public ownership

This article does not cite any references or sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (December 2007)

It has been suggested that State property, Public property and Public space be merged into this article or section. (Discuss)

Public ownership (also called state ownership, government ownership or public property) refers to state ownership or control of any asset, industry, or enterprise at any level, national, regional or local (municipal); or to common (full-community) non-state ownership. The process of bringing an asset into public ownership is called nationalization or municipalization. There is a distinction to be made between state ownership and public property, the former may refer to assets operated by a specific organization of the state used exclusively by their operators or that organization, such as a research laboratory, while public property refers to assets and resources that are available to the entire public for use, such as a public park. In primarily market-based economies, government-owned assets are often managed and run like joint-stock corporations with the government owning a controlling stake of the shares. This model is often referred to as a state-owned enterprise.

A government-owned corporation (sometimes state-owned enterprise, SOE) may resemble a not-for-profit corporation as it may not be required to generate a profit. Governments may also use profitable entities they own to support the general budget. SOE's may or may not be expected to operate in a broadly commercial manner and may or may not have monopolies in their areas of activity. The creation of a government-owned corporation (corporatization) from other forms of government ownership may be a precursor to privatization.

Public ownership right - a set of the established by law legal provisions that regulate public relationships in the area of ownership, management and use of objects of public ownership rights in the interests of people.[1]

Arguments for and against

See also: arguments for and against privatization and nationalization

For

• Public services. According to the theory of public goods, some services, such as defence, cannot be provided by the private sector directly—only a government system of taxation can finance them. Others (merit goods), such as education, can be under-provided by the private sector (according to social standards concerning access to them).
• Essential services. Certain political theories (namely social justice theories) consider some services as essential (i.e. providing the service outweighs other concerns, especially commercial ones). A very common example here is health care. In the case of such essential services, nationalization may ensure their continuation regardless of commercial, environmental, or other external pressures. According to proponents of such theories, these concerns are surpassed by the positive externalities that are deemed likely to result from ensuring the service's availability to everyone.
• Accountability. As mentioned above, while a governmental monopoly is nonetheless still a monopoly, it is answerable to the electorate rather than a small group of shareholders. (e.g. if the telephone service is nationalised, voters can bring pressure onto the government to provide better services, and parliament may have the power to sack anyone responsible for a reduction in the quality of service).
• Consumer interests. Public ownership can protect consumer interests in sectors where competition is low, where choices are important but made infrequently, and/or where consumers do not have the expertise to make good decisions (such as in health care).
• Common good. A profitable nationalised industry contributes with its profits directly to the common wealth of the whole country, rather than to the wealth of a subset of its population.
• Financial security. Public sector institutions have access to finance at government interest rates, which are (almost) always lower than even the most financially secure private sector firms, because the government is unlikely to go bankrupt, which means less risk to the lender.
• Work ethic. Employees may be more inclined to view their work positively if it is directed by a management appointed by a government that they have a say in electing, rather than a management representing a shareholding minority. Also, they may gain intrinsic satisfaction knowing their work is important and essential for society as a whole. There has been discussion of a public service ethos which makes public sector workers work harder than they would for a private employer.
• Equity. Public ownership can help prevent extreme imbalances of wealth.
• Cost reduction through economy of scale in markets where that works.
• Emphasis on Societal Objectives through public ownership, state or democratic control of major economic resources to attain the overall societal objectives of a nation or community.

Against

• Poor service. Government ownership can encourage complacency and poor service from employees who are granted extra rights and privileges to encourage them to support the government and not strike. They know that their jobs are more secure than those in the private sector. More generally monopolies can cause corporate complacency, leading to slow service and a culture of secrecy.
• Waste. Government ownership may lead to waste (x-inefficiency) if it proves unable to motivate management and personnel through appropriate incentives, including appropriate pay and threat of redundancy.
• Consumer choice. Public ownership in an industry which could be competitive in private hands may stifle innovation if proper incentives are not provided by the government. Consumer choice may be reduced and there may be no alternative sources - and no catalysts for alternative sources - of goods or services that better meet consumer preferences.
• Misinvestment/over-investment. Public ownership of profitable services may lead to "gold-plating" (over-investment in assets) if decisions are driven by engineering ideals and not efficiency concerns.
• Unprofitable companies survive. Public ownership of a loss-making service or industry (such as flu vaccines) may inhibit the changes needed to ensure long-term profitability (or permit bankruptcy). This may mean subsidising unnecessary losses indefinitely.
• Misallocations of labour and money. The government may be inefficient in running production, trading, or service operations, in the sense of causing misallocations of labour and capital, with consequent reductions in the standard of living and economic growth.
• Accountability. Accountability to the market may be eliminated, and accountability through government may be an insufficient replacement, particularly if an industry or service does not have a high public profile or if the government is not democratic.
• Influenced by politics. Decision-making in the public sector may be prone to interference from politicians for political or populist reasons. The industry may be over-staffed in order to reduce unemployment; it may be forced to conduct transactions or actions in certain areas in order to win local votes; it may be forced to manipulate its prices in order to control inflation. Of course, some of these measures may be considered positive rather than negative, but if they are not taken properly, in the long run they are likely to be an inefficient way to meet the desired goals.
• Work ethic. Employees may be more inclined to view their work positively if it is directed by a management representing the employees as shareholders (as through an ESOP) or other shareholders with whom they identify. Also, they may gain intrinsic satisfaction knowing their work is important and essential for themselves, their family, or immediate community.
• Source of Income Sometimes governments are accused for overcharging for products where they hold a monopoly, thus utilising them as an additional source of income, or hidden tax.
• Cost reduction through competitive free enterprise in markets where that works.

See also

• General
  • Government - Ownership
  • Ownership
• Organizational Models
  • Corporatization - State Enterprise - Government agency - Government Department - Cooperative
• Government ownership / funding
  • State-owned enterprise - Public sector - Public services - Public good - Sovkhoz - Non-governmental organization - Government debt - Government finance
• Private ownership
  • Private ownership - Ownership society - Public company - Private sector - Social sector - Stock exchange - Stock market - Consumer debt - Voluntary sector - Co-operative - Volkseigener Betrieb
• Change of ownership
  • Privatization - Nationalization - Municipalization
• Regulation
  • Regulation - Deregulation - Liberalization