What Are Advantages Of A Private Sector?


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David Gill answered
Without a private sector the entire economic system would be state run. This may not be a bad thing, if the state in question was benign and run for the people; the communist ideal. This is very rarely the case and so a private sector helps overcome difficulties associated with state controlled economies.
  • Competition
A state run economy allows only one choice of goods or service. When these services are offered by private companies the consumer has greater choice. With more than one service or product provider to choose from, higher demand sees more competitive prices.

  • Employment
Another major benefit of a private sector is the creation of jobs. In a state run country, jobs can be scarce because there are only a finite number. The private sector promotes increased competition and there is opportunity for job creation. Private sector employees can earn more than their government counterparts.

  • Why do we have a public sector?
The private sector isn't necessarily all good. Capitalism is vulnerable to the same problems as Communism; namely greed from those in power. The private sector allows competition and provides consumers with choice, but small businesses are often trampled underfoot by their established peers.

  • Isn't that what competition is about?
Small businesses can't match the prices of large corporations due to their own limited capital. This can lead to a handful of companies dominating an industry, leaving little choice for the consumer.

  • So I'm confused - is it good or bad?
It can be extremely beneficial to society, as long as there is no massive disparity in wealth. With the deterioration of local businesses and domination of multinational corporations the competition laws either need to be reviewed or enforced.


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