Business organizations in the public sector
Public sector businesses These are businesses and services that the government owns. They include things like hospitals, schools, fire stations, and government departments. They are run to provide services to the public, not mainly to make profit.
Public corporations These are big businesses fully owned by the central government.
They used to be private companies, but the government bought them — this is called nationalisation.
Examples in many countries: railways, water supply, electricity boards (though many are now being sold back to private companies — privatisation).
How they are run
The government owns them but doesn’t run them directly.
Instead, a Board of Directors is appointed by government ministers.
The government sets the goals (like good service, low prices, safety), and the directors manage the business according to these goals.
Advantages of Public Corporations
Protects essential industries Some industries (like water and electricity) are too important to leave to private companies. Government ownership keeps them stable.
Controls natural monopolies In some industries, having competition is wasteful (like two railway lines to the same town). If the government owns these, it can stop private companies from overcharging people.
Saves failing but important businesses If a big company is about to collapse, the government can take it over (nationalise it). This protects jobs and keeps the service running.
Provides important but non-profitable services Public services like TV and radio can still produce important programmes even if they don’t make much money, because profit is not the main goal.
Disadvantages of Public Corporations
Less pressure to make profit No private shareholders pushing for high profits, so the business might not be as efficient.
Government subsidies can cause laziness Managers may think the government will always rescue them, so they may not try to reduce costs. It’s also unfair to private companies that don’t get subsidies.
Lack of competition Without competitors, they might not improve service, offer choices, or be efficient.
Political influenceGovernments may use these businesses for political goals, like creating jobs before elections, instead of running them like proper businesses.
Other Public Sector Enterprises
Local governments run some services.
Free services: schools, street lighting — paid through local taxes.
Paid services: swimming pools, markets, theatres — expected to at least cover costs.
If they make a loss, the local government gives a subsidy.
Many services are now being privatised to reduce costs and reduce the load on taxpayers.