Privatization is a word that is used to refer to the transfer of activities that are related to
the public sector to the private sector. In other words, it is a phenomenon where governments
contract for privately-owned companies to provide services that have been previously provided
by the government. Over the past decades, Canada has experienced many privatization activities
involving federal and municipal governments increasingly reducing their direct involvement with
the Canadian economy. Most of the privatization activities in Canada have involved the sale of
Crown corporations, contracting of privately-owned farms to deliver public services, and also
transferring most of the infrastructure development to the private corporate sector. In this
literature study, the pros and cons of Canada being headed towards privatization will be weighed
and as a result, come up with a properly structured conclusion to propose or oppose Canada
being privatized.
Even though most public officers see privatization as a remedy to most of the occurring
government ills, it remains to be a highly controversial activity within the public sector. That, it
is also important to understand that both the proponents and opponents of privatization base most
of their arguments to argue with each other by only focusing on their side of the issue. Those
who favor privatization in Canada base most of their arguments on financial gains of involved
deals as well as efficiencies from operations carried out by the private sector (Le & Robinson
2018). On the other hand, opponents of privatization in Canada stress the on matters regarding
social implications. Hence, it is important to look into the issue critically to come up with what is
best for the citizens living in the country.
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Arguments for Privatization
Several reasons have led to various public authorities to turn into privatization all over
the world and Canada is not left out. Most of these reasons for privatization have been identified
to range from government having constrained capacity to build as well as maintain necessary
infrastructure, the efficiency of the private sector, budget challenges, and lack of viable
alternatives. Most of the drivers are based on investment demand which can generate cash as
well as be able to protect inflation among those willing to have a hand in the very low borrowing
costs.
First, privatization has been identified to be an effective way that the government of
Canada can use to fund critical infrastructure-related needs. For instance, Canada is a big country
in the global era, privatization can be employed in its cities to build as well as enhance its social
and physical infrastructure to make it remain a competitive country. That coincides with the
challenges it faces to obtain funds for such types of upgrades.
Privatization has also been identified to be a great source where the country can obtain
immediate revenue in instances where the country might be undergoing a constrained budget. It
is important to note that most of the current policymakers all over the world favor privatization
as a way in which to deal with the government having strained finances. Demographics show
that most of the developed countries like Canada as well as other industrializing countries like
China soon will have to incur huge additional costs in the public sector since citizens are living
longer lives and have fewer children (Boardman et al., 2016). Thus, there is new stress to fund
old-age benefits since retirees to workers ration are expanding. It is believed that privatization
will offer a large source of revenue that can meet such kind of budget challenges.
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It is also important to note that most of the private infrastructure funds attract investment
vehicles linked with certain investors, thus enabling the privatization of infrastructure by
appealing to potential bidders. It might seem or look like a curious fact, but some of the biggest
banks in the world are the largest players in global privatization which Canada is not an
exception from that. In fact, in most instances, financial corporation investors have been attracted
to infrastructural related investments because of the premiums that often yield over corporate and
public bonds.
In Canada, some of the available alternatives to privatization seem unattractive. For
instance, most privatization decisions do not take place in a vacuum which is a policy that has
often been lost in most of the public discourse. When having an activity such as the long lease of
public assets, there comes with a big potential to generate enormous public revenues. In a
different view, the reality is that, if revenues are absent in case privatization does not occur, the
government is tasked to choose a different course either raise taxes, borrow, or spend less among
other unattractive procedures.
Risks of privatization
Privatization is seen to be an extraordinarily powerful tool for governance in any
government and Canada is no exception. Just like any other tool, it is prone to be incorrectly
used especially in wrong circumstances, or with malevolent intentions. At times, privatization of
public assets brings about severe implications that might end up stretching across generations
and involve loss of billions of cash. Therefore, some considerations need to be taken into
perspective before any privatization decision is undertaken.
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One of the greatest impacts of privatization in Canada is constraining its future options
since it will place public assets under private control for some time (Whiteside 2013). Mostly, a
privatization contract is written only demanding some kinds of performance measure whoever
which only includes those that are visibly anticipated at the time the contract is written. In
reality, a lot can change since the public is left with no control over a private entity which
follows an outdated contract that does not reflect the interests and expectations of the public.
Thus, if control is left with an elected government the control is with voters and they decide what
to happen with a particular asset and the government is unhindered to cater to the evolving
preferences.
Sometimes privatization results in socially aligned implications that affect certain groups
since the primary benefit of privatization are only due to efficiency in the private sector. In most
cases, profit-driven firms lay powerful incentives that increase revenues and reduce costs. Those
incentives might be good but in the long run, they might end up bringing adverse social effects if
some key public assets are in the hands of the private sector. For instance, private operators
might cut costs by harming the vulnerable segment of society such as the low-income segment.
Also, they might end up creating costs that might end up spilling over to the public sector. They
can also make good assets more popular leading to increased revenues although it may not be for
the best interest of society.
Privatization puts a country at risk of stealing from its future since it deals with
generating huge revenues in the present in exchange for the revenue streams that might have
accrued to the citizens of the future. It is a two-way scenario where future generations can
benefit if privatization revenues are invested back into things that increase productivity in the
future or be robbed of cashflows after sums of cash are squandered to pay for current expenses.
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Sometimes private owned entities might end up failing to fulfill obligations that they are
expected to complete in the contract (Crisan 2013). In simple terms, the privatization contract is
only good depending on monitoring and how it is enforced. Thus, privatization is based on
contractible quality and the contact doe not enforce itself and therefore a government is still
required to oversee privatization contracts and have a working strategy in case private firms fail
to fulfill its obligations.
Conclusion
Based on the above discussion, privatization can be seen to be a good governance tool
that Canada can use since it is among one of the country’s in the world having big economic
muscles. However, privatization of some of its publicly owned agencies should be put into many
considerations to make sure that the interests of the present and future generations are held. That
might include coming up with adjustable contracts, proper oversight, the appointment of properly
scrutinized private firms, public participation among many others. In so doing, it can achieve
great success as well as ensure its infrastructure matches the then-current standards through
involved private sectors' firms for the benefit of its citizens.
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References
Le Grand, J., & Robinson, R. (2018). Privatisation and the welfare state. Routledge.
Boardman, A. E., Vining, A. R., & Weimer, D. L. (2016). The long-run effects of privatization
on productivity: Evidence from Canada. Journal of Policy Modeling, 38(6), 1001-1017.
Whiteside, H. (2013). Stabilizing privatization: Crisis, enabling fields, and public-private
partnerships in Canada. Alternate Routes: A journal of critical social research, 24.
Crisan, D., & McKenzie, K. J. (2013). Government-owned enterprises in Canada. SPP Research
Paper, (6-8).