8.8 Public Ownership, Privitisation, Regulation And Deregulation Of Markets Flashcards
(39 cards)
What is public ownership?
Ownership of industries, firms and others assets such as other social housing by central government or local government
(The states acquisition of such assets is called nationalisation)
What are publicly owned industries known as?
Nationalised industries
How have labour governments justified nationalisation?
On the grounds that effective state planning required state ownership of the ‘commanding heights’ of the economy
-essential for efficient operations in key industries regarded as too important to be left to market forces
What was public ownership used to do?
Regulate the problem of monopoly (particularly natural monopolies in the utility industries)
What is privatisation?
The transfer of assets from the public sector to the private sector
How many major industries have been privatised from 1981-2015?
15
What are the 5 arguments for privatisation?
-revenue raising
-reduces public spending and the government’s borrowing requirement
-the promotion of competition
-the promotion of efficiency
-popular capitalism
Case for privatisation as revenue raising?
-provides gov with a short term source of revenue when assets are initially sold
Case for privatisation as reducing public spending and the governments borrowing requirement?
Post 1979 conservatives govs have aimed to reduce public spending and government borrowing
-privatising loss making industries reduces public spending and government borrowing also falls if private ownership returns these industries to profitability (increase in cooperate tax revenue)
Case for privatisation as the promotion of competition?
Has been justified on the grounds it promotes competition through the break up of monopoly
(E.g at the time of their privatisation industries such as gas and electricity were natural monopolies but now there is significant competition through privatisation and regulatory bodies)
Case for privatisation as the promotion of efficiency?
Supporters of privatisation believe that public ownership gives rise to special forms of inefficiency that will disappear once an industry moves to the private sector
(Business efficiency and commercial performance improved through the threat of takeover and the discipline of the capital market)
Case for privatisation as popular capitalism?
-promotion in enterprise culture crucial-it extends ownership to employees and other individuals who hasn’t previously owned shares-thus added incentive for the electorate to support the private enterprise economy
(Proved to be a winning formula for conservatives and labour)
What are 4 arguments against privatisation?
-monopoly abuse
-short-termism wins over long-termite
-selling the ‘family silver’
-free-lunch syndrome
Case against privatisation: monopoly abuse?
Privatisation increases monopoly abuse by transferring socially owned and accountable public monopolies into weak and less accountable private monopolies
Case against privatisation: Short-termism wins over long-termism?
When nationalised long term investments can only be profitable in the long term,
After privatisation these investments will not be made because company boards focus on short-termism and delivering dividends to keep shareholders and financial institutions happy
(Counter would be gov starved nationalised Industries of investment to keep government borrowing down)
Case against privatisation: selling the ‘family silver’
Private sector businesses will sell its capital assets to raise revenue to pay for current expenditure, tax payers should not condone the sale of state owned assets
Case against privatisation: The free-lunch syndrome
Opponents of privatisation argue state owned assets have been sold too cheaply
This is because offer prices of shares in newly privatised industries would be at a level which guaranteed a risk free capital gain(opposite of an enterprise economy)
What is regulation?
The imposition of rules and other constraints which restrict the freedom of economic action in the market place
What are the two types of regulation?
External regulation
Self regulation
(Both types can be imposed by law)
What does a failure to comply with regulation result in?
Breaking the law(leads to fines or even imprisonment)
What is self regulation?
Involves a group of individuals or firm regulating themselves(e.g through a professional association)
What is external regulation?
Involves an external agency laying down and enforcing rules and restrains
(External agency could be a gov department or special regulatory body set up by the government such as the CMA)
What is one reason governments use regulation?
To correct market failures and achieve the socially optimal level of production Nancy consumption
(Monopoly is also a form of market failure and regulation is used to limit and deter monopoly exploitation of consumers
What is a good example of government regulation?
Reducing social costs of market activities such as consumer protection legislation and anti-discrimination and safeguards of workers rights
