Question

Privatization is when the government gives one or more of their responsibilities to a private for-profit or a non-profit firm. Our federal government regulates many things such as K-12 education, public colleges and universities, the post office, tax collection efforts, the ports, the highways, the Federal Bureau of Investigation, the Food & Drug Administration, the VA hospital system, Medicare for the elderly and the public retirement plan known as Social Security – just to name of few.

Please write a 350+-word essay on the following questions:

1. Can you think of any government service that can be successfully privatized?
2. What is wrong with the government program or service right now?
3. Can a “for-profit” or “non-profit” entity probably run the program or service with more efficiency, at a lower cost and with better results?
4. Would the private entity still need tax dollars from the government or could they become self-sufficient and run the program immediately without any more government involvement?

Answer 1

Privatisation helps increase the efficiency with which the whole society benefits. There are certain drawbacks that public companies have which can be removed with the process of privatisation. In the USA, governments are resorting to privatisation as it helps reduce their expenditure and increases the competition without compromising on the efficiency.

The construction of roads and maintenance of highways can be privatised in the United States of America. Similarly, the railways can be privatised in India as this will help increase the services provided. The problem that often comes up with is that the government does not want to compromise on the quality or prices of the goods. Private companies work on profit basis and this might hinder social goals. This is why there is the government is not in favor of privatising Indian Railways but is looking for investments from private sector. Another option that can be sought out in such cases is Private Public Partnerships (PPPs).

The problem with Indian Railways is that they are not able to control the costs and offer quality services to the public. This is leading to passengers shifting to buses or flights. The public believe that they do not get the value for the price they pay. There have been many issues regarding the quality of services provided to the public. This is why, there is a need for private entities to step in so that they can improve the functioning of railways by providing quality services while being cost effective.

A profit organisation, which is essentially private entities will be able to bring up the quality of services provided by the Indian Railways. Also, because all private organisations work with the motive of maximising profits, they will be able to bring down the costs of operations as well. Mainly, by increasing competition, privatisation will bring more efficiency. It cannot be assured that a non-profit entity will be able to do the same as a profit organisation only because of the lack of funds. Non-profit entities will definitely improve the quality of services provided but since they work on a non-profit basis, they might not focus on bringing costs down. There however is a possibility that if they had the funds, they would run the railway system more efficiently than the government.

Since providing public goods involves huge costs, private entities may not be able to run it on their own immediately. They will definitely need help from the government or some tax dollars. This is why private-public partnerships should be explored as an option.