Public services that were once operated directly by the public — such as utilities, transportation, and other essential systems — are now run through a process known as privatization.
For instance, in places like the U.K., the private sector has assumed control of all those things that used to be operated by the government but were later found to be weak or in need of reform. Privatization is a process whereby publicly-owned services are transferred to the private sector. Privatization is not just limited to services; it can also apply to entire sectors.
This means that if a service was previously provided by the government but later turned into something that could be better delivered by the private sector, then it would be considered for privatization. In this article, we explore some of the histories behind privatization in America along with its pros and cons.
What is privatization?
Privatization is the process whereby publicly owned services are transferred to the private sector. In other words, privatization is the transfer of services from the government sector to the private sector. Privatization can be done for several reasons. Some of the most common reasons for privatization are to save costs or to increase efficiency and/or outcome.
The privatization of a government service doesn’t mean that it’s completely taken out of the government’s control — the government will still have some oversight over the service. But for the most part, the service is now operated by the private sector.
History of privatization in America
The first major privatization in the U.S. happened in 1849 when the U.S. Treasury took control of the federal mint and then sold the gold, silver, and copper left over from the minting process. This was a first step toward the government no longer operating certain industries. As the U.S. grew, so did the importance of public services. In 1912, the Departments of Agriculture and Interior were established, and their operations provide important functions to our society today.
Benefits of privatization
The best reason to consider privatization is that the government is too large and inefficient. Privatization allows the government to operate more efficiently, or even shut down when it has no use for its resources. This is important because when the government operates services, it can often be inefficient or wasteful due to the lack of competition in the market.
For instance, in the education system, there is no pressure to perform well as there is in the private sector. If a school is underperforming, the parents can choose to send their children elsewhere. However, if the government is operating the schools, there is little or no pressure to improve performance.
Disadvantages of privatization
Privatization often comes with cost increases compared to government-run services. This can be due to lower wages and benefits for employees, higher costs involved in managing a private business, and/or lower taxes to make up the difference.
Another possible downside of privatization is that it can leave the public with a lack of familiarity with private companies and how they operate. It’s also possible that privatization could lead to less government oversight and oversight of industry practices, resulting in less protection for the public.
The U.S. has had privatization in one form or another for hundreds of years. While privatization is often considered a good thing, it comes with its fair share of risks and downsides. It’s important to consider the benefits and risks of privatization before making any changes. And, most importantly, it’s critical to stay informed and to participate in the upcoming public debate over privatization.