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P. 19. The privatisation debate, p. 261.

Privatised and nationalised firms exist in England. After 1970 much has been privatised.

The early nationalised industries began with a port in 1908. The labour nationalised a lot after war. The latter (1960s) privatisation included iron and steel etc.

Arguments in favour of nationalisation

1. Economies of scale.

2. Externalities.

3. Capital expenditure.

4. Preventing the abuse of monopoly.

5. Control of the economy

6. Special pricing policies.

Maximising revenue.

Socially needy customers are preferred.

7. Social benefits.

8. Strategic reasons

9. Industrial relations

10. Socialism (major reason)

11. Loss of long-term revenue

Arguments against

1. Efficiency.

2. Abuse of monopoly power.

3. Bureaucracy.

4. Lack of incentive.

5. Declining industries (state is inflexible).

6. The corporate state is more democratic.

7. Political interference in nat. industries.

8. Profit when sold + taxes following

The objectives of nationalised industry

1. To break even (AC=AR) in long run.

2. To cross subsidise different customers should be avoided.

3. Meet financial objectives imposed by the state.

4. Social cost and social benefit analyses must be used.

Oftel and Ofgas were set up to control nat. industries. Total turnover of privatisation was 40b and it started 1970 with conservative government. When privatisation started prices of nat. industries services were raised to attract investors.

Average incremental costing (AIC) was adopted (easier)=

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