Public Private Ventures 1 Do you favor Privatization
Public Private Ventures 1
Do you favor Privatization of Public Services A – Yes C – No E – It Depends 2
What Services could be privatized A – Health Care B – Roads C – Parks and Recreation D – Education E – Social Services 3
What is Privatization? Here is one efforts at privatization of public services Privatizing U. S. toll roads http: //www. youtube. com/watch? v=bd 04 jn. Dq 8 x 0 4
Whats and Whys of Privatization refers to the transferring of functions and property from the government to private forprofit or nonprofit entities. Public administrators must cope with rules, regulations, and red tape, while there are fewer restrictions in the private sector. 5
Whats and Whys of Privatization The topic draws strong emotions on both sides. To some, privatization is a way to save money and harness the benefits of market forces. Others see it as an ideologically motivated means to shrink the government. Bottom Line – Disagreement Why 6
Whats and Whys of Privatization The 4 types of market-like arrangements most commonly used by government include: Contracting out is a legal relationship between government and a private organization for the purchase of goods or services. It is the most common form of privatization arrangement in the United States. 7
Whats and Whys of Privatization 8
Contracting Out In States Used 92% of the cases of privatization Used Mainly in Corrections General Administrative Services Transportation Education 9
Whats and Whys of Privatization Load shedding is an arrangement in which the government completely discontinues a service. For example, the closing of a state mental hospital forcing citizens into private facilities. 10
Generally Not Use – Why? A – Too easy C – Too Hard E – Too Controversial 11
Whats and Whys of Privatization 12
Whats and Whys of Privatization Vouchers are government coupons that allow recipients to purchase goods or services from private organizations at a reduced price. Important in education and housing. 13
Whats and Whys of Privatization 14
Vouchers Used in 4% of the cases of privatization May increase in the future In SC, discussed with education 15
Whats and Whys of Privatization Asset selling occurs when government sells off assets. For example, the federal government selling part of the federal radio frequency spectrum to private companies. 16
Other Forms Grants – 8% in cases of privatization Mental health and retardation Health Social Services Education 17
Other Forms Volunteerism Most believe creates a cost savings Partnerships Does projects in cooperation with Private Donations Provides assistance especially in social services Deregulation Removes regulations on stats monopolies to encourage competition 18
Privatization A business is a business Money is money Government can operate like a business 19
Economic and Political Rationales for Privatization The economic rationale asserts that harnessing market forces will improve service delivery and cut costs. In this view government is considered inefficient and wasteful. 20
Is government wasteful? A – Yes C – No E – In some case but not all 21
Economic and Political Rationales for Privatization The chief political reason for privatizing stems from a desire to reduce the size of government agencies and programs. 22
When to Privatize Scholars have identified six situations that are most favorable to successful privatizing efforts: 1. When government can specify the task in advance and the firm’s performance can be accurately evaluated. 2. When poorly performing private contactors can be easily replaced. 23
When to Privatize (continued) 3. When the ends (results) are more important than the means (procedures). 4. When the firm has considerable experience in the policy area. 5. When government can intervene in the event of poor performance. 6. When the firm provides other useful public services. 24
How to Privatize Political Champion Organization Reorganize or cut agency budgets 25
How to Privatize Cost Analysis Transition public employees Monitoring and oversight 26
A Bit of Fry and Laurie Privatization of the Police Force http: //www. youtube. com/watch? v=k 6 Ckltz. GAx. Y 28
Are there services that should not be privatized? A – Education B – Social Services C – Law Enforcement D – Health Services E – Parks and Recreation 29
Services the Government should Provide Regulates Freedom Services with customers who can’t pay 30
History of Privatization 19 th Century 20 th Century Local Government 31
Showdown at Indian Point New York State’s Department of Environmental Conservation has ruled the obsolete cooling system at the Indian Point nuclear power plant violates the federal Clean Water Act Options install a system that recycles cooling water Millions of dollars shutting down the plant. 32
Which Option? A - install a system that recycles cooling water Millions of dollars Or E - shutting down the plant 33
Showdown at Indian Point supplies 30 % of the electricity used by New York City and Westchester County sucks up 2. 5 billion gallons of water a day close the Hudson to all fishing for American shad federal licenses for the reactor expire in 2013 and 2015 the water-quality certificate is a prerequisite for renewal 34
Showdown at Indian Point Entergy officials said they might fight the ruling in court Appeal it to the Nuclear Regulatory Commission (NRC) Results in Long legal battle Intervention by NRC What is needed Clean river and electrical power Replace the Cooling system 35
Which Option? A - install a system that recycles cooling water Millions of dollars Or E - shutting down the plant 36
Other Utilities Telephone Service in the state of Washington Installed using your money 37
Arguments for Privatization Cost savings Speedy implementation of programs High quality services Lack of expertise More innovation More flexibility and less red tape Sows grow of government Introduces competition between public and private 38
Arguments against Privatization Does not save $$ Lack of competition may lead to private monopolies Corruption Diminish accountability of government Compromise quality due to bottom line Lowers public employees moral Destabilizes economically marginal communities 39
Problems with Privatization has an impact on the relationship between citizens and their government. When the wrong firm is chosen to perform a task a phenomenon known as adverse selection occurs. Since a firm cannot be observed at all times, it may fail to provide the expected service—a problem of moral hazard. 40
Problems with Privatization A third problem involves principal-agent conflict where the goals of the government and the firm come into contact. For example, the firm wants to make a profit while the government wants to ensure the service is available to all citizens. The firm has an incentive to avoid providing services in highcost areas or to high-cost populations in order to maintain profit margins. 41
Civil Society and Privatization Some view the move to privatization as an erosion of civil society since public service becomes reduced to just another commodity to be marketed and sold. If transferring government functions to the private sector means that citizens are treated like customers and less as citizens then public accountability is eroded. 42
Final Note Not all governments are wasteful and inefficient Not all private business are efficient and inexpensive Look before you leap. 43
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