Why do governments privatise companies in the hope it will save money, when a properly-managed government-owned entity is surely just as …

economics : Why do governments privatise companies in the hope it will save money, when a properly-managed government-owned entity is surely just as capable as yielding a healthy profit? balaji

Answer by Balaji Viswanathan:

In theory, there is no difference between theory and practice. But in practice, there is.

                                                                       — Yogi Berra

The question says "properly managed". That is like saying if Unicorns turn blue. Let me know how the following question sounds:

Why should I not compete with Usain Bolt in athletics when a properly trained and able body is capable of running very fast?

Of course, in theory, anyone who is so well trained can take on Bolt. Unfortunately practice and theory are different and most of us are not trained to run like Bolt. Bolt would reach the end line, before I could even start. Thus, I wouldn't bet on winning him.

In the same way, most government organizations don't have the right people and right mechanisms to turn a profit.  They are privitizing after realizing this fact. I might spend years in the gym without being able to run like a thunder. Because, Bolt has a few core capabilities that can't be achieved by mere training. In the same way, some corporations build a few core capabilities that are extremely hard to replicate, especially by career bureacrats who have never sold a damn thing in their life.

Most people who have not run a business underestimate how brutally hard it is to generate a profit. I have spent years running businesses and have realized how supremely hard it is to build and run a profit generating organization. Thus, instead of fighting a useless battle attempting to run complex businesses, governments should let the entrepreneurs do that job for them. Just because someone could get elected by convincing people or be super smart to write policies doesn't mean he/she can run a business.

Why do governments privatise companies in the hope it will save money, when a properly-managed government-owned entity is surely just as …

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