PUBLIC CORPORATIONS:

A business owned by the government and run by Directors appointed by the government. These businesses usually include the water supply, electricity supply, etc. The government gives the directors a set of objectives that they will have to follow:

  • To keep prices low so everybody can afford the service.
  • To keep people employed.
  • To offer a service to the public everywhere.

These objectives are expensive to follow, and are paid for by government subsidies. However, at one point the government would realise they cannot keep doing this, so they will set different

objectives:

  • To reduce costs, even if it means making a few people redundant.
  • To increase efficiency like a private company.
  • To close loss-making services, even if this mean some consumers are no longer provided with the service.

Advantages

  • Some businesses are considered too important to be owned by an individual. (electricity, water, airline)
  • Other businesses, considered natural monopolies, are controlled by the government. (electricity, water)
  • Reduces waste in an industry. (e.g. two railway lines in one city)
  • Rescue important businesses when they are failing.
  • Provide essential services to the people (e.g. the BBC)

Disadvantages

  • Motivation might not be as high because profit is not an objective.
  • Subsidies lead to inefficiency. It is also considered unfair for private businesses.
  • There is normally no competition to public corporations, so there is no incentive to improve.
  • Businesses could be run for government popularity.
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