February 26, 2013
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Recently, I had an argument with a best friend regarding privatization of public services.
- The government should only be the controller but not the implementer.
- The government should put up the quality of service (QoS) for the private company to follow.
- The government should strictly monitor the private company and take action (fines or terminate the contract) if the QoS is not met.
- Privatization promotes competition and brings better services to the public.
I did not agree but could not really justify why not. After days of thinking and reading, I come out with the following:
- It’s good for an organization (e.g. government) to be small so that it can be efficient. However, there can be many ministries (can be seen as individual organizations) within the government. If a private company (also an organization) can be efficient, why not a ministry?
- Privatization is capitalization. The aim is to maximize the money earned. It is not a sin to make money however public necessities like water and sanitation (and probably electricity and transportation infrastructure) should be accessible to the public free of charge (FOC) or at a minimal cost. Totally opposite of maximizing profit.
- A market needs competition to trigger the improvement in the QoS and keep the price reasonable. Water and sanitation (and probably electricity and transportation infrastructure) is a natural monopoly. There is simply no competition available.
Privatization may be better in some area but not all, especially for those public necessities or services. Also, I don’t think any government embracing privatization will ever do so to their military forces.