criticized for the amount of money spent to advertise each sale.

- It has been argued that privatization has not led to greater competition. In some cases public monopolies with no competition have become private monopolies and have been able to exploit their position.

- Nationalized industries were sold off too cheaply. This shows that more people want to buy shares than there are shares available.

- Natural monopolies have been sold off. Some argue that they should remain under government control to prevent a duplication of resources.

- It is argued that, in the private sector, any part of business which make a loss will be closed down. This appears to have happened in the public transport.

- Many of the nationalized industries are important for the development of the nation. To put them in private sector might jeopardize there existence.

Regulation of privatized industries:

- One criticism of privatization was the dominant industries which were previously owned by state.

- They may be able to exploit their position to increase their prices and reducing the services.

- Because privatization created some private minorities, the government set up specialist agencies to protect the public.