2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

HOME CONTACT US PRIVACY POLICY ABOUT US

Advantages of Privatization
The arguments or advantages of privatization maybe be as:

1. Financial Resources
The main advantage of privatization is to generate financial resources for the government in order to
generate resources disinvestment of public sector enterprises.

2. Optimum Utilisation of Resources

It has been observed that the public sector has failed in the optimal use of national resources.

The private sector may success in the optimum use of resources by maintaining efficiency.

Related: Privatization: Meaning, Features, Scope, Objectives (Explained).

3. Fostering Competition
Most of the public enterprises enjoy the status of monopoly.

It results in inefficiency and losses.

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 3/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

HOME CONTACT US PRIVACY POLICY ABOUT US

Forms (PDF)
Start Download
To View Form, Download Here.
Download Form Finder Free now.
form nderfree.com

OPEN

Privatization creates a situation of competition for public enterprises and they are forced to improve their
efficiency.

4. Reduce Fiscal Burden

Privatization reduces the fiscal burden of the state by relieving it of the losses of the public enterprise and
reducing the size of the bureaucracy.

5. Economic Democracy
Privatization helps to control government Monopoly. It helps to attract more resources from the private
sector.

It emerges from economic democracy by private participation in the economic sphere.

6. Better Industrial Relations

Privatization may increase the number of workers and the common man who are shareholders.

This could make the Enterprises subject to more public vigilance.

Related: Industrial Relations (IR): Importance, Types, and Needs (With Examples).

7. Reduction in Political Interferences

The process of privatization reduces political interferences in the public sector enterprises by giving more
representation to the private sector in the management of Public Enterprises.

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 4/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

8. Reduction in Bureaucracy
HOME CONTACT US PRIVACY POLICY ABOUT US
Public Enterprises become synonyms bureaucracy.

They can be made from bureaucracy by the process of privatization.

9. More Productivity
The private sector can improve productivity by maintaining efficiency in its operations.

advantages of privatization in points

10. Economical
The process of privatization maintains the economy in the operations, whereas the operations of public
Enterprises are costly.

11. Individual Motivation

Free Step 1 Practice

Exam

Ad

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 5/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

The success of private sector resides in the profit motive.

HOME CONTACT US PRIVACY POLICY ABOUT US

Privatization motivates the managers to make efficiency in the operations of the enterprise so that I can
earn more and more profits.

Related: 12 Need and Importance of Motivating Salesman (Explained).

Disadvantages of Privatization
Following are the disadvantages of privatization in points:

1. Problem of Price
The government usually want to sell the least profitable Enterprises, those that the private sector is not
willing to buy at a price acceptable to the government.

Affordable Pricing Cost-effective China Cone

Crusher Save Your Costs And
Parts Consuming
Download
Visit Site
Ad Ad

Related: Top 12 Strategies & Policies of Pricing in Marketing.

2. Opposition from Employees

Disinvestment tends to arise political opposition from employees who may lose their jobs, from politicians
who fear short-term unemployment consequence of liquidation of cost reduction by private owners, from

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 6/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

bureaucrats who stand to lose patronage and from those sections of the public who fear that national
HOME CONTACT US PRIVACY POLICY
assets are being concerned by foreigners, the rich or aABOUT US
particular ethnic group.

3. Problem of Finance
In the developing countries under the developed capital market sometimes makes it difficult for the
government to float shares and for individual buyers to finance the large purchase.

4. Improper Working

Cone Crusher Price

China Cone Crusher
Manufacturer Supply High
Quality Cone Crusher With
Competitive Price

The main disadvantage of the private sector is that it has fallen much short of what this sector is capable
of or what it has achieved in some other countries.

The private sector is not interested in cost reduction and quality production.

There are again many unfair practices in which many businesses indulge in often resulting in the
generation of black money and corruption.

There is the little flowering of genuine entrepreneurship with can innovate and dare into new products and
new processes.

5. Independence on Government
There has been an excessive Regulation and control of the private sector by the government.

This has prevented and competition from becoming a generalized phenomenon of the economy.

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 7/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

The private sector has also become too much dependent on the government for meeting its imports
HOME CONTACT US PRIVACY POLICY ABOUT US
requirement, output sale, finances, etc.

This has sniffled the capacity of the private sector to stand on their own.

disadvantages of privatization in
points

6. High-Cost Economy
Another problem with the private sector is that its cost, in general, are large and the price of products are
unduly high.

Barring a small proportion of companies which are efficient and show good profitability ratio, many are
insufficient.

The cost of production in large part because of the poor technology and partly because of the poor
management.

The two other factors of higher costs are the high costs of raw materials and components and the higher
rate of indirect taxes

Related: 16 Factors Affecting Economic Environment (With Examples).

7. Concentration of Economic Power

The private sector emerges a monopoly and the concentration of economic power in the hands of few.

The dominance of some business groups in terms of capital and assets is an economic and social
problem.

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 8/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

The private sector operates on the principle of maximization of the Monopoly profits. It is harmful to
HOME
consumers andCONTACT US
society as PRIVACY POLICY
a whole. ABOUT US

8. Bad Industrial Relations

An unfortunate aspect of the private sector is the recurrence of industrial disputes which hamper the
smooth progress of the industries.

For a number of years, there have been larger than in the public sector.

The harmful consequences are obvious work stoppages leading to the nation utilization of capital
equipment, idle labor, wastage of Manpower, loss of production, law and order problems, etc.

9. Widespread Sickness
The private sector industries such as Textiles, Engineering, Chemicals, iron, and steel and people are
suffering from the problems of industrial sickness.

These industries are facing continues losses.

It adversely affects the industrial environment.

10. No Guarantee of Success

Privatization is not a guarantee of the success of an individual unit.

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 9/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

HOME CONTACT US PRIVACY POLICY ABOUT US

It has been observed that many private sector units make huge losses.

11. Ambulance Development

Private sector units are influenced in those areas which are most suitable for-profit purpose.

It results in the concentration of individual units in a few areas.

Thus, privatization will be harmful to balance economic development.

Conclusion

It is important to realize that privatization is not a Panacea for the ills of is of the public sector. In countries
where market functions poorly and Enterprises are still vulnerable to arbitrary government edicts,
Transferring ownership to the private sector is unlikely to achieve much.

It merely transfers the ownership of rents from the public to the private sector.

Similarly, creating private monopolies without an effective system of monitoring and controls opens up
the danger of exploitation of consumers.

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 10/18
2/12/2020 22 Advantages and Disadvantages of Privatization (Economics) - Googlesir

According to the “Human Development Report” 1993, Indeed, changing the culture by providing adequate
HOME
training for newCONTACT US
entrepreneurs, PRIVACY POLICY
for ABOUT US
example, or ensuring a competitive environment is probably more
significant than changing ownership.

And if the enterprise is still a Monopoly after privatization, as is often the case with utilities, it must be
subject to suitable controls, otherwise inefficiencies and Monopoly power will merely be transferred to the
private sector, with the costs being borne by consumers or monopolistic exploitation by efficient private
owners replaces the inefficiency of public ownership.

Thus, now you know the advantages and disadvantages of privatization.

Read More

11 Advantages and Disadvantages of Functional Organizational Structure

15 Characteristics of Capitalism Economy (With Examples)

17 Scope and Importance of Macroeconomics (With Examples)

20 Types of Entrepreneurs (Informative Explained)

10 Components or Elements of Planning (with Examples)

5 Different Types of Disequilibrium in Balance of Payments (BOP)

19 Role And Importance Of Managerial Economics (Step-by-Step)

8 Key Factors Affecting Span of Control (Explained with Examples)

18 Benefits and Objectives of Marketing Control (Explained)

10 Objectives of Entrepreneurial Development Programmes – Explained

Share Now:

 Share

https://www.googlesir.com/advantages-and-disadvantages-of-privatization/ 11/18