Public Management and Administration - Owen E.hughes

Public Enterprise 97
In sum, there has been no single consistent governmental aim for using public
enterprise. There have been a set of diverse reasons beyond mere profitmaking.
Public enterprises have always had objectives other than to make
money. Of course, a government has the power to involve itself in any part of
society, which must include creating its own enterprises.
Kinds of public enterprise
A public enterprise is a particular kind of statutory authority: one that sells
goods and services to the public on a large scale, with the financial returns
accruing in the first instance to the authority itself. Most public enterprises are
in the non-budget sector, and operate with substantial independence. Public
enterprises provide many services including, in some countries, utilities such
as telecommunications, electricity, gas supplies, water and sewerage; transport,
such as rail, airlines, shipping services and urban public transport; financial
services, notably banks and insurance companies; and agricultural marketing.
Some countries have government-owned oil companies, motor vehicle companies,
tobacco and alcohol companies. Indeed, it is hard to imagine a particular
product or service that has not been government-owned in at least one country
at one time. The only point in common of all these is their government ownership.
As they differ widely from each other, and face quite different environments,
some kind of taxonomy needs to be developed.
Public utilities
Public utilities provide services – water, sewerage, electricity, gas, and
telecommunications – considered essential for the economy as a whole. These
are usually provided as services with connections to households from a network.
This makes for two unusual features. First, the household connection
means there is a real, or at least a tendency towards, ‘natural monopoly’. Once
a network is established, it becomes continually cheaper to add extra consumers.
Competition is constrained, as the cost of providing service to a new
customer for a new entrant to the industry, faced with the cost of establishing
a network, should be higher than the rate that could be charged by the incumbent.
For example, with wire-based technology, competition in the local telephone
network or in electricity distribution would mean an extra set of cables
being laid in each street and electricity poles on both sides of the road. Since
the initial expense would be too great, a new entrant at this level is most
unlikely and there is, therefore, a tendency to monopoly provision.
Secondly, the essential nature of public utilities means the services they supply
are politically sensitive, with great disruption to the private economy and
households resulting if supplies are interrupted. Water and sewerage connections
are matters of public health as well as natural monopolies; modern life