Privatisation

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State Provision (or Nationalisation)

The state can provide a a number of goods and services for consumers. This is called state provision.

State provision

The government either provides state provisions itself (e.g. state education) or provides free goods or services to the public that it's bought from the private sector (e.g. private health services offered free to NHS patients).
The government pays for goods/services through tax revenues. It then offers them to the public for free.
Examples:
- The National Health Service (NHS).
- Police service.
- Secondary school education.

Advantages of state provision

State provision can reduce inequality by redistributing money from the wealthy to the poor. This is something the market doesn't always do.
Without state provision, some services might not exist as they aren't profitable.
- E.g. some train routes that aren't profitable do not exist.
Value judgements need to be made about what the state can and can't provide well.

Disadvantages of state provision

Without a drive for profit, there is less incentive to make a service as efficient as possible. The economic incentives for efficiency could be eroded.
There is an opportunity cost of providing one service over another.
With asymmetric information, there is a risk of government failure.

Privatisation

The government owns public firms and industries. Privatisation sees publicly owned firms/industries become privately owned firms/industries. Governments may privatise to boost competition.

What is privatisation?

Examples of what privatisation entails include:
- Public Private Partnerships (PPPs) - when a firm in the private sector completes a project for the government that benefits the public (e.g hospitals are often leased to the government by private firms which own the building).

Advantages of privatisation

The incentive for profit means that resources will be allocated more efficiently.
When the government sell off their enterprise, they will gain revenue that can be put to alternative use.

Disadvantages of privatisation

The drive for efficiency means that an element of humanity might be lost. Efficiency may come in the way of delivering a fair service.
There is a moral argument against providing some services profitably.
- E.g should we be able to pay for better healthcare than others?
Safety and spending on safety measures may be worse in privatised industry that are judged only on profits.

Examples of Privatisation

Here are some examples of privatisation in practice:

Privatisation of Royal Mail

The Royal Mail was an entirely publicly held firm until 2013 when the government sold 60% of its stake to private investors and gave away 10% in shares to employees, leaving the government with 30%.
The government sold the rest of its shares in 2015, and in total raised £3.3bn.
The government argued that selling Royal Mail would allow it to raise funds to make the investment required to fend off new competition. The government used the money to pay off some of the UK's debt.

Contracting out

Governments contract out the provision of various services. The government then pays for the contract and distributes as if it had been publicly provided.
By contracting certain jobs out, the government can get jobs done by specialist firms who service other customers and benefit from economies of scale.
But by contracting out certain jobs, the government becomes reliant on other firms. There are risks that a firm with a contract goes bankrupt or faces strikes from its workforce.

Tendering

Governments can put out jobs to tender, giving prospective suppliers the chance to bid for contracts to supply goods or services.
Tendering is a competitive process with firms giving their best offers in order to win contracts.
However, because the tendering process is based on what firms promise they can deliver, it is common for firms to over promise and under provide which can lead to large unexpected costs and reduced quality.

Public-Private Partnership (PPP)

PPPs are when governments and private firms collaborate on a project.
Funding comes from a combination of government payments and the firm being given the rights to earn money from this, on completion.
Any shortfalls between initial costs and the government grant is covered through Public Finance Initiatives which raise money through selling bonds to banks and investors.
The government is responsible for making sure the objectives are met and the firms are responsible for the execution.

Veolia and Suez

Veolia and Suez are two multinational waste collection, disposal and water management companies.
They both work closely with local and national governments across the world and often compete in the tendering for contracts and in being involved in PPPs.
In 2018, Suez's UK projects included the opening of a 'Energy from Waste' plant in Cornwall and Wilton. This is a PPP with the firm working with local councils to bring the project to life.

1Introduction to Markets

2Market Failure

2.1Market Failure

2.1.1Types of Market Failure

2.1.2Externalities

2.1.3The Deadweight Welfare Loss of Externalities

2.1.4A-A* (AO3/4) - The Externalities of Education

2.1.5Public Goods

2.1.6Information Gaps

2.1.7End of Topic Test - Market Failure

2.1.8Application Questions - Market Failure

2.2Government Intervention

2.2.1Government Intervention in Markets

2.2.2Subsidies & Price Controls

2.2.3Pollution Permits & Regulation

2.2.4A-A* (AO3/4) - European Emissions Trading

2.2.5State Provision & Information Provision

2.2.6Government Failure

2.2.7End of Topic Test - Government Intervention

2.2.8A-A* (AO3/4) - Government Intervention

3The UK Macroeconomy

3.1Measures of Economic Performance

3.1.1Measuring Economic Growth

3.1.2National Income Data

3.1.3Inflation

3.1.4Causes of Inflation

3.1.5Consequences of Inflation

3.1.6Employment & Unemployment

3.1.7Causes & Impact of Unemployment

3.1.8A-A* (AO3/4) - Hysteresis

3.1.9Balance of Payments

3.1.10Current Account Deficit & Imbalances

3.1.11End of Topic Test - Economic Performance

3.1.12Application Questions Macroeconomy

3.2Aggregate Demand

3.2.1Aggregate Demand

3.2.2Consumption

3.2.3Investment

3.2.4Government Expenditure

3.2.5Net Trade

3.2.6End of Topic Test - Aggregated Demand

3.2.7Application Questions - AD

3.3Aggregate Supply

3.3.1Aggregate Supply

3.3.2End of Topic Test - Aggregated Supply

3.3.3A-A* (AO3/4) -Aggregate Supply

3.4National Income

3.4.1National Income

3.4.2Injections & Withdrawals

3.4.3Equilibrium Level of Real National Output

3.4.4Multiplier Effect

3.4.5End of Topic Test - National Income

3.4.6Application Questions - National Income

3.5Economic Growth

3.5.1Causes of Economic Growth

3.5.2Output Gaps

3.5.3Business Cycle

3.5.4Impact of Economic Growth

3.5.5End of Topic Test - Economic Growth

3.5.6A-A* (AO3/4) - Growth

4The UK Economy - Policies

4.1Macroeconomic Objectives & Policies

4.1.1Possible Objectives

4.1.2Demand-Side Policies - Monetary

4.1.3Demand-Side Policies - Monetary 2

4.1.4A-A* (AO3/4) - The Future of Interest Rates

4.1.5Demand-Side Policies - Fiscal

4.1.6Demand-Side Policies in 2007-08

4.1.7Strengths & Weaknesses of Demand Side

4.1.8Supply-Side Policies

4.1.9Supply-Side Policies 2

4.1.10Conflicts Between Objectives

4.1.11A-A* (AO3/4) - Conflicting Incentives

4.1.12Phillips Curve

4.1.13End of Topic Topic - Policies & Objectives

4.1.14Application Questions - UK Policies

5Business Behaviour

5.1Business Growth

5.1.1Size & Types of Firms

5.1.2Business Growth

5.1.3Pros & Cons of External Expansion

5.1.4Demergers

5.1.5End of Topic Test - Business Growth

5.1.6A-A* (AO3/4) - Business Growth

5.2Business Objectives

5.2.1Business Objectives

5.2.2End of Topic Test - Business Objectives

5.2.3Application Questions - Business Objectives

5.3Revenues, Costs & Profits

5.3.1Revenue

5.3.2Costs

5.3.3Economies & Diseconomies of Scale

5.3.4Profits

5.3.5Profits 2

5.3.6End of Topic Test - Revenue, Costs & Profits

5.3.7A-A* (AO3/4) - Revenue, Costs & Profit

6Market Structures

6.1Market Structures

6.1.1Efficiency

6.1.2Perfect Competition

6.1.3Perfect Competition 2

6.1.4Monopolistic Competition

6.1.5Oligopolies

6.1.6The Prisoner's Dilemma

6.1.7Collusion in Oligopolistic Markets

6.1.8A-A* (AO3/4) - Which Factors Affect Collusion?

6.1.9Monopolies

6.1.10Price Discrimination

6.1.11Monopsony

6.1.12A-A* (AO3/4) - Models in Economics

6.1.13Contestability

6.1.14Benefits of Contestability

6.1.15End of Topic Test - Market Structures

6.1.16Application Questions - Market Structures

6.1.17A-A* (AO3/4) - Cereal Collusion

6.2Labour Market

6.2.1Demand for Labour

6.2.2Supply of Labour

6.2.3Labour Market Imperfections

6.2.4A-A* (AO3/4) - Labour Productivity & Unemployment

6.2.5A-A* (AO3/4) - What Level of Unionisation is Good?

6.2.6Wage Determination

6.2.7Elasticity of Labour Supply & Demand

6.2.8Intervention in Setting Wages

6.2.9End of Topic Test - Labour Market

6.2.10A-A* (AO3/4) - Labour Markets

6.3Government Intervention

6.3.1Reasons for Government Intervention

6.3.2Government Promotion of Competition

6.3.3Usefulness of Competition Policy & Examples

6.3.4A-A* (AO3/4) - Modern Competition Policy

6.3.5Privatisation

6.3.6Government Regulation

6.3.7A-A* (AO3/4) - Nationalisation vs Privatisation

6.3.8Government Protection of Suppliers and Employees

6.3.9Impact of Government Intervention

6.3.10End of Topic Test - Government Intervention

6.3.11Application Questions - Government Intervention

7A Global Perspective

8Finance & Inequality

8.1Poverty & Inequality

8.1.1Absolute & Relative Poverty

8.1.2Inequality

8.1.3Inequality 2

8.1.4Lorenz Curve

8.1.5Government Policy on Poverty

8.1.6End of Topic Test - Poverty & Inequality

8.1.7A-A* (AO3/4) - Inequality & Poverty

8.2Emerging & Developing Economies

8.2.1Measures of Development

8.2.2Factors Influencing Growth & Development

8.2.3Barriers to Development

8.2.4Barriers to Development 2

8.2.5A-A* (AO3/4) - The Bottom Billion

8.2.6Development Strategies

8.2.7Interventionist Strategies

8.2.8Aid

8.2.9International Institutions

8.2.10International Institutions 2

8.2.11End of Topic Test - Emerging & Developing

8.2.12Application Questions - Developing Countries

8.3The Financial Sector

8.3.1Role of Financial Markets

8.3.2Market Failure in the Financial Sector

8.3.3Role of Central Banks

8.3.4End of Topic Test - The Financial Sector

8.3.5A-A* (AO3/4) - Financial Sector

8.4Role of the State in the Macroeconomy

8.4.1Public Expenditure

8.4.2Taxation

8.4.3Public Sector Finances

8.4.4End of Topic Test - Role of the State

8.4.5Application Questions - Role of the State

9Examples of Global Policy

9.1International Policies

9.1.1Global Debt & Deficit Policies

9.1.2Poverty & Inequality Policies

9.1.3Changes in Interest Rates

9.1.4Competitiveness Policies

9.1.5End of Topic Test - International Policies

9.1.6A-A* (AO3/4) - International Policies

9.2Policy Responses to Shocks

9.2.1International Tax Policies

9.2.2Problems for Policymakers

9.2.3End of Topic Test - Policy Responses

9.2.4Application Questions - Policy Responses

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