Private vs Corporate vs Public Enterprise

There is allot of Ideological rubbish in the debate about public vs private enterprise.
Let me state at the outset that I am not against private enterprise. In fact, I believe it is the backbone of freedom of the individual, and an effective vehicle for innovation.

In it's most basic form private enterprise is the sole operator offering his/her skills direct to the user. As the scale of operation increases we get partnerships and private companies. These businesses have direct feedback from the customer to the ownership. The owners are directly affected by the success or failure of their own efforts. The natural tendency is to good service at a fair price. This of course is no guarantee as, with every aspect of society, there are some greedy and shonky people involved.

I won't include joint stock companies (publicly listed companies on stock exchanges) as these entities are not strictly private enterprise. I will use the term "corporate." The owners of the business are normally not the operators/workers of the business, they are mostly anonymous investors who's motivating interest is profit. These entities attract the most rapacious individuals into management, who then strip as much remuneration as they can from the business, without any real risk. In fact we have seen many instances where some incompetent CEO and team totally ruin the business yet still end up with the "golden handshake." They also have a tendency to use their board positions to "buy" favours from the political sphere. How many companies have ex politicians on the board?
These structures have the ability to develop into immensely powerful, trans national, economic nodes. This creates distortion in the free operation of both the economy and politics.

Public enterprise has been under concerted attack by the corporate sector eager to get it's hands on the assets and the possibility of monopoly inflated profits. Public sector enterprises when properly resourced and managed have been a very cost effective deliverer of services. They have also been used to set standards for the private and corporate sectors, helping to reign in some of the excesses. They also have been used to train workers to a high standard, as quality was regarded as more important than cost cutting. Many of these well trained workers were then snapped up by the private sector. This training role has been undervalued in the private/ public debate. Public sector enterprise is also ideally suited for the provision of "caring" services. Health, welfare, education etc. In these requirements of the population, to have profit as the primary motivation of the provider, is to virtually guarantee cost cutting leading to poor service provision. Too few nurses to do a proper job, poor facilities, heartless administration, etc, etc. We hear of these atrocities all the time.
Unfortunately most of our Governments have been captured by the Corporate Sector and are busily selling off all the best public assets, often way under value, and underfunding the rest to prepare the public, through discontent with the declining service, for the inevitable sale.

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Comment by Darron Passlow on February 1, 2011 at 3:49pm

Here is a comment from Davos. There are others concerned about "business malpractice" and what can be done.

Comment by Synaps on January 31, 2011 at 11:55am
Thanks for the comments Wayne.
You've actually hit on the core problem in all spheres of life. Quality of management. Part of which, and the initiating part, is motivation. What are the motivations for doing this thing? If it is to povide a good service for the benefit of society, then I believe, with the ups and downs of life taken into account, outcomes will be good. If other motivations are primary, then I suggest we are on sticky ground.
This is the main point that I'm attempting to bring to the fore for discussion. It is the quality of intent that first needs to be addressed as all action flows from it. Some ability in management is also useful.
Comment by Wayne Eddy on January 31, 2011 at 9:00am
Thought about this a bit more over the weekend. I think not-for-profits can also loose their way.
Logically, unless organisations evolve mechanisms over time to ensure that they continue to exist, they will disappear. Unfortunately the corporate will to exist can easily become more important than the organisation's original purpose.
Comment by Wayne Eddy on January 27, 2011 at 2:01pm
OK, I think I am pretty much on Synaps' side in this debate. I understand the theory that corporations end up being more efficient than governments because of competitive pressures, but I can't think of very many examples of the sale of government utilities to corporate enterprise resulting in cost savings for users.

I also think that in the 21st Century collaboration will become more important than competition, and that governments are in a better position to encourage collaboration than the corporate world.

There are exceptions. Despite its detractors, I see Google as an example of a corporation that is doing the right thing, despite huge profits. But that could well be because its founders (Larry Page & Sergey Brin) are still at the helm, which actually supports Synaps' theory.
Comment by Synaps on January 25, 2011 at 12:25pm

Thanks Darron,

Dialogue is much more fun than monologue, and both sides of the discussion bring valuable insight.

Comment by Darron Passlow on January 25, 2011 at 11:44am

I will bail out of this debate now as I can see we are getting nowhere and stating the obvious to make our own point. It would be nice to see comments from others.

If you have not already, you should look to join the WikiLeaks army (that is gathering daily momentum) to bring "untruths" to public attention (I assume so they will be rectified). Unfortunately WikiLeaks has been pointing out the flaws in Government and governance (or at least this is where main stream media has focus its WikiLeaks commentary). But I understand there is more to come, including corporate greed!.

I am a fan and there is a strong worthwhile debate on OzLoop (started by Steve) that is worth reading, thinking about and perhaps commenting on.

Regards and have a nice day.

Comment by Synaps on January 25, 2011 at 10:20am

Ah,Darron, I think we have a slight disconect in terminology. If you were to read my post again ,you may notice that I give "private enterprise" a good rap. It is the Ltd corporation and the mind set that goes along with it that I am critical of.

Do you not see how the Corprorate model has been gobbling up both the "private" business sector and much of the public sector over the years? Is not the true role of business to provide the population with the other goods and services that it requires that are not provided by Government or the individuals own efforts?

I see you agree that the "corporations must have a social conscience", but we seem to differ in that you seem to think that mostly they do, whilst I see many examples of where they don't.


I will add a clarification withn regards to the difference between "private' and "corporate". I see the worst affenders as the large corporation that are run by those that did not found the company. Those that are still run by the founder mostly still have the  actual service provision as their primary motivation. They founded the business because it was their passion to provide the service. These companies are in a state od flux moving from the "private"  sector to the "corporate sector". Once the "proffesional" managers  take control the whole emphasis is the maximisation of return to the share holder. This is their duty. Take a look at the rules of incorporation for Limited liability public companies. They are largely a law unto themselves, with little provision for prosecuting bad practice. Most of the regulation then falls to civil courts, and we have seen how successful asic has been in it's attempts to clean up bad practise. These are  design flaws built into the system to avoid responsibility whilst maximising returns on invested funds.

If we must delve into the details to get this across, so be it. Examples (not necessarily Australian as it is no longer a relevant jurisdiction when it comes to the "corporate " sector).

James Hardy and the Asbestos travesty.

Exxon and the Valdise.

BP and the American Oil spill.

Union Carbide and the Bopal atrocity.

The Banking system that caused the GFC.

Shell in Nigeria.

I will not add more, it's too distressing to call to mind these criminal and evil examples of corporate "good intentions".

Yes some "corporations" act in responsible ways, some tell us they act in responsible ways but don't. And others don't give a toss and sue or harrass or persecute anybody that says they are not acting in a responsible manner.


Comment by Darron Passlow on January 25, 2011 at 8:47am

No, no no! You should read my post again. I do not agree with your ideas expressed above.

Your comments seem to have a very socialistic bias. And good on you for that. I do not class myself as a capitalist (and try to have a balance view) but I do believe in the value of a profit making corporate approach. However, I do believe that corporation must have (generally do have) a social conscience. There are exceptions to every rule.

Corporations are different to government (I think you acknowledge this!) in that corporations need to make a profit to continue to exist. You seem to forget (ignore) that corporations do employ (or have employed) the majority of us and provided salaries (which lead to personal taxes). Responsible corporations pay taxes. Imagine the situation where corporation could not make profits, so they close their doors and "we" have no jobs to go to. What do we all go and work for the government. The government would quickly close down without the taxes unless they could generate revenue and profits to survive (so around we go!)

So if you read my note again you will see that I am in favour of corporations making a profit (I do not call this capitalism as this has a bad connotation and is not necessarily an accurate description) but I am also in favour of government looking after our interests and "keeping the b..... honest". The majority of businesses realise they need a social conscience and need to embrace social good (and this is enhanced by their employees, who are just like you and I - the public).

This need for social good should be enforced by government and be encouraged via close, trusted working relationships with business and their communities.

This is basically what Gov2.0 (and open government) can do for us and this is why I am such a staunch supporter and advocate for Gov2.0.

Happy Australia Day to all.

Comment by Synaps on January 25, 2011 at 7:35am

Hi Darron,

Thank you for your comment.

I think you should read your comment again, apart from an initial putdown, you have basically agreed with what I have said.

The capturing of Government by the corporate sector is mostly through influence of their economic power, which if exercised properly is somewhat legitimate (though Government is for the People not the corporate sector), and through mindset, as the "corporate" view of economics has "infected" the thinking of polititians and bureaucrats. We have been hearing the corporatising mantra from Government for years. Why is that? Some of it was to cook the books, isolating individual budgets out of the normal budgetary process. And some of it seems to be some sort of cultural cringe(thats not how the Americans do it?). There would not be any smell of corruption of course.

The Government hasn't sold off the best assets? Commonwealth Bank? Telstra (PMG before being corporatised) Power Assets, Queensland rail? Etc., Etc.,Etc., How well have those gone for ALL of us. Instead of the profits going back to offset tax collection, and in the light of Governments terror of offending the super rich by raising taxes, they have opted to cut spending on essential services. 

The previous Liberal was especially culpable. Instead of investing the proceeds of a booming economy in needed infrastructure, they used it for porkbarreling and tax cuts for the rich.

 You have given examples of just this, and confirmed my assetion " underfunding the rest to prepare the public, through discontent with the declining service, for the inevitable sale."

("The asset management planning has been so bad that a lot of key assets (in a number of portfolios are in such bad condition, there is significant expenditure required to get the assets back so that they can provide the required (promised) services. So government then realises it cannot "foot" the bill to get some (all) assets back into a workable state and deliver on promises")

"Corporations are not the "baddies", they are focused on business and making a profit" is exactly the problem. Business and Profit are not the proper motivating intent for the provision of services to the population. I don't believe I called them "baddies", though there would appear to be some in their ranks. They are at fault in this by the basic design flaw of the corporate model. THEY ARE FORMED FOR PROFIT. So now those services that were previously provided by Government at cost ( if there were any profits, they offset taxation), now have to be provided with cost plus 20% 30% 50% whatever profit plus obscene renumeration for the executive cabal. Make sense?

Comment by Darron Passlow on January 24, 2011 at 7:35pm

This post provides a biased and unjustified attack on the private/corporate sector and its involvement with government. I disagree whole-heartedly with the premise that..

"most of our Governments have been captured by the Corporate Sector and are busily selling off all the best public assets". This is a ridiculous and unfounded statement and too general to be taken seriously.

I have worked in private, corporate and government spheres and have seen a completely different approach and explanation for what we see externally (when we are not involved). The comments in the above post seem to come from someone (hidden under a pseudonym) that has not been there but is an observer from afar!

As an example, take the recent atrocious (clandestine) attempt to sell off the NSW Power assets.

I worked in the power industry for years, when it was government run and managed (very successfully - 70 through 90s). Then profits were appropriately divided up and distributed only after future operating and rehabilitation costs were allocated (and put away). More recently the state government has extracted significant dividends while the state run entities have neglected the key asset management issue of "putting money away for a rainy day" (having money to rehabilitate and renew aging infrastructure). Note this has not just occurred in energy but across the state government portfolio - rail, transport, education, hospitals etc.

The asset management planning has been so bad that a lot of key assets (in a number of portfolios are in such bad condition, there is significant expenditure required to get the assets back so that they can provide the required (promised) services. So government then realises it cannot "foot" the bill to get some (all) assets back into a workable state and deliver on promises.

Along comes private and corporate enterprise. Astute corporations are always on the look out for new opportunities and worthwhile investments. Corporations take a long term view to managing assets and hence can see the wisdom of large upfront investments with gradual returns occurring over years (decades).

Corporations are not the "baddies", they are focused on business and making a profit (sometimes in the longer term). When government poorly manage their assets it does provide significant interest (opportunity) for corporations. 

However, what we as the public need to ensure (by constant surveillance) is that the sale of assets by government to private enterprise is done at a fair value and represents a "win" situation for the constituents. Government does not need to concern itself with the WIN for corporates as they can adequately look after their own interests.

So in part I am agreeing with the above post, in that we (the public) need to be vigilant and keep governments honest.

This is happening as we discuss this issue here in NSW as there is an ever louder chorus of objection to "adhoc", unjustified sell off of state (government) assets. The NSW power industry is a hot topic of discussion at the moment but this is only one issue in a list of issues arising from poor government management decisions.

This leads into the unquestionable need for "open government" and the delivery of all the values extolled in the Gov2.0 debate.

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