The Public Sector
- The public sector is a key element of mixed economies
- Public sector firms are owned and controlled by the government and are usually funded through taxation
- Their main goal is usually to provide services such as education, healthcare or emergency services that may not be provided by businesses
Diagram: Examples of Public Sector Services
Hospitals, schools and emergency services are often partly or fully provided by the public sector
- Public sector firms operate on a local, regional or national government level
- Transport for London provides local transport in the London region
- Caribbean Airlines operates across several countries in the Caribbean, with ownership shared by the governments of Trinidad and Tobago, Jamaica and Guyana
- Comboios de Portugal provides train services across the country and in to Spain
- Governments are likely to retain ownership of organisations in the public sector for several reasons
- They are strategically important to the country, such as the defence or justice systems
- They provide essential services such as water, electricity supply or emergency services
- They are merit goods that may not be provided in sufficient quantities by private businesses such as education or health services
Public Corporations
- Public corporations are owned by the government
- They are usually businesses which were once owned by private individuals and have been nationalised
- In 2022, the German government nationalised Uniper, the country's largest importer of gas, to improve energy security as a result of the conflict between Russia and Ukraine
- In 2008, the UK government nationalised Northern Rock, a bank which was on the verge of collapse as a result of the global financial crisis
- They are usually businesses which were once owned by private individuals and have been nationalised
- Government ministers appoint a Board of Directors, which manages the corporation
- Directors are expected to run the corporation according to objectives set by the government
- Although they may be profitable, the aim of corporations is to provide a public service
- Governments should not interfere with day-to-day operations and decisions of the corporation
- Directors are expected to run the corporation according to objectives set by the government
Advantages and Disadvantages of Public Corporations
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Other Public Sector Enterprises
- In some cases, profit-making companies are partly owned or controlled by the government. They sell shares on the publicly listed stock exchanges so they are a mix of the private and public sector
- In the US, Amtrak (passenger trains) is a state-owned for-profit enterprise whose shares are majority owned by the federal government
- In the US, Amtrak (passenger trains) is a state-owned for-profit enterprise whose shares are majority owned by the federal government
- Other businesses are funded by central and local government but may still levy charges for some services
- The NHS is free at the point of use for British citizens, but they must pay for medical prescriptions, some procedures and parking on hospital premises
- The French state funds leisure facilities such as swimming pools and public sports venues but usually charges users a small fee for their use
- Due to the constraints of government spending in many countries, many services are now being privatised or suffer from insufficient funding