ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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How to Get the Government-Owned Corporation Working

It is possible to structure government enterprises to work at improved levels of efficiency. In the private sector, for the most part, it is the markets that impose discipline. In the public sector there are generally no comparable disciplining mechanisms. However, there is nothing to prevent the creation of mechanisms for scrutiny and accountability for government enterprises.

The last few decades have seen large scale movements towards private enterprise in many parts of the world. Nevertheless, there remain numerous government-owned enterprises in almost every country, including the US. Some enterprises are government-owned for reasons of national security or pride, others because private enterprises don’t adequately internalise costs, and still others exist simply because they started out government-owned and it is hard to alter the status quo. Whatever the reasons, the fact is that we will always have some significant set of enterprises that are government-owned.

The question then is: Are these institutions doomed to operate at high levels of bureaucracy, sloth, political interference, and inefficiency? When one looks at the large fraction of these public sector units that are ailing, one is tempted to say yes. In a country like India, where there are so many troubled government-owned enterprises and, despite a great deal of rhetoric by politicians about large-scale privatisation plans, it has proved to be remarkably difficult to convert the ailing government units into private enterprises, the prospects seem especially dismaying. And the recent scandal at UTI – once thought to be the pride of the public sector – has only served to exacerbate that dismay.

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