Private companies V.S Public companies

[Zadig]

Ok, I am wondering if any one can give me some objective information about the effiency of both types of companies.
Because, I recently brought this up in class, we are learning about government intervention in the economy, and I told my *socialist* economics teacher that the private sector was more efficient, however I had no examples or anything to prove my point.
So my teacher told me that it was B.S, so could any one help me to prove her wrong?

[Frankie88]

Well the first thing that comes to mind is that private companies are out to make a profit and the people that work for them usually get a piece of the profit so those workers are in theory more motivated and thus more efficient. But in some sectors like healthcare for example making profit is not the first priority and those sectors usually work more efficient wene nationalised or partly nationalised.

[Fishy]

Well the first thing that comes to mind is that private companies are out to make a profit and the people that work for them usually get a piece of the profit so those workers are in theory more motivated and thus more efficient. But in some sectors like healthcare for example making profit is not the first priority and those sectors usually work more efficient wene nationalised or partly nationalised.

Difficult with health care... To have everything run by the government you can be sure that there will be a minimal level of quality and care everywhere. That the treatment will be cheap, but you can also be sure that no real advancements would be made in a quick pace. That people will likely continue working like they always did even if things should change for the better.

The advantages of private companies over public companies are probably:

- Making more money.
- Less beaurocracy involved
- Costs are usually less.
- Faster technological advancements.

Downside would be the risk. As a private company can fall over. And if it's an important country that would really hurt. Think GM or banks. If run by the government then they wouldn't fall over. They wouldn't have been making this much loses, but they would never have made the same profits to begin with.

[Desperado †]

Well the first thing that comes to mind is that private companies are out to make a profit and the people that work for them usually get a piece of the profit so those workers are in theory more motivated and thus more efficient. But in some sectors like healthcare for example making profit is not the first priority and those sectors usually work more efficient wene nationalised or partly nationalised.

I'd go with this. With services which serve the general public in which profit is the second priority (or should be), such as education, healthcare or emergency services it is more efficient to nationalise or partly nationalise. Though with other companies, the prime example being farmers in the soviet union, the lack of motivation can cause the system to collapse.

Though efficiency does not equal fairness.

[Admiral Piett]

Public companies have far more influence on politicians than private ones. A good example is the Big 3 auto companies in the late 40s, working with government agencies, forced false claims of fraud on an upcoming car company, Tucker. They all pressured a couple of Senators to use whatever means necessary to shut them down. They succeeded by filing false charges against the company, using the media to blacken their image, and inflated the price of goods needed to build the cars. The same behavior occurred with the railroads, the steel industry, and the oil industry in the late 1800s - all of them publicly subsidized.

[Lee1026]

Define efficiency.

[Viking Prince]

The biggest risk at failure is with publicly owned companies with large union particpation that are dominant in their sectors. Since almost all government owned firms are large, unionized, and dominant in their sectors -- I would suggest all are failures or will be failures. Remember they became government owned because of political pressure to keep the losing firm from bankruptcy. This will most certainly lead to additional loses at the firm and/or higher prices for consumers.

The best competitive environment is where there is little unionization, privately held, and medium or smaller in size with many competitors.

You did not mention what level this instruction is aimed at. I am assuming 2nd year undergraduate college. I would strongly suggest checking the credentials of your econ teacher if this cannot be fully explained to you in language appropriate to the level students in the class. Just a hint.

[Ishoss]

In some cases Public Companies are best, though usually in a consumer environment they are not. You don't want to privatize Wal Mart, f.ex... But say this country, let's call it "X". the most awesome letter there is, wanted to build their first railroad. It would be beneficial for their country if the government created their own company to do this, instead of putting it in the hands of the private. The Private would only look for the lines giving most profit, and they would most likely build multiple lines for each company. No one likes railroad lines, plus it's a quite polluting business creating them.

When the government creates the railroad lines there will be one plan, and a lot easier to find the best lines.

And you can hardly call StatoilHydro a failed business.

[Viking Prince]

In some cases Public Companies are best, though usually in a consumer environment they are not. You don't want to privatize Wal Mart, f.ex... But say this country, let's call it "X". the most awesome letter there is, wanted to build their first railroad. It would be beneficial for their country if the government created their own company to do this, instead of putting it in the hands of the private. The Private would only look for the lines giving most profit, and they would most likely build multiple lines for each company. No one likes railroad lines, plus it's a quite polluting business creating them.

When the government creates the railroad lines there will be one plan, and a lot easier to find the best lines.

And you can hardly call StatoilHydro a failed business.

StatoilHydro is not operating under the guidelines that I stated were needed to be a prime candidate for failure. They do not operate production properties absent other partners. They are not the dominant player in their sector -- they are not even the dominant player in oil and gas exploration within the Norwegian Sector of the North Sea. They are not operating within a single country. They did not enter into government ownership through failure but were created by the government as a public utility (for the lack of a better phrase) for the initial purpose of developing local oil and gas resources by contracting out the actual work for competitive bids.

btw -- 70% unionized and 42% of company workforce is foreign. This is all further diluted with partnership and joiont operating agreements with other firms. I think about 40% of firm is traded on the exchanges as well.

If you want to look at 100% state owned oil and gas production companies not partnering or bullying their partners so the partners leave....

I see your and raise you

Regards,

VP

[Ishoss]

StatoilHydro is not operating under the guidelines that I stated were needed to be a prime candidate for failure. They do not operate production properties absent other partners. They are not the dominant player in their sector -- they are not even the dominant player in oil and gas exploration within the Norwegian Sector of the North Sea. They are not operating within a single country. They did not enter into government ownership through failure but were created by the government as a public utility (for the lack of a better phrase) for the initial purpose of developing local oil and gas resources by contracting out the actual work for competitive bids.

btw -- 70% unionized and 42% of company workforce is foreign. This is all further diluted with partnership and joiont operating agreements with other firms. I think about 40% of firm is traded on the exchanges as well.

If you want to look at 100% state owned oil and gas production companies not partnering or bullying their partners so the partners leave....

I see your and raise you

Regards,

VP

I believe all I can do is and retreat quietly from the table.

[Zadig]

The biggest risk at failure is with publicly owned companies with large union particpation that are dominant in their sectors. Since almost all government owned firms are large, unionized, and dominant in their sectors -- I would suggest all are failures or will be failures. Remember they became government owned because of political pressure to keep the losing firm from bankruptcy. This will most certainly lead to additional loses at the firm and/or higher prices for consumers.

The best competitive environment is where there is little unionization, privately held, and medium or smaller in size with many competitors.

You did not mention what level this instruction is aimed at. I am assuming 2nd year undergraduate college. I would strongly suggest checking the credentials of your econ teacher if this cannot be fully explained to you in language appropriate to the level students in the class. Just a hint.

No, I am in 1ere Baccalaureat Francais, so I suppose in 11th grade...
Yet, despite my teacher being... biased to say the least, she is an excellent teacher and teaches us a lot, I just have a better understanding of economics because of my father who used to be a currency trader and explained loads of things to me.

[the Black Prince]

depends on the area of "business"

public companies work best where they exist to provide a service. Royal Mail and the Post Office is a classic example. When the postal industry was privatised, private firms took on the business mail, the big contracts, parcel mail and so on. Door to door residential delivery no one would touch, because you can't make money from it.

So now, Royal Mail is left with a residential delivery network and the post office neither of which it can afford because the lucrative parts of the postal business have been sold off. So now postage gets more expensive, post offices close, the service gets worse, all because people fail to realise that the postal system is not a business, its a public service. The money made by the postal system is not profit, it exists to pay for the cost of the service and fund development of it, nothing more. Try to run it as a business, and the service gets worse, because those elements of the business that are not profitable get axed.

You know, all those business letters that are franked UKMail or one of the other private companies, are still delivered by the post man, because it is not cost effective for these companies to deliver each item, its cheaper to collect the mail, sort it, and just deliver it to the local Royal Mail sorting office and pay them to deliver it. If the entire network was privatised, there would not be door to door delivery, or you would be charged for it. You'd have to go to the local office and collect your post. Because as a service, its a money drain.

The same goes for bus services. If bus services were truely run as a business, none of the rural villages would have a bus link, because they're not profitable routes. To force the private companies to run these routes, local councils must subsidise them, effectively pay the bus service to run them. Competition in this sector also has not improved services, because companies are only interested in making money, and a great deal of the service does not make money.


Each industry is different though, and the rail transport network is a good example of where privatisation could have worked, had it been done differently. As it is, we once again face souring costs and falling service because the rail companies are only out for profit.

Sectors like telecoms, privatisation has worked, because telecoms aren't really a public service anymore. Firms can directly compete for customers (which they don't have to do on the rail network) and the only aspect of telecoms that is really a public service is the landline network, which is decreasingly relevant in a mobile wireless age. Customers voted with their money and left British Telecom in droves when they were able to do so. BT is now having to fight tooth and claw with Virgin and Sky and others to maintain a dominant market position, and the service all 3 companies is providing is actually improving as a result.


Where a public service is being provided to a customer, private business sense only has limited applicability, because good business sense will tell you to stop providing some of the service because it makes no money.

Where what is being sold is a product (whether physical or intangible) then private ownership is better. The telecoms privatisation was not privatisation of the landline network (a public service) but of the use and cost of that network (a phone package). The actual line rental is something separate, and until recently, all companies charged the same for that, because ultimately all that money goes to BT to pay for the maintenance and investment in the network.

[laserlipo]

Hello Friends,

In the world there are so many private and public companies are there..Among all companies there are different efficiency different platform and different strength are there so there will be no comparison in between private and public companies

[Son of Mao]

Public Companies are batter.

[JP226]

Ok, I am wondering if any one can give me some objective information about the effiency of both types of companies.
Because, I recently brought this up in class, we are learning about government intervention in the economy, and I told my *socialist* economics teacher that the private sector was more efficient, however I had no examples or anything to prove my point.
So my teacher told me that it was B.S, so could any one help me to prove her wrong?

Well... I'd just ask why the general trend throughout much of the world is to privatize industry versus maintaining a government run entity. And I assume by public you mean government owned and operated companies.

[dogukan]

Private sector is more efficient as there is a race to go for better quality while **** people's lifes.
Public is better IMO, because it's PUBLIC. SOCIALISM FTW!!!

[JP226]

Private sector is more efficient as there is a race to go for better quality while **** people's lifes.
Public is better IMO, because it's PUBLIC. SOCIALISM FTW!!!

A man with wisdom that we could all learn from

[Bovril]

Quick point I've not seen mentioned yet:

The quality of a public enterprise is hugely dependent on the government that runs it. For example, medicaid could be vastly more 'efficient' if it were not for the fact that it is illegal in the US for the government to use its market share to barter down drug prices when purchasing. Also, in corrupt countries, public ownership becomes increasingly meaningless, as institutions serve to create wealth for those who have power over them regardless of public interest. In this sense they become like subsidised private companies to an extent.

The goal of a public economic institution should, IMO, be to create economic outcomes the public values. This must surely mean that public control/input is a vital factor in increasing public sector efficiency. Our current domocracies are often pretty bad at this.

[Celsius]

Private all the way. Government/Public owned business's cost more to run than they bring end. Private companies goods costs less also. capitalism is where its at

[Desperado †]

Capitalism can also value efficiency over workers rights, and on the extreme side result in crap like this.