Question

Do you believe in smaller government? Why or why not?

Does privatization achieve that goal?

Provide one an example of privatization in your state (service outsourced or a government asset that was sold). Did it work? 

Answer 1

Small government was best summarized by the principal author of the Declaration of Independence and third President of the United States Thomas Jefferson when he claimed, “That government is best which governs least, because its people discipline themselves.” Meg Whitman, former CEO of eBay, current CEO of Hewlett-Packard, and one-time Republican candidate for Governor of California described it as “making a small number of rules and getting out of the way. Keeping taxes low. Creating an environment for small businesses to grow and thrive.”

While most people believe that lower taxes and minimal interference may be good, I do not believe in this concept of a smaller government whole-heartedly, For businesses to prosper, lower tax rates may prove to be beneficial. However, minimal government interference does not ensure that there are stringent laws and regulations in the market that businesses should abide by in order to maintain fair trade and employee rights.

The economy, again, does not only have businesses. There are other aspects to it as well. Government support and intervention is mandatory and quite important in spheres of healthcare, education and development. While you can argue that people know best what is good for them, it is scarcely true that people will think of the good of others as well, All public goods will go to shambles if they are left to be maintained only at the behest of profits.

Which leads us to the Point of Privatisation- To a large extent, Privatisation does help maintain the idea of a small government, and can often prove beneficial to some extent- creating faster growth and expansion and bringing in greater profits. However, this is not true for a lot of cases where firms focus on these aspects at the cost of everything else.

An evaluation of the given scenario should answer the below questions:

• It depends on the industry in question. An industry like telecoms is a typical industry where the incentive of profit can help increase efficiency. However, if you apply it to industries like health care or public transport the profit motive is less important.
• It depends on the quality of regulation. Do regulators make the privatised firms meet certain standards of service and keep prices low?
• Is the market contestable and competitive? Creating a private monopoly may harm consumer interests, but if the market is highly competitive, there is greater scope for efficiency savings.
• Can you create incentives in a nationalised firm? For example, performance related pay could replace the profit incentive.

basis these answers, it can be appropriately decided whether it works for that case of not.

Recently, in India, The government has decided to get LIC listed on the markets. The announcement was made by Indian Finance Minister Nirmala Sitharaman in her Budget Speech. Government had set a target of Rs 1.05 lakh crore in FY20. We are yet to see how this will take shape in the coming years.

The Indian Railways are also to be privatised soon. The official line is that privatisation will be a “win-win” situation: The Railways will attract private investments worth an estimated Rs 22,500 crore, and will also be able to gainfully re-deploy manpower for more rewarding tasks. Private players will get business opportunities in a “supply-driven” sector. Commuters will get to comfortable rides in glitzy private trains that will offer value-added services, while ensuring punctuality.

But, as it turns out, there is a flip-side as well. If private trains get preferential treatment on the timetable, the schedule of the Indian Railways trains will suffer. Tariffs could also become a problem for more underprivileged sections of society as the charges are to increase in order to show more profits.