Pros and Cons - Debbie Newman, Ben Woolgar 2014

Privatisation
Section A. Philosophy/political theory

Privatisation is the process of the state selling off its assets in certain industries and allowing a competitive free market to deal with those sectors instead. It spans largely corporate projects like nationalised mining, to utilities provision (electricity, water, gas, etc.), to public services (healthcare, education, etc.). The core of the debate remains the same, although the urgency of it may vary; for instance, we might be far more worried about the state selling off hospitals than about losing a government-owned car manufacturer.

Pros

[1] Privatisation is the most efficient way to provide public services. State-run bureaucracies will always be inefficient because they know that there is a government bailout waiting for them if they overspend, or fail to cut costs or sack staff. Moreover, governments tend to be more responsive to union pressure than private companies, and this prevents the mass sackings that are necessary to trim bloated government agencies.

[2] Private businesses in a free market are in competition and must therefore seek to attract customers by reducing prices and improving services. This means they cannot provide a sub-par service, because they will simply lose customers; a similar thing happens if they charge more than people are willing to pay. Businesses are motivated by profit, and so will work to ensure that they do not lose money by failing to improve service.

[3] Privatisation gives ordinary people a chance to be ’stakeholders’ in the nation’s economy by owning shares in services and industries. Privatised industries and services are answerable to shareholders. Having a real financial stake in a company gives people a direct interest and a say in the running of national services.

[4] Privatisation reduces the pressures on government finances; there is no longer the constant spectre of inefficient companies needing bailouts or making losses that the state cannot afford to sustain. Moreover, private companies can raise money for investment from the market rather than having to turn to their national treasury; in this way, they use private capital to serve the public interest.

Cons

[1] There is more to providing a good service than ruthless efficiency, free market economics and the drive to make profits. The vulnerable sectors of society will always suffer from privatisation. People in isolated villages will have their unprofitable public transport scrapped. Treating elderly patients will not represent an efficient targeting of medical resources. Public ownership ensures that health, education and the utilities are run with the underpinning of a moral conscience.

[2] It is misleading to identify privatisation with deregulation. Monopolies can be ended through deregulation without the government giving up its control of a state-owned and/or state-run element within an open market. A state-run service operating within an open market, drawing finance from the private sector and giving ordinary people a chance to invest, can be highly effective in promoting competition without sacrificing the public interest; for instance, in South Africa, the state-owned airline SAA competes healthily against private sector competitors. In addition, the supply of certain services, like water or trains, is a ’natural monopoly’, which means that no competition is really possible; in such cases, the state must control them to keep prices low, rather than allowing companies to overcharge consumers.

[3] It is a fantasy to suppose that private individuals who are shareholders or stakeholders exercise any power over privatised industries. The only way to guarantee accountability to the people is for utilities and services to be run by the government, which is truly open to influence through the democratic processes.

[4] Nationalised industries, if used properly, can be profit-making. For instance, when many governments nationalised banks in 2008, they did so on the basis that they would run them at a profit, and eventually sell them off; this plan is proving broadly successful, and the US and UK governments will almost certainly turn a profit on those nationalisations. Nationalised industry can be a gain for all.

Possible motions

This House would privatise.

This House would sell off its assets.

This House would trim the bloated state.

Related topics

Capitalism v. socialism

Marxism

Welfare state

BBC, privatisation of the

State pensions, ending provision of

Private schools

Arts funding by the state, abolition of