PRIVATISATION &

NATIONALISATION
4.1.8.8
 Learning Challenges

◦ Challenge 1: Understand the reasons for intervention in markets

◦ Challenge 2: Evaluate the importance of de-regulation of markets

◦ Challenge 3: Respond to a exam questions

How does this
fit?
Lets see what you know..
1. What is privatisation?
2. What were the objectives of privatisation?
3. What are the possible benefits of privatisation?
4. What are the roles of the regulators?
 What is privatisation?

‘Privatisation is the process by which a

former publicly owned organisation or
activity is sold off to the private sector.’
(Assets are transferred from the public
(government) sector to the private sector
Thatcher & Popular capitalism

Watch this first!....

https://www.youtube.com/watch?v=Z7Qq01tC0lU
Watch this video – make notes

◦ https://www.youtube.com/watch?v=M0VADl_SgAE
PRIVATISATION &
NATIONALISATION
4.1.8.8
 Learning Challenges

◦ Challenge 1: Understand the reasons for intervention in markets

◦ Challenge 2: Evaluate the importance of de-regulation of markets

◦ Challenge 3: Respond to a exam questions

 Do Now Task!
1. What is meant by the term privatisation?
2.Who was the first politician to sell off public
businesses?
3.Can you name four privatised businesses?
4.Can you explain one reason why governments would
privatise an asset?
 What is privatisation?

‘Privatisation is the process by which a

former publicly owned organisation or
activity is sold off to the private sector.’
(Assets are transferred from the public
(government) sector to the private sector
 Role of government in regulation
◦ https://www.youtube.com/competitionandmarketsauthority

◦ Monopoly power may take actions

Aimstoof restrict price increases, action on quality,
Govn. Intervention:
performance standards, profitLead to improved efficiency
◦ Mergers & takeover have to go throughLower
thePrices
Competition & Markets Authority
More choice
◦ May regulate against price fixing or cartels in the market
Better quality
◦ Ensure consumer receive the correct information to make informed choices e.g.
food labelling
◦ Quality & safety standards are met for its employees
◦ Reduce market failures and imperfection
◦ Increase social objectives
 Nationalised to Privatised

In the UK privatisation has led to a major

reduction in the size of public sector as a
proportion of GDP and employment, producing
less than 2% of GDP and responsible for 1.5%
employment.
Why privatisation & what are the
benefits?
Economic liberalisation opening up markets to private ownership
and competition, reducing govn. intervention in the economy

Contractualisation
Marketisation
Public-Private Partnerships (PPP)
Private finance Initiative (PFI)
Deregulation
 Why privatisation &
what are the drawbacks?
4. Problem of regulating
1. Public interest private monopolies

6. Short-termism
of firms
3. Government loses out
on potential dividends

2. Natural monopoly

5. Fragmentation of industries
what are the drawbacks….?
Natura
l Mono
poly

A natural monopoly occurs

when the most efficient
number of firms in an
industry is one. For example,
tap water has very significant
fixed costs.
Privatisation as a development strategy
◦ For some countries, privatisation is part of the process
towards moving away from a state-dominated economy
towards a mixed economy with both public and private
sector operating. Good examples include China, India,
Chile, Ethiopia and Vietnam.

◦https://www.tutor2u.net/economics/reference/developm
ent-strategies-privatisation
PRIVATISATION &
NATIONALISATION
4.1.8.8
 Learning Challenges

◦ Challenge 1: Understand the reasons for intervention in markets

◦ Challenge 2: Evaluate the importance of de-regulation of markets

◦ Challenge 3: Respond to a exam questions

 Do Now Task!
1.Explain two advantages of privatisation
2.Explain two disadvantages of privatisation
3.What is meant by regulation?
 Is the loss to society that
Dead Weight Loss market failure creates.
The diagram highlights a
monopoly market
structure, in which a
deadweight loss is created
because of the presence
of monopoly power i.e.
restriction of output and a
rise in prices - leading to
the welfare of society to
be lower with presence of
the monopoly compared to
a perfectly competitive
market.
Watch the video & take notes
Regulations
• These are rules that are enforced by an
authority e.g. government
• Usually supported by legislation (laws)
which are enforced with legal action
against those who break the rules
• Used to control activities of producers
and consumers and try to change
unwanted behaviour
 Regulations come in many forms
◦ Used to address market failure
Reducing the use of demerit goods – banning or limiting
the sale
Reducing the power of monopolies – regulatory board
price caps
Protection for consumers and producers from problems
arising from asymmetric information – Consumer Rights
Act (protects consumers from substandard products
 Regulations?
◦ Regulations can be difficult for governments to
work out - for example acceptable pollution is it
too high too low??
◦ Regulation is needed in some aspect world wide
not just country specific.
◦ Complying with excessive regulations can be
expensive for firms may force some to close and
other to move to a different country
◦ Monitoring compliance is also expensive – if
punishments are not harsh enough they may not
be a deterrent at all!
 What is deregulation?
◦ Is the opposite of regulation – removing
or deducing regulations
at i on
◦ Removes some of the barriers to entry eg ul
d er
o n
to increase competition in markets rd er
o
◦ Tackle market failure and monopolistic cu t i ve
x e
markets si g ns e
m p
◦ Often used alongside/or as part of Tru
privatisation to prevent privatised public
monopoly becoming a private monopoly
PRIVATISATION &
NATIONALISATION
4.1.8.8
 Learning Challenges

◦ Challenge 1: Understand the reasons for intervention in markets

◦ Challenge 2: Evaluate the importance of de-regulation of markets

◦ Challenge 3: Respond to a exam questions

 Do Now Task!
1.Explain what is meant by the term regulation
2.How do regulations reduce market failure?
3.What is meant by the term nationalisation?
 What is deregulation?
Is another form of privatisation, reduction or elimination
of govt. control in a sector, allowing more competition into
restricted markets – may involve removing barriers to
entry to allow more firms to enter the market e.g.
removing a monopoly, cutting red tape, freer markets
Watch the video & take notes
 Nationalisation
Is the process of taking
an industry into public
ownership.
Another form of
government intervention
to address market
failure
What are the advantages of
nationalisation?
Watch the video & take notes
Quick Test
1. What is meant by nationalisation?
2. What is meant by privatisation?
3. State two possible reasons for nationalisation.
4. State two possible problems of public sector ownership
5. State two possible reasons for privatisation
6. What is regulatory capture?
7. What is meant by deregulation
8. State two ways the government may intervene in a market
9. State two ways a government may encourage greater competition
10. What is monopoly power?
 Exam Q’s

1. Explain the economic reasons for privatisation. (20 marks)

2. Explain why a government may wish to nationalise an
industry? (15 marks)
3. To what extent is privatising industries economically
desirable? (25 marks)
Reading

Privatisation in emerging countries (Estrin, 2018)

Ethiopia privatisation plan gets underway (February 2019)

Modi govt clears deck for Air India's privatisation (February 2019)
 Why Privatisation?
◦ In 3’s create a mind
map using A3 paper
for the case of
privatisation as an
economic strategy
 Learning Challenges

◦ Challenge 1: Understand the reasons for intervention in markets

◦ Challenge 2: Evaluate the importance of de-regulation of markets

◦ Challenge 3: Respond to a exam questions