Questions and sample answers on privatization of government owned companies

Define privatization and its effects globally

Considering the media coverage offered to the global shift to markets, which has taken the form of privatization; it is likely to determine that influence of government-owned enterprises in global economics ended. According to Parker and Saal (2003, p. 25), the state-ownership of production resources like metal smelting and Mills was prevalent in the Near East society of traditional times. In contrast, ownership by the public in the Near East was standard for other aspects of economic activity, including money lending and trade. In a society like ancient Greece, state-ownership was reserved for resources like mines, lands, and forest areas, but the work of managing and exploiting the resources was assigned to firms and individuals. In traditional China, the government commanded the ownership and control of some resources, including iron and salt. Parker and Saal (2003, p. 26) wrote that at the onset of industrialization in the West and its city states, the private ownership dominated the production of industrial products and the provision of services and goods. The difference between high or minimal government engagement in the management of resources and running of economics remained a common phenomenon through to the 20th century among Western countries and its colonies. In countries like the US, the engagement of…

What are the effects of privatization on economic growth?

Economic growth is a concept that plays a critical role in the macroeconomics of national economies. The concept was adequately explored by William Easterly in “the elusive quest for growth” (Mishkin, 2008, p. 225), where he pointed out that many countries remain on the verge of an economic crisis. The fundamental impact of privatization is evident in the Coase Theorem, which highlights that the private sector is more efficient than the public sector in addressing the issues related to externalities (Hahnel & Sheeran, 2009). However, in the case where the government cannot guarantee the efficient regulation of the privatized companies, the adverse externalities of privatization may not be adequately contained. In such a situation, the process of privatizing corporations may have adverse effects on the social wellbeing of the citizens. In other instances, privatization may not address all the issues that it is intended to address, as many regimes are often concerned about issues beyond social welfare and…

Describe the efficiency of state-owned and privately owned organizations

Throughout the decades that privatization has been in use, many economic strategists and scholars have explored the input of the regime in the financial system. Among the economic strategists that have examined the issue, debate touches different areas of study, including public finance, economics, law, and economics (Crew & Parker, 2008). The economic ideology of privatization is a component to the study of the economic aspects of ownership, and the government’s role in the ownership of production resources. The government’s role in the management of corporations is that of pushing for effectiveness, which points to the possible explanation for the performance improvement reported among privatized companies. The theory used in support of the private ownership of production means is based on the theorem of welfare economics. The primary assumption underlying the theoretical framework is that externalities are non-existent in consumption or production, including that goods are…

Compare the performance of government-owned and privately owned companies

Comparing the operational efficiency of privately and state-owned enterprises is one of the ways that can be used to analyze the effects of having the organizations under the ownership of the government(Sabatier, 2007). This goal can be realized by exploring the potential drawbacks reported in the studies done in the area, which have limited the effectiveness of the data compiled in the area. The problems that affect the studies done in the field include the insufficiency of data, the compilation of false or misleading data, the omission of variables, biases of selection and endogeneity (Cameron & Trivedi, 2006, p. 92). There are some significant methodological challenges that arise from the attempt to detach the effects of the ownership of an organization and its performance. The initial problem is contrasting the functionalities of SOEs to those of privately-owned institutions, noting that it is…

What are the reasons behind state ownership of companies among the developing countries?

Megginson (2005, p. 13) highlighted that the state-ownership of resources increased among developing countries for a variety of reasons, including that government ownership was regarded a necessity in promoting growth. After going through colonialism, the countries of Africa, Latin America, and Asia spurred economic growth through spending in physical facilities heavily. Government ownership, which was primarily adopted through nationalization, was used to demonstrate the change of ownership to the foreign nationalities that had previously owned many of the profitable firms (Noll, 2000). The various motivations for state-ownership increased its adoption across many parts of the world, particularly after the conclusion of World War II, as the change sparked the adoption of privatization after a few decades. Many economic experts and scholars link the modern framework of privatization with the conservative administrative outlook of Thatcher’s administration that rose to…

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