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Benefits of Privatization - Essay Example

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The term privatization is used to refer to the process of change of ownership of an organization that is owned by the government sector to organization’s ownership by the private sector…
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Benefits of Privatization
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Benefits of Privatization

Download file to see previous pages... Privatization has been experienced by various organizations throughout the world over a long period of time. Various organizations that were owned and controlled by the government sector have been privatized due to the several benefits associated with privatization. One of the main reason due to which government’s tend to choose to privatize a previously state owned business is the failure of the government to operate the business in a an effective and efficient manner. This is mainly because government’s end up operating the business for the interest of politicians that are ruling the government and not working in the favor of the public of particular nation. This writing will focus on the various benefits that have experienced by organization due to privatization while debating the other side of the coin. Body Benefits of Privatization There have been various theories that favor privatization and there have been various practical incidences when privatization has resulted in huge benefits to organizations and even nations. Privatization is pursued by organizations because the public sector has failed to operate in a profitable manner and the management of public organizations has not done their job in a proper manner. Governments themselves favor privatization and this happens as a result of the increased burdens experienced by government because of state ownership of organizations. When organizations are controlled by the government, governments tend to provide goods and services to the public in shape of subsidies, the management of such organizations work for the benefit of the overall population rather than meeting the demands of individual groups due to which organizations fail to meet the demands of the public and the unions in state owned organizations exercised higher amount of power than unions of organizations that are controlled by the private sector. Due to failure of the government sector to address the needs and wants of the individual groups, individuals experienced dissatisfaction. According to surveys conducted by Donahue, in the region of United States organizations have experienced lower operating cost when they were privatized as compared to the period when they were under the control of the government (Holzer 88). Another reason due to which organizations become privatized is that governments do not operate with the main aim of maximizing profits for the organization and the shareholders of the organization. There tends to be ample amount of changes in the governance of organizations due to which these organizations become inefficient. Lastly, the pressure on governments is low as they do not have to worry about the bankruptcy of the organization as these organizations are never allowed to fail and they are financed by the tax money. Another reason due to which organizations are privatized is because this process helps the government in increasing their revenue. When organizations are owned by the public sector, organizations do not pay taxes and become a burden on the tax payers to continue operating as they even do not work to attain profits. When organizations are privatized, they are obliged by the regulations to pay taxes on the profits they make and the profits they earn are used to fund the operations of the organization. Due to increase in the amount of taxes obtained through private enterprises, government is able to decrease its budget deficit as they do not need to obtain loan for operating the nation and they operate the nations with the revenue earned ...Download file to see next pagesRead More
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