Disadvantages of Privatization

Disadvantages of Privatization

Disadvantages of privatization are creation of monopoly, failure to manage the organization, decline in quality of service, unemployment, misuse of disposal receipt and purchase of future sale. These disadvantages has been explained below

1.    Creation of Monopoly

Privatization may result in creation of monopoly in the economy; monopoly is created where major competitor buys the public organization. Monopoly is not in the best interest of the people for many reasons. (Monopoly earn abnormal profits)

2.    Failed to Manage

New management may not be able to run the large organization, it is noted that public organization normally are very large, because those organization are created for a larger group of people. Therefore, it is not easy to run such organization with limited skills.

3.    Decline in Quality of Service

Privatization may result in decline of quality of service, because businessman or investor is more interested in profit than quality, where government is more interested in quality than profits.

4.    Unemployment

Other disadvantage of privatization is unemployment, because new investor would be interested to run with minimum labour source, where public organization normally over staffed, therefore some staff may lose their jobs.

5.    Misuse of Disposal of Receipt

One of the main disadvantages of privatization is to use the receipt of disposal in non productive projects.

6.    Purchase for future Sale

Privatization should not be future sale, but for improvement of services and competitive environment. It means that buyer should not sell the shares in stock exchange at higher prices by manipulating profit and earn easy profit.