Private VS Public Sector

So today I will be discussing the differences between the public and private sectors and then concluding which is better.

Firstly, it is important for me to disclose what the sectors are designed to do. These sectors are there in order to provide services and goods to people living in an economy, each individual sector is based on whether it is controlled by the government (public) or independent businesspeople and companies (private). There are a variety of arguments and counter-arguments about which one is better.

The private sector’s goals are to maximise profit for it’s shareholders, which is usually done through the most efficient means. This is because the product needs to be  produced as inexpensively as possible in order to  increase the profit margin. However, the goal is not primarily to provide services cheaply to everyone. For example, Tesla’s cars cost less to make than they sell for, and therefore Elon musk makes money and now is worth $190.5 billion. (according to Forbes).

On the other hand, the public sector’s goals are to provide services at a reasonable cost to the citizens and are, as stated above, government controlled. However, profit is not the primary objective. For example, the NHS in the UK which makes medical costs cheap and available for everyone.

So, which is better? To answer this question we must ask another, more commonly known as the economic problem. How to make the best use of scarce resources in order to satiate the infinite desires of people? This problem is split into 3 different parts:

·        Who should manufacture resources?

·        How should they manufacture resources?

·        Who to give the resources to?

Today we must attempt to answer the first and third part of the economic problem in order to answer the first question.

Which sector should manufacture resources?

This is a question about which part of the economy is more efficient with their manufacturing process. Most would rightfully claim it is the private sector due to its innate requirement for efficiency for profit, most of the private sector uses all of their purchased resources, whether it be for the desired products or immediate resale to get the highest value from their purchases. The public sector is relatively inefficient due to bureaucracy and corruption as well as profit not being their primary goal. Therefore some waste products are thrown away, , instead of being recycled and re-sold.

Whom should the resources be given to?

Most would say, “people who can afford them”. Referring to Tesla again, not everyone deserves a free Tesla, which would support the private sector over the public sector. However, if another example is taken, healthcare, do only rich people deserve healthcare? Should healthcare be leveraged by companies whose primary objective is to gain profit? Why should patients on their deathbed be forced to give away their financial well-being for their physical well-being? Which allows pharmaceutical companies and hospitals to exploit their patients. This is a chronic problem in the USA, where healthcare costs tens of thousands of dollars (without insurance).

I propose another question, which is cheaper?

Public sector companies are free (or very cheap) for public use thus it must be cheaper overall. However nothing would be further from the truth as these companies take money from the consumers of their respective nations as they are funded through taxes. These taxes are stolen from the pockets of all the citizens, masked as a tax. This stops any competition for efficiency for these public corporations as they are funded by these unavoidable taxes and are therefore more expensive as a whole to the economy than any private business. For example, in order to fund the NHS after being underfunded for a long time, the UK is increasing the National Insurance tax by 1.25%. National insurance is the cost of welfare services (public sector) in the UK including the NHS, and it costs an employee making £1000 per week £94.62 weekly, would be paying 9.5% of your total income to national insurance.

 

In conclusion, these markets have their own benefits and negatives however I believe that the private sector of the economy is better than the public sector due to the private sector companies being more efficient with their resources than their public sector counterparts.