law of public enterprise part one

1. Lecture One
The Law of Public Enterprises
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2. A Brief Conceptual Outlook of Public Sector
Economies and Public Enterprises
In a modern society, the state bears the
responsibility to undertake all-round functions
that touch upon every aspect of individual life
of citizens and the society at large.
The state duty to dispense economic justice
requires the state to give solution to economic
instability such as macro-economic problems.
(i.e. unemployment, inflation, wealth
inequality and issues of economic growth)
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3. The state would have economic tools at its disposal
in order to discharge its functions in the
economy.
Public sector economies is one of such tools.
The public sector is more than just a simple totality
of enterprises, but is generally a special system
whereby the state uses its property (including
those enterprises), which enables different forms
of state intervention in the economic processes in
order to deal with specific economic and social
problems.
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4. Public sector economies is grown rapidly after
WWII especially in the countries which got
their independence after the war.
However, the nature of public sector economies
is dependent up on the politico-economic
ideology followed by the government who
hold power.
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5. • How public sector looks in the developed
economies?
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6. Ideology
1. Socialism
a. public sector ownership and control of large-scale
production and distribution facilities
b. It calls for the national mobilization of internal
resources and creation of an advanced public
economy
c. It uses nationalization of a property belonging to local
and foreign private sector
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7. 2. Capitalism
a. it underlies the economic dominance of private
groups.
b. It is guided and reinforced by market mechanism
and competition.
c. The public sector is significantly minimized and it
plays regulative and supplementary roles.
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8. State intervention in the public sector is
undertaken through establishing public
enterprises. The importance of such
enterprises is, however, differ from one
country to another depending on the above
factors.
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9. Why public enterprises are chosen as a form of state
intervention?
to fill the gaps left in the economy by private enterprise,
either because of the size of investments required or
because of the unpredictability of the project;
to provide a basic infrastructure for the economy;
to promote greater national economic independence;
to provide some measure of check over or at least
competition with the private sector;
to obtain greater control over the economy,
to ensure a more balanced distribution of industry and its
rewards.
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10. Another alternative to establish public
enterprise or state intervention is
government’s control.
Such control can be regulatory or prohibitory
methods.
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11. Public enterprise strategy
• There is ownership
• Broad discretionary power
is essential
• More predictable and
controllable
Regulatory strategy
• No ownership, it is through
control
• There are generalized rules
• Less predictable and
controllable
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12. Common weaknesses and problems of public
enterprise and regulatory strategies:
dominance of the external;
largely foreign environment;
corrupt and powerful local elites, who in collusion
with foreign interests, manipulate the local
economy for narrow class or group purposes;
unresponsive political systems.
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13. Public enterprises are engaged in production
and provision of public goods in which no
private enterprise is not committed to engage
in.
Public goods are:
• Non-rivalry
• Indivisible
• Incxcludable
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