Privatization means the sale of shares and certain assets to private business owners. Many people say private ownership runs more effectively than a public sector. The UK privatized many public sectors in the following years of the 1980s and 1990s. Yet, private companies exploit many terms and conditions of the state’s monopoly. They run on their basis without any government restriction.
Advantages of privatization
In privatization, companies need to work very effectively because they need to make the maximum profit. In government-occupied companies, the owners and the employees have no authority to enjoy the profit. But private companies can enjoy the gain in the form of development and more salaries.
Private companies are free from political pressure. They can work independently without bothering the different government agendas and peer pressure of working too well for the current party. They can fire anyone that doesn’t follow the company policies.
Pressure from shareholders
Shareholders put a lot of pressure on the company, encouraging them to work out the best for it. The value of the shares will tell you about the position of a company. If the company’s share declines, the company will be sold to a powerful businessman or will end up with debts.
Privatization is more competitive than government-owned companies because private companies have many people in the market working on the same idea. One must perform better than the rest of the companies in a good organization with excellent views.
Raised revenue by the government
The government provides enough revenue as soon as your company works out well. These revenues will help the firm to develop more. But, taking too much from the government will lead your company to become a public-oriented one.
Disadvantages of privatization
Create own monopoly
They create a monopoly that includes a high rate of interest. They don’t have any fixed prices. Government sets up a policy for the price that is applicable until the next budget. Private companies work in their interest. They don’t bother about their valuable consumers.
Lack of public interest
As mentioned before, they lack the interest of the common public. Private companies want to earn more to achieve more for their firm. Their main aim is to make the most from their sufficient resources and marketing strategies.
Loss of potential dividends
Government is unable to get the potential dividends. Instead, the prosperous businessmen enjoy the well-off shareholders.
The exploitation of industries
Private companies tend to destroy many companies in their market by several means. They emphasize the best, and this will eliminate many government sectors. One cannot blame them because they work for their development.
They are short-period businesses, meaning their hard work will be wasted. Their business is insecure, which means they don’t have sufficient safety. They will have to launch according to the government policies and will have to end it up anytime.
Insecurity of employees
Employees are insecure in these companies because companies hire the best and want the maximum amount of work. They don’t bother about the financial and emotional security of the employees. Their main requirement is the ultimate work done in the least period.
Privatization can be a good thing sometimes, but it has certain flaws that must be focused on. There should be a balance between government as well as public companies.