Sample Business Studies Paper on Privatization in Canada

Privatization is a word that is used to refer to the transfer of activities that are related to the public sector to the private sector. In other words, it is a phenomenon where governments contract for privately-owned companies to provide services that have been previously provided by the government. Over the past decades, Canada has experienced many privatization activities involving federal and municipal governments increasingly reducing their direct involvement with the Canadian economy. Most of the privatization activities in Canada have involved the sale of Crown corporations, contracting of privately-owned farms to deliver public services, and also transferring most of the infrastructure development to the private corporate sector. In this literature study, the pros and cons of Canada being headed towards privatization will be weighed and as a result, come up with a properly structured conclusion to propose or oppose Canada being privatized.

Even though most public officers see privatization as a remedy to most of the occurring government ills, it remains to be a highly controversial activity within the public sector. That, it is also important to understand that both the proponents and opponents of privatization base most of their arguments to argue with each other by only focusing on their side of the issue. Those who favor privatization in Canada base most of their arguments on financial gains of involved deals as well as efficiencies from operations carried out by the private sector (Le & Robinson 2018). On the other hand, opponents of privatization in Canada stress the on matters regarding social implications. Hence, it is important to look into the issue critically to come up with what is best for the citizens living in the country.

 

Arguments for Privatization

Several reasons have led to various public authorities to turn into privatization all over the world and Canada is not left out. Most of these reasons for privatization have been identified to range from government having constrained capacity to build as well as maintain necessary infrastructure, the efficiency of the private sector, budget challenges, and lack of viable alternatives. Most of the drivers are based on investment demand which can generate cash as well as be able to protect inflation among those willing to have a hand in the very low borrowing costs.

First, privatization has been identified to be an effective way that the government of Canada can use to fund critical infrastructure-related needs. For instance, Canada is a big country in the global era, privatization can be employed in its cities to build as well as enhance its social and physical infrastructure to make it remain a competitive country. That coincides with the challenges it faces to obtain funds for such types of upgrades.

Privatization has also been identified to be a great source where the country can obtain immediate revenue in instances where the country might be undergoing a constrained budget. It is important to note that most of the current policymakers all over the world favor privatization as a way in which to deal with the government having strained finances. Demographics show that most of the developed countries like Canada as well as other industrializing countries like China soon will have to incur huge additional costs in the public sector since citizens are living longer lives and have fewer children (Boardman et al., 2016). Thus, there is new stress to fund old-age benefits since retirees to workers ration are expanding. It is believed that privatization will offer a large source of revenue that can meet such kind of budget challenges.

It is also important to note that most of the private infrastructure funds attract investment vehicles linked with certain investors, thus enabling the privatization of infrastructure by appealing to potential bidders. It might seem or look like a curious fact, but some of the biggest banks in the world are the largest players in global privatization which Canada is not an exception from that. In fact, in most instances, financial corporation investors have been attracted to infrastructural related investments because of the premiums that often yield over corporate and public bonds.

In Canada, some of the available alternatives to privatization seem unattractive. For instance, most privatization decisions do not take place in a vacuum which is a policy that has often been lost in most of the public discourse. When having an activity such as the long lease of public assets, there comes with a big potential to generate enormous public revenues. In a different view, the reality is that, if revenues are absent in case privatization does not occur, the government is tasked to choose a different course either raise taxes, borrow, or spend less among other unattractive procedures.

Risks of privatization

Privatization is seen to be an extraordinarily powerful tool for governance in any government and Canada is no exception. Just like any other tool, it is prone to be incorrectly used especially in wrong circumstances, or with malevolent intentions. At times, privatization of public assets brings about severe implications that might end up stretching across generations and involve loss of billions of cash. Therefore, some considerations need to be taken into perspective before any privatization decision is undertaken.

One of the greatest impacts of privatization in Canada is constraining its future options since it will place public assets under private control for some time (Whiteside 2013). Mostly, a privatization contract is written only demanding some kinds of performance measure whoever which only includes those that are visibly anticipated at the time the contract is written. In reality, a lot can change since the public is left with no control over a private entity which follows an outdated contract that does not reflect the interests and expectations of the public. Thus, if control is left with an elected government the control is with voters and they decide what to happen with a particular asset and the government is unhindered to cater to the evolving preferences.

Sometimes privatization results in socially aligned implications that affect certain groups since the primary benefit of privatization are only due to efficiency in the private sector. In most cases, profit-driven firms lay powerful incentives that increase revenues and reduce costs. Those incentives might be good but in the long run, they might end up bringing adverse social effects if some key public assets are in the hands of the private sector. For instance, private operators might cut costs by harming the vulnerable segment of society such as the low-income segment. Also, they might end up creating costs that might end up spilling over to the public sector. They can also make good assets more popular leading to increased revenues although it may not be for the best interest of society.

Privatization puts a country at risk of stealing from its future since it deals with generating huge revenues in the present in exchange for the revenue streams that might have accrued to the citizens of the future. It is a two-way scenario where future generations can benefit if privatization revenues are invested back into things that increase productivity in the future or be robbed of cashflows after sums of cash are squandered to pay for current expenses.

Sometimes private owned entities might end up failing to fulfill obligations that they are expected to complete in the contract (Crisan 2013). In simple terms, the privatization contract is only good depending on monitoring and how it is enforced. Thus, privatization is based on contractible quality and the contact doe not enforce itself and therefore a government is still required to oversee privatization contracts and have a working strategy in case private firms fail to fulfill its obligations.

Conclusion

Based on the above discussion, privatization can be seen to be a good governance tool that Canada can use since it is among one of the country’s in the world having big economic muscles. However, privatization of some of its publicly owned agencies should be put into many considerations to make sure that the interests of the present and future generations are held. That might include coming up with adjustable contracts, proper oversight, the appointment of properly scrutinized private firms, public participation among many others. In so doing, it can achieve great success as well as ensure its infrastructure matches the then-current standards through involved private sectors’ firms for the benefit of its citizens.

 

 

References

Le Grand, J., & Robinson, R. (2018). Privatisation and the welfare state. Routledge.

Boardman, A. E., Vining, A. R., & Weimer, D. L. (2016). The long-run effects of privatization on productivity: Evidence from Canada. Journal of Policy Modeling38(6), 1001-1017.

Whiteside, H. (2013). Stabilizing privatization: Crisis, enabling fields, and public-private partnerships in Canada. Alternate Routes: A journal of critical social research24.

Crisan, D., & McKenzie, K. J. (2013). Government-owned enterprises in Canada. SPP Research Paper, (6-8).