What is merits and demerits of privatization?

Answer 1

Adding an industry to the free market economy opens up a price and services war for the consumer. Who can offer the best service on this industry? Who can offer the most competitive deal on that service? Profit drives innovation, companies wanting to meet customer demand for new technologies will race to spend their profit on research, academia can benefit as the recipient of this money.

The privatisation of the british bus network has lead to national bus trips for 1 GBP where previously bus companies only functioned independantly within a council/county.

The biggest disadvantage is the varying levels of service and the potential for an even worse monopoly than a state run service. If one company offers absymal levels of service but dominates with an unbelievably low price then a private monopoly can wreck a service or industry. An all out price war can also lead to low levels of service across the whole industry, extremely low profit margins can hinder research and stump growth of new technologies. Redundancies follow excessive price wars and a lack of job security infects the industry raising unemployment rates.