Advantages and Disadvantages of State Ownership

520 Words2 Pages
Introduction In some democratic socialist governments, some industries as well as manufacturing enterprises considered important are typically run by the state. This text highlights the various advantages and disadvantages associated with state ownership. State Ownership: Advantages and Disadvantages State ownership according to the Organization for Economic Co-operation and Development - OECD (2005), "includes businesses in several sectors, notably utilities and infrastructure"¦" It should be noted that most of the state owned enterprises are in themselves vital, that is; they are critical for the normal functioning of the society. As OECD (2005) points out, state owned enterprises are typically insulated from two things i.e. bankruptcy and takeover threats. There is hence a need for the state to run some enterprises whose collapse could interfere with economic growth and development. This is more so the case for enterprises offering education and medical services. According to Low (2000), "conventional motivations for state-owned enterprises include industrial restructuring and promoting certain industrial structures, such as when the state pioneers certain industries." The author further notes that in some cases, public monopolies are viewed more favorably than private monopolies. State engagement in natural monopolies is hence more desirable. It is also important to note that some sectors require significant investments which may be out of reach for other
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