The state and the public sector
Some key features of the modern state are:
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Complete sovereignty in a defined territory;
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Legislative and coercive powers;
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Can raise taxation and distribute the proceeds;
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It is above sectional interests;
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The state’s autonomy is limited.
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International economic trends are outside of its control;
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The authority of the state is delegated to a supra-national institution.
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The public sector refers to all publicly funded or publicly owned bodies, even though it may not form part of the tools of government.
The extent and growth of the public sector is a feature of all advanced western economies.
Reasons for growth of public spending/sector:
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Industrialisation and urbanisation;
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Demographic pressures;
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Electoral pressures;
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Pressures from public sector bureaucrats and professionals;
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Pressures from users, clients and pressure groups;
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The welfare state.
There are tendencies in the public sector towards the proliferation of bureaucracy and increased public spending due to lack of discipline,
The current consensus is that the state’s role is an enabler rather than a direct provider of services.
Public ownership
Public ownership is when the state owns an enterprise or develops it. The state is usually responsible for:
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Utilities;
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Extractive industries;
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Transportation;
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High-tech industries;
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Commercial operations to be of major economic importance.
In the last decades, a number of areas of the public sector have been delivered to the private sector in a process of privatisation. The objectives include:
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Short-term reductions in public sector borrowing and expenditure;
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Greater investment;
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Remove control of industries from civil servants;
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Efficient management;
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Competition;
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Contracting out work to private firms.
Privatisation has had conflicting results. It has allowed privatised utilities to expand their services into foreign markets. However critics argue that the injection of competition and private management techniques have resulted in improvement.
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