DEREGULATION AND PRIVATIZATION

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

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..

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

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

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.

Forms of Privatization 1. The conversion of a state run company into a public company, often accompanied by a sale of its shares to the general public. 2. 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. 3. 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.

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.

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).