Privatization can also be called denationalization or disinvestment. All three terms describe a situation where a government decides to transfer control of a government, and thus public owned, resource to the private business sector, either partially or totally. Sometimes, the government continues to exert a certain amount of control over the industry or service, called municipalization. For example the government may be able to limit prices and make certain demands through contracts, but private companies perform the work for a municipalized industry or service. The reverse process of privatization is called nationalization, when a government takes control of an industry or service from the private sector.
There are many industries in the US that are either privatized or municipalized, and there are arguments for and against nationalizing certain private industries, and privatizing others. For example, considerable debate exists regarding the issue of privatization of the social security system. Supporters for this process contend that this would allow people to better fund their retirement by giving them opportunities to invest in higher yield investments. Opponents suggest that privatizing the system could be disastrous for those who don’t make wise investments. Theoretically, a person who invests poorly could end up with no retirement income.
In general, the arguments for privatization of an industry are as follows:
- 1. Government run industries cost more because they have larger bureaucracies.
2. Government run industries leave people with little choice in the market place.
3. Privatizing an industry fosters competition in the market place, which transfers to lower prices and greater choice for the consumer.
4. Governments should not be in the business of controlling industries or services since this gives them too much control over the people.
Arguments against privatization include the following:
- 1. A privatized industry is most concerned with profit, so while initial benefits to the consumer may occur, the industry may not be induced to keep prices low unless government controls are exerted.
2. The competition fostered in privatized industries may result in dirty or unsavory business practices.
3. Privatization may limit access to certain industries for people who cannot afford them.
4. The public has little control over a private industry, and decisions in that industry may adversely affect those in the public sector.
In the US, people point to problems encountered when certain industries have been privatized. When utility companies were privatized, problems began to occur, and higher prices have been noted. There’s consideration of privatizing various industries: education, public transportation, social security, and a slew of others. Some people, especially on the left side of the political spectrum, feel that other industries in the private sector should be nationalized.
Creating a national health plan has been proposed for several decades. In some countries, medical care is nationalized, and has both problems and benefits. In a nationalized health care plan, no one does without basic health care, access to immunizations, or emergency room services when needed. Funding for such a plan is largely through increased taxes, but people don’t pay additional money to health insurance companies. Critics of nationalized health plans say that one of the biggest problems is people may have to wait for several months to several years for elective surgeries, like gallbladder removal. Yet, privatized health plans, especially large ones, may have so many members that the same wait time exists; thus this criticism may not be applicable.
