The British government plans to use the proceeds from the sale of the Eurostar stake and other assets to reduce public debt. Credit Christian Hartmann/Reuters
To reduce the country’s crippling public debt, Britain plans to sell government-owned assets worth $32 billion by 2020. This includes the proposed sale of the government’s 40% stake in Eurostar International, the high speed train service operating in Europe. However, this strategy has received harsh criticism from Railroad Unions, and spokespersons for the government’s incompetence to assess the assets’ true values. Please find more details on this article here.
In my opinion, however, privatization will have longer lasting positive impacts other than just the reduction of fiscal debt. For one, increased pressure from private shareholders and the private incentive to maximize profits will cohesively lead to greater efficiency in these corporations/industries. This long term advantage, for instance, can help reduce the costs of production of the Eurostar, eventually allowing the service to be provided at a more competitive and economical price. This can negate the disadvantage that accompanies most privatized public goods, that is, disregard of public interest. Another advantage is that the short term-ism of governments can be avoided which results from governments focusing on short term welfare to boost their standings in upcoming elections.
But, given the nature of the rail industry, the government should maintain the necessary regulations to keep check on the private monopoly formed by the sale. This legal factor from the PEST analysis will ensure that the private monopoly doesn’t exploit the Brits. Hence, the sanctity of the public good can be fostered, while increasing the one-time revenue of the nation.
The debate of privatization is always a heated one, especially when it concerns public goods/services. But, given the inefficiencies of command economies, it is only viable that “the invisible hand of the free market” is allowed to sparkle magic, albeit with slight supervision from the government.