Privatization and the Economy

Economic growth is important in reducing poverty, unemployment, and improving living standards in a country. A growing economy brings sustainable jobs for people, it is especially important in developing countries to increase available resources and provide better education, health and social spending. (Importance of Economic Growth) 

Privatization is the transfer of ownership of assets from the public sector into the private sector, and it is something that plays a huge role in economic growth. More and more governments around the world have turned to privatization because it is effective in establishing property rights, which helps build a strong free market economy where people make individual decisions, not the government. (Filipovic)

The economic benefit of privatization is that the governments role in the economy decreases, which means that the economy becomes more efficient. A government has a non-economic focus, while the private sector is looking for economic incentives in the market, which will help make the country more economics focused and lead to more expansion in the economy. The government doesn’t efficiently run an economy because they have no reason to, and that leads to an economy that has low income, leaving no ability to grow and maximize production. 

Another benefit to privatization is helping a countries fiscal debt problems. Privatization makes governments more able to pay portions of their debt off. This means that interest rates will go down and the level of investment will increase. Privatization gives power to people because they have the ownership in the country, not the government. This gives people the motivation to work harder, because it will directly pay off. It is a true example of competition breeding success.

There are benefits to privatization, but it is a complicated process and it can have its fair share of issues. A natural monopoly can occur in some situations, which will lead to there being only one producer being the best situation and leaving many people out of work. 

I learned about the impact of privatization on economic growth from various articles and case studies through the web. The articles I read were very well developed and done professionally, they were longer, harder to read articles, but that benefited me because they had quality information and intriguing thoughts. I think that this was a really good topic for me to research, last week in my blog I looked at emerging market economies, and I was able to see the connection between both of these topics. The reason many of these market economies are able to grow is because of the privatization of their countries economies. 

What I see in privatization is that it is the best way for economies to grow and for quality of life to  improve for many people in developing countries. It works well because there is a motivation factor that isn’t there with a publicly controlled economy. Resources aren’t allocated efficiently in a public run economy and private firms push the country forward. As I said it connects to emerging market economies, but I also wrote about micro financing, which is something used for people who have low income that it has a direct relationship to. I said in that blog that it would be better if these people were given steady, quality paying jobs rather than having them micro finance their lives to get by everyday. 

Grant Williams

Filipovic, Adnan. “Impact of Privatization on Economic Growth.” Issues in Political Economy, vol. 14, Aug. 2005.

“Importance of Economic Growth.” Economics, 25 Nov. 2009, econ.economicshelp.org/2009/11/importance-of-economic-growth.html.