Privatisation and Nationalisation Flashcards Preview

AS-Economics > Privatisation and Nationalisation > Flashcards

Flashcards in Privatisation and Nationalisation Deck (6)
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1

Privatisation

the transfer of ownership from the public sector (government) to the private sector.

2

Privatisation Advantages

- Profit motive encourages firms to increase efficiency (lower costs), better quality services, more innovation, more research and development (R&D)
- Government receives a large one-off payment when selling its companies.
- The business will be “stream-lined” and inefficient workers will be made redundant.

3

Privatisation Disadvantages

- Prices may rise as private firms seek to maximise their profits, which might be too expensive for poorer people.
- Government misses out on future revenue from profits that might have been made.
- Job loss might occur as those workers that are not needed are dismissed.

4

Nationalisation

the transfer of ownership from the private sector to the public sector (government).

5

Nationalisation Advantages

- Can be done for strategic reasons e.g. to prevent a business from failing and will earn a government future revenue if profit is made.
- Jobs and employment are protected.
- The government can provide services that the private sector may not have been able to e.g. rural loss making train routes

6

Nationalisation Disadvantages

- It is expensive and incurs opportunity costs and might occur for political reasons.
- Too many workers might be employed as government may wish to avoid redundancies for political reasons.
- Lack of profit motive motive can result in lower efficiency and poorer quality.