What is Privatization?
The sale of a business or industry, that was owned or managed by the government, to the control of the private sector. It also involves the transfer of business and/or services, not just the sale of assets. The goal of privatization is profit maximization.
P3’s are the hot new form of privatization because they are advertised as a partnership but are just one step away from full private ownership. P3’s are designed and financed by private companies, but after the term of the contract they are transferred back to the government, after the private sector has made millions off tax payers.
The problem with privatization, you services get worse, companies cut corners, under invest, and profit is always number one.
- Your costs go up.
- Value for your money goes down as companies must make profits for shareholders.
- You cannot hold private companies accountable, because they are not democratically accountable to the public.
- Problems with outsourcing include last of transparency, manipulation of contracts and reluctance of governments, to terminate under performing providers.
- Staff are underlined. There are negative effects on employment and working conditions.
- Qualified staff are replaced with casual workers who have less rights and who are paid less.
- It is difficult to reverse, once services are privatized it is difficult to get them back into public hands. Also, we lose the pool of knowledge skills and experience public sector workers have acquired over the years.
Types of privatizations:
- Contracting: the most common form. The government enters into agreements with private vendors to provide service.
- Public private partnerships (P3’s): these are partnerships between public agencies and private service partners, they share the responsibility to provide government services.
- De-regulation: governments stop regulating services to allow private companies to begin offering the same services in order to encourage competition.
- Service shedding: governments greatly reduce, or completely stop offering services to allow private sector companies the opportunity to begin offering their resources.
- Shared issue privatization (SIP’s): this involves selling shares on the stock market.