Arguments for privatisation
1.Improve incentives for productive efficiency.It makes managers accountable to shareholders.
e.g there is a profit incentive to get rid of surplus labour, which would have been difficult in a nationalised industry for political reasons.
But sheltered monopolies could have little incentives to cut costs no matter who owns them.Privatisation will be most successful where there is potential for competition.
2. Pre-commitment by government not to interfere for political reasons
3. Increased share ownership.
4. Increased competition from deregulation will bring benefits for the consumer
- Increased competition leads to lower prices
- Increased competition encourages the development of new products
- Increased competition encourages better quality service
Revision Notes and Essays on Privatisation
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