privatisation

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  • privatisation
    • when governments sell public sector businesses to new owners in the private sector.
    • arguments for:
      • the new owners operate the business with profit as a main aim
        • this encourages them to run the business efficiently
      • competition may now be encouraged if the business is sold off to several different private owners.
        • this helps to increase efficiency and to keep prices low
      • governments are often short of money.
        • new owners may have additional capital to invest in improving the service offered by the business
      • important business decisions will now be made fore reasons of business efficiency - not by government popularity.
        • for instance, the government might subsidise a loss-making coal mine to protect miners' jobs.
          • a private mine owner would close the mine to use resources more efficiently and profitably elsewhere.
      • the sale of the business to private owners raises money for the government
    • arguments against:
      • as the new owners are interested mainly in profits, some services making losses may be closed down.
        • these might be very important for some people or areas, for example, closing a rural bus route or not delivering letters to isolated districts
      • workers' jobs could be lost as the new owners attempt to increase efficiency in order to raise profits.
      • the business might be sold off to one owner who would still be able to run it as a monopoly.
        • this could lead to higher prices for the customers
      • only a few-people - the new owners - will benefit from owning the business, whereas before privatisation the whole country could benefit from any profits made as it was owned by the government

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