Deregulation and privatization

1. Deregulation and privatization

2. The role of government is to make decisions about how to collect and spend tax dollars (or other sources of income that a government might generate). • It is expected that a government will make long-range plans and design a budget which explains where the money will come from and how it will be spent. • Sometimes a government will build an unbalanced budget, a plan that has a deficit or a surplus

3. A deficit means that the government plans to spend more money than it receives. • A surplus budget means that the government plans to spend less money than it takes in. • Either scenario can lead to complex problems. • . • .

4. Deficit Budget? • A deficit budget might make short-term sense since the government could invest in • jobs, • industry, • education • improved health care However, a deficit eventually needs to be paid off and that can mean significantly less money in future years for all the things that people really want

5. Privatizing or deregulation • Governments can sometimes try to reduce the effect of unbalanced budgets by privatizing or deregulating businesses that it owns. • Sometimes selling off government property or enterprises can raise a lot of cash in a short time. • Taking government regulations away can also help businesses generate income more quickly—and it saves the government money because it no longer needs to monitor those businesses to the same extent. • Less responsibility means fewer government employees, and that leads to increased cash flow

6. Privatization • The theory behind privatization is that these enterprises run more effectively and offer better service when compared to democratic governments. • This is because managers of state-owned enterprises pursue objectives that differ from those of private firms • Managers of public corporations are usually often driven by political considerations not economic ones.

7. Forms of Privatization • The conversion of a state run company into a public company, often accompanied by a sale of its shares to the general public. • Transfer of publicly owned resources and services from government ownership to private ownership (e.g., roads, utilities, airports, national parks). • In many cases, government still regulates the standards for service operation and maintenance of resources. • Still for others it is the act of converting a publicly operated enterprise into a privately owned and operated entity. • Shares formerly owned by the government, as well as management control, are sold to the public.

8. Deregulation • Deregulation is defined as the process of removing regulatory authority over regulated companies. In a deregulated environment rates and services will be determined by the market place in much the same manner as other consumer goods.

9. Federally regulated industries • The process of decreasing or removing government regulatory control over industries and letting competitive forces drive the market • In Canada the major Federally-regulated industries include: • Banks, insurance companies; • Railroads and airlines; • Telecommunications, broadcasting; • Energy exports; pipelines and transmission lines between provinces and to the U.S.; • Nuclear energy (considered to be of national significance).