Public ownership

Public ownership

Public ownership (also called government ownership, state ownership or state property) refers to government ownership of any asset, industry, or corporation at any level, national, regional or local (municipal); or, it may refer to common (full-community) non-state ownership. The process of bringing an asset into public ownership is called nationalization or municipalization. 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.

Arguments for and against

"See also: arguments for and against privatization and the welfare state"


*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.
*Efficiency. In natural monopolies, competition is wasteful, and will tend to be eliminated by competitive forces (leading to a private monopoly or oligopoly). A public sector monopoly can be held to account via democratically-elected governments, in a way in which a private monopoly cannot. (A private monopoly may be subject to regulation, but this may be an inefficient way of securing the public interest.)
*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 intrinisc 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.


*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 labor and money. The government may be inefficient in running production, trading, or service operations, in the sense of causing misallocations of labor 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.
*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.
*Work Ethic Employees are tempted to do the bare minimum in government jobs, as there is little incentive to perform. Mandatory breaks during a busy times, lunch breaks taken from 12-1, when the rest of the world has time to run errands, closed on saturdays and sundays - again when the rest of the world has time to run errands. Leaving at 5pm on the dot, no matter what. These practices are present in private industry too, but they are pervasive in governmental run institutions. The main reason for the difference, is that there is more incentive to perform in the private industry.

ee also

**Government - Ownership
*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 - Deregulation - Liberalization

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Look at other dictionaries:

  • public ownership — n [U] businesses, property etc in public ownership are owned by the government ▪ The Opposition intends to bring the industry back into public ownership …   Dictionary of contemporary English

  • public ownership — noun Ownership by the state, eg of nationalized industry • • • Main Entry: ↑public * * * public ownership UK US noun [uncountable] legal possession of businesses and industries by the government of a country Thesaurus: government programmes and… …   Useful english dictionary

  • public ownership — noun uncount 1. ) legal possession of businesses, land, and industries by the government of a country or area 2. ) AMERICAN the money that people in general have invested in a corporation …   Usage of the words and phrases in modern English

  • public ownership — The portion of a company s stock that is held by the public. Bloomberg Financial Dictionary * * * public ownership public ownership ➔ ownership * * * public ownership UK US noun [U] (also government ownership, state ownership) GOVERNMENT,… …   Financial and business terms

  • public ownership —    control and management by politicians and bureaucrats    The use of the phrase is normally confined to commercial businesses, utilities, etc. No member of the public should be so rash as to try to assert ownership rights over them:     Various …   How not to say what you mean: A dictionary of euphemisms

  • public ownership — noun (U) businesses, property etc in public ownership are owned by the state: The steel and coal industries were taken into public ownership …   Longman dictionary of contemporary English

  • public ownership — /pʌblɪk ˈoʊnəʃɪp/ (say publik ohnuhship) noun 1. ownership by a community as a whole. 2. the socialist objective of ownership by the state. 3. government takeover of some commercial enterprise. 4. the possession by the public of shares in a… …   Australian English dictionary

  • public ownership — noun ownership of an industry by the people or the state; nationalisation Syn: state ownership …   Wiktionary

  • public ownership — owned by the public, under the control of one of the government offices …   English contemporary dictionary

  • public ownership — UK / US noun [uncountable] legal possession of businesses and industries by the government of a country …   English dictionary

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