Privatisation | Definition, Reasons, Pros & Cons

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PRIVATISATION | Definition, Reasons, Merits and Demerits

PRIVATISATION | Definition
PRIVATISATION | Definition

Privatisation is a policy of the government created to afford individuals, corporate bodies, the opportunity to take over ownership and control of government enterprises, companies, etc.

REASONS FOR PRIVATISATION

  • To introduce efficient management: Individuals and other bodies are efficient in the management of enterprises than the government.
  • Individual participation: The forum is created for individual participation and ownership of industries or enterprises in the countly’s economic system.
  • Revenue for the government: More revenue now accrues to the government through individual or collective participation.
  • Unproductive industries: The system accommodates competition and so unproductive industries or enterprises may not survive the day.
  • Industrial autonomy: Because the industries or companies are privatized and commercialized, provision of autonomy is made possible in the system.
  • Consumer’s choice: To create an opportunity for consumers’ to buy produced goods based on choice.
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Advantages Of Privatisation

  • Efficiency in management: Privatisation promotes efficiency in the management of most enterprises or industries.
  • Increase in revenue: More revenue will be generated for the government through privatisation.
  • Innovations: Innovations are injected into the production and rendering of high quality products and efiicient services to the people.
  • Competition: The system is open to individual and collective participation resulting to competition among emerging investors.
  • Consumers’ choice: Consumers have enough choice to make in the purchase of goods and services.

Disadvantages Of Privatisation

  • Profit maximization: This policy will lead to high cost of produced goods and services aimed essentially at profit maximization on the part of the producers.
  • The masses: Will experience low or poor standard of living and this is because most of the enterprises or companies would want to maximize their profits.
  • Reduction in labour force: Privatisation may bring about reduction in the work force or labour force of most companies, thereby increasing the already saturated labour market
  • Income not evenly distributed: Income is usually not evenly distributed as a result of this policy and this is because a few individuals (producers) are now in control of the means of production of goods and services.
  • Neglect in consumer’s welfare scheme: With privatization, people’s welfare scheme are not adequately catered for or implemented.
  • Strike or demonstration: Privatisation usually produces conflict between the employer (producer) and the workers especially in the area of workers total emolument. When dialogue between them fails strike becomes the inevitable tool for workers. Strike is the refusal to work.

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