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Privatization Essay

3120 words - 13 pages

Privatization Trends in Government in the 1990's e University of Submitted to: Prof. Submitted by: D el 6 7 May

PRIVATIZATION HAS BECOME INCREASINGLY ATTRACTIVE TO GOVERNMENTS AT ALL LEVELS BOTH IN THE UNITED STATES AND AROUND THE WORLD. PRIVATIZATION, HOWEVER, POSES A

DIF~ERENT

SET OF PROBLEMS FOR PUBLIC ADMINISTRATORS. THE GOAL OF PUBLIC ADMINISTRATOR IS TO RUN HIS/HER AGENCY AS EFFICIENTLY AS
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POSSIBLE.

BUT IN TIMES OF FISCAL CONSTRAINlj PRIVATIZATION IS SEEN

AS A SOLUTION TO BUDGETARY PROBLEMS. AS WITH ALL ISSUES THERE ARE TWO SIDES. PROPONENTS OF PRIVATIZATION FEEL THAT THE PRIVATE SECTOR CAN DELIVER THE SAME SERVICES THAT GOVERNMENT CURRENTLY ...view middle of the document...

A PURE PUBLIC GOOD OR SERVICE IS DEFINED AS ONE WHERE ADDING ANOTHER CONSUMER DOES NOT IMPOSE AN ADDED COST OF PROVIDING THAT SERVICE; AND EXCLUDING ANOTHER PERSON FROM UTILIZING THIS SERVICE IS COSTLY OR IMPOSSIBLE. AN EXAMPLE OF PURE PUBLIC GOOD WOULD BE DEFENSE OF THE COUNTRY WHERE ADDING ANOTHER CITIZEN DOES NOT INCREASE THE COST OF THE SERVICE AND EXCLUDING THAT

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SAME CITIZEN WOULD BE NEARLY IMPOSSIBLE. 0BVIOUSLY THERE ARE DEGREES OF THIS WHEREBY SOMETHING IS CONSIDERED A PUBLIC GOOD BUT MAY NOT ABSOLUTELY MEET THE CRITERIA GIVEN ABOVE. TO THE OPPONENTS OF PRIVATIZATION IT SHOULD BE NOTED THAT PRIVATIZATION DOES NOT ELIMINATE GOVERNMENT ENTIRELY FROM PROVIDING THAT SERVICE. INDEED, THE GOVERNMENT MUST OVERSEE THE PRIVATE FIRM PROVIDING THE SERVICE IN ORDER TO ENSURE THAT EVERYONE IS RECEIVING THE SAME SERVICE AND NO ONE IS TREATED SPECIAL OR DISCRIMINATED AGAINST. PRIVATIZATION IS BEING CONDUCTED AT THE LOCAL LEVEL AND MORE RECENTLY AT THE STATE LEVEL. THE FEDERAL GOVERNMENT IS

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ALSO CONSIDERING PRIVATIZING AGENCIES BUT HAS YET TO DO SO. OTHER GOVERNMENTS SUCH AS CANADA, CHILE, AND GREAT BRITAIN HAVE IMPLEMENTED SUCCESSFUL PRIVATIZATION AT THE NATIONAL LEVEL. THERE ARE DIFFERENT FORMS THAT PRIVATIZATION TAKES ON. ONE IS WHERE THE GOVERNMENT MAKES AN AGREEMENT SPECIFYING A PARTICULAR FIRM, RATHER THAN THE GOVERNMENT, IS RESPONSIBLE FOR PROVIDING A PARTICULAR SERVICE. AN EXAMPLE OF THIS WOULD BE BOSTON WHERE BROWNING FERRIS INDUSTRIES (BFI) IS CONTRACTED TO COLLECT THE CITY'S TRASH. IN THIS INSTANCE THE GOVERNMENT CHOOSES A PARTICULAR LEVEL OF SERVICE AND PAYS THE SPECIFIED AMOUNT THE CONTRACT CALLS FOR BUT LEAVES THE DECISIONS ON HOW

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TO EXECUTE THE SERVICE UP TO THE FIRM.

A SECOND TYPE OF PRIVATIZATION WOULD BE WHERE THE FIRM IS
AWARDED A CONTRACT FOR SERVICES IN A PARTICULAR AREA. THE FIRM CHARGES THE PUBLIC FOR THE SERVICE RATHER THAN THE GOVERNMENT PAYING DIRECTLY. THE GOVERNMENT HOWEVER REGULATES THE LEVEL

OF THE SERVICE AND THE RATES CHARGED FOR IT. PUBLIC UTILITIES ARE A PRIME EXAMPLE OF THIS TYPE OF PRIVATIZATION. IT IS THE TYPE OF SERVICE THE GOVERNMENT WOULD CHARGE A USER FEE EVEN IF IT PROVIDED THE SERVICE ITSELF. STILL ANOTHER TYPE OF PRIVATIZATION ALLOWS FOR A FUNDING ROLE FOR THE GOVERNMENT (TO MAINTAIN A LEVEL OF DEMAND FOR THE SERVICE), BUT ALLOWS THE INDIVIDUAL USER TO PICK THE PROVIDER OF

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THE SERVICE. EXAMPLES OF THIS ARE THE VOUCHER SYSTEM WHERE THE GOVERNMENT DETERMINES THE FAIR PRICE FOR THE SERVICE AND THE INDIVIDUAL IS FREE TO CHOOSE ANY PROVIDER OF THE SERVICE WITHIN THAT PRICE RANGE (OVERAGES ARE PAID BY THE INDIVIDUAL AND IF A PERSON FINDS A BETTER RATE A PERCENTAGE OR REBATE MAY BE GIVEN). THE MOST COMMON EXAMPLE OF THIS IS EDUCATION WHERE THE PARENT CHOOSES THE SCHOOL THEIR CHILD ATTENDS AND USES THE VOUCHER TO PAY FOR THE COST. WHILE PRIVATIZATION CHANGES WHO PROVIDES THE SERVICE IT DOES NOT CHANGE WHO PAYS FOR THE SERVICE. THE SOURCE OF THE FUNDING IS ALWAYS THE TAXPAYER. IT...

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