Privatization- Advantage

and Disadvantage
Topic:-Privatization- Advantage or Disadvantage
Name:- Yash Prabhakar Mhatre
Roll no :- 281
Std:- FYBSC Div:-B
Date of Submission:- 13-03-2022
Subject:- Foundation Course
Name of Professor:- Prof Janhavi Mam
Privatization
• Privatization is the phenomenon of governments
contracting privately owned.
• For-profit companies to provide services that were
previously provided by the governments themselves.
• It can happen at the local, county, state and even federal
level.
 Advantages
• Competition drives entrepreneurs and service providers to innovate the products and
services they offer and work to make their offerings more appealing to consumers
than their competitors’.
• When a public service is privatized, it can become immune to political influence.
• By providing public services more efficiently and at a lower cost by privatizing them,
governments can lower the taxes they impose on residents.
• In some cases, privatizing a public service like a prison can create job opportunities for
residents in an area, increasing the quality of life for them and strengthening the local
economy.
Disadvantages
• One important disadvantage to recognize is the opportunities for bribery and corruption that come with
privatization.
• Typically, private companies are less transparent than government offices, and this reduced
transparency paired with a drive for profit can be a breeding ground for corruption.
• Although privatization is usually promoted on the basis that it will reduce consumers' costs, it can also
drive costs up.
• According to nonprofit consumer advocacy group Food & Water Watch, a proposed private water
service for Milwaukee would cost residents 59 percent more than they were paying for public water
service.
The Risk of Corruption
• A joint sector can open the door to corruption.

• Unscrupulous people may use agreements with the government to make money for
themselves at the public's expense.
• The lure of large sums of money can itself be a cause of corruption.

• People will seek to influence the political process in order to gain the money from joint
sector agreements, and may make the government more dysfunctional through their
actions.
• Corruption will limit joint sector usefulness.
Quality of Services
• One reason for the creation of a joint sector is that it can be a way to reduce the costs of
government.
• By contracting with private providers, a government can eliminate some of the costs of bureaucracy
that typically accompany government services.
• While costs may be reduced in this way, it can also lead to a reduction in the quality of services, as
private entities will be chiefly concerned with maximizing their own profits.
The Risk of the Creation of a Monopoly
• Because of the advantages that publicly funded companies have over their private rivals, there
is always the danger that they will create a monopoly in any industry that they become
involved in.
• Competition between private firms is usually a cause of improvement in an industry and of the
reduction of costs.
• To the extent that a public partnership limits competition, it could lead to a reduction in the
quality of any service or good.
Reduced Ability for Wealth Creation
• Another consequence of having a joint sector is that it may crowd out private companies that
are more adept at wealth creation.
• Wealth is mostly created in the private sector.
• Joint sector ventures have an advantage over private businesses because they do not have
the same need to turn a profit.
• This can allow them to push private companies out of markets and reduce their ability to create
wealth for the greater society.
 Conclusion
• Private enterprises are driven by competition in the free market and the reach for greater
profits. They are forced to innovate and to keep the consumer happy or risk going out of
business. Since it must be profitable, a private enterprise must maximize efficiency, which
eventually trickles down to lower prices for consumers. Competition and the drive for
efficiency promote innovation and the development of new technologies. However, the
motivation to earn profits sometimes encourages enterprises to choose profit over
societal concerns such as safety, health or ethical concerns. In its worst form, short-term
profit takes precedence over long-term interests.
Resources
List the resources you used for your research:
• https://bizfluent.com/info-8743912-advantages-disadvantages-
notforprofit-hcos.html