Advantages and Disadvantages of Privatization

Privatization is always a contiguous issue, and any government going for it has to face lot of pressure from general public as well as employees of the company or industry which it is trying to privatize. Given below are some of the advantages and disadvantages of privatization –

Advantages

  1. The biggest advantage of privatization is that once a privatization is done completely there is no interference from political leaders and also one does not need to do undue favor to them which in itself is a big boost when it comes to doing business and increasing profitability.
  2. It increases the overall efficiency and reduces the bureaucratic culture which is the main culprit because typically in government organizations work happens at its own leisurely pace which results in delay in decision making and therefore reduces the effectiveness and competence of public sector enterprise.
  3. As far government is concerned it has also benefits from doing privatization because majority of governments all over the world has fiscal deficit and by doing privatization government can reduce fiscal deficit to an extent, however full control is possible only when government control its unnecessary expenditures.

Disadvantages

  1. Private companies do not care about the society and their main motive is to earn profits, which is with contrast to government companies which keeps doing social work and therefore if privatization happens it will result in fewer funds for society because private companies have no obligation to do social work.
  2. Privatization also affects the employees because in private sector enterprises there is emphasis on performance which indirectly results in work pressure and meeting deadlines or targets and individuals who have been doing work for years without much pressure find it difficult to adjust to new setting and many end up resigning from their service.
  3. In privatization there is a risk that it may take decisions of starting a project which results in short term benefits but may not good for long term.

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