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Essay: Privatisation in Germany

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  • Subject area(s): Sociology essays
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  • Published: 18 October 2015*
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  • Words: 765 (approx)
  • Number of pages: 4 (approx)

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Germany can offer a relevant case study I privatisation. When it partially privatized, it initially maintained the government monopoly but gradually progressed to complete privatization and removal of the monopoly. Currently, Germany is one of the most effective international posts on at least one important the benchmark’non-domestic revenue. This country is the number one, in Accenture’s analysis of “non-domestic revenue” as a percentage of total revenue among 24 international posts in 2008 (69 percent and 68 percent, respectively,). Given the state of technology, privatization is probably the only long-term solution for the Postal Service. However, the USPS is currently so burdened with interference from the government that investors would likely would not touch it. Simply put, the governance structure of the USPS is flawed, and its ability to realize commercial success is very limited. A better approach would be for lawmakers to reject the concept of government-enforced monopoly on mail delivery and thereafter expose the monopoly mail provider to competition. If the government were to eliminate the regulations and if the Postal Service were to revise its business model along the lines recommended by former postmaster general John Potter, then probably privatization might become more attainable, and investors might as well become more interested. However, complete removal of the monopoly does not necessarily need to occur at the onset of privatization. Alternatively, the postal monopoly can be eliminated over time. Such a policy would alleviate the concerns of the general public, lawmakers, and capital markets about the successful continued operation of the U.S Postal Service. This would increase the acceptance of privatization by each of these essential groups.
While the post-struggle years were characterized by nationalizations of large parts of American infrastructure, since the 80s and 90s many key state-run industries have been privatized.
The most important part of privatization is that the private sector capital would bring with it ‘private sector disciplines’, and result in a service which efficiently run and is effective in service delivery. In addition, the private sector capital would be more flexible than government funding. It can be raised more quickly and does not require lengthy State Aid clearance – which can take up to 18 months – from the European Commission.
In many of the major privatizations of the 1980s and 1990s, the government opened up the sale to members of the public by selling shares on the Stock Exchange market. Historically these sell-offs have been hugely popular with the public, but, in the long run, most individual investors have been selling their shares to the institutions. The government has a choice to either float USPS, although this type of sale is very expensive to administer. The other option is for the government to sell USPS to another company. This could be a sale to a national mail provider. Alternatively USPS could be sold to a private equity group. However, private equity firms are often regarded with some suspicion as many financial reporting regulations do not apply to them. Private equity has had a bad press over the years, Market liberalization, which results in a shift away from the traditional government-run monopoly model of postal operations, is the best model for USPS. In this model, the postal service flexibility is increased as well as competition due to opening up the postal market for other players.
The liberalization process should, however, go hand in hand with a continued government regulation of postal markets after the reform. Typically the regulator not only mandates that universal service obligations are met, but also requires that markets previously dominated by an incumbent postal operator remain competitive. In addition, the government mandates service standards and pricing. The idea of liberalization is fraught with fears of post-office demise, a decline in either the quality or universality of the postal service, and/ or a significant increase in postal prices. However, these fears have not materialized in the countries which have liberalized their postal services such as the Royal mail in the UK which was recently liberalized by passing the Postal Services Act 2011. The Act allowed for up to 90% of Royal Mail to be privatized, with at least 10% of shares to be held by Royal Mail employees. The liberated Royal mail has continuously shown the ability to offer its customers an affordable, reliable, universally accepted and increasingly efficient postal delivery services with Share prices rising by 38% on the very first day of conditional trading, About a half a year later, the market price was as high as 58% more than the sale price and peaked as high as 87%. (Royal Mail Privatization (August 2011) “What it Might Mean for Subpostmasters and the Public”, The Subpostmaster).

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