In recent years countries have been arching to privatization as a way to dispose of state-owned, obsolete, and ineffective firms as well as to provide an inflow of foreign capital. Privatization generally refers to moving of a service or an asset from the public to the private sector. In a survey of 82 U.S. cities, 100% reported privatizing food service in public facilities, 100% had privatized major construction projects, 70% services, and 50% solid waste management.
Private Prisons
The idea of privately owned and managed prison services, traditionally provided by the government, was unthinkable ten years ago. Today this is not only happening in America but all around the word, transforming the way economies work. The concept of privatization is very simple to understand. Monopolies are not very effective in the long run. The quality of services provided by the government monopoly explains on its own the drawbacks of a monopolized system (William, 1996). In a monopolized system, the provider of services does not face any competition and this absence of competition lowers the quality of goods and services provided (Smith, 1993). Privatization gives way to increased competition, hence increasing the quality of goods and services produced. This shift of government owned institutions to the private sector brings enormous benefits to the citizens as they both receive and pay for the services.
The Pros of Privatization
Markets, competition, and private ownership are essential for an efficient economy. This view coincides with Adam Smith's concept of the "invisible hand”. “Free markets will determine the most economically efficient service delivery, and that the role of government should be limited to that of legal enforcer” (Smith, 1993).
Because of economies of scale, privatization is more efficient than government delivery of services. Private companies can perform the same service for several municipalities, justifying their.....
