Privatizing Infrastructure, Essay Example

According to Haarmeyer (1992), there are some significant benefits of privatizing public services, such as water distribution and management. The first benefit XXX mentions in the video is increased efficiency. The reason for this process improvement is that private companies – unlike public sector agencies – are motivated by competition and profits, according to Haarmeyer (1992, p. 1). Further, competition can lower the cost of management, therefore, customers (the public) can benefit from price decreases. XXX mentions two different scenarios: when the agency is struggling, and then they can reduce the deficit of their budget by allowing private companies to step in. When the organization is successful, however, they can use the service as an asset, sell it for a profit for a private company, creating funds for other important projects. Further, the sale would result in an increased tax revenue, as private companies have to pay taxes on properties and profits for governments.

With regards to water system privatization, Haarmeryer (1992, p. 3) states that “state and local governments increasingly lack the financial and technical resources to efficiently operate and maintain these systems”. The above is a logical argument, in particular when the water and drainage, cleaning systems are old and outdated, and an extensive amount of money needs to be invested into maintaining them. Further arguments used by the author are: the fragmentation of the systems, the high capital intensity of water management, and the services being under-priced. As the water management systems and resources owned by local municipialities are not engaging in market competition, according to Haarmeryer (1992, p. 7), they are “financially and operationally constrained”. This means that finding money in the local budget to maintain and modernize existing systems is extremely challenging for public agencies.

References

Haarmeyer, D. (1992) Privatizing infrastructure: Options for municipal water-supply systems.     Reason Foundation.

Class Video. (n.d.) Privatization.