Comparing profits from state-owned companies and privately owned companies
is not healthy from an economic perspective because the first one doesn’t have as key
performance indicator targeting a big profit margin. The North American healthcare
system is based on cost principles, but has different output targets, and the stateowned medical system firstly targets increasing the quality of life and secondarily
reaching breakeven on costs; meanwhile the privately owned healthcare system
follows the idea of saving the patient, but being cost-effective, and also reaching
as secondary goal a bigger profit margin and of which a huge part is reinvested in
research and development (Bodislav 2015). According to Milward and Parker
(1987) and Stiglitz (1988), the state-owned healthcare system uses 2% of its income,
while the privately owned one uses 30–40% of its income. Stiglitz also underlines
that there are sectors of the economy that could be only covered by state-owned
companies, because they are the only ones that could internalize the losses.
9.4.1 The Impact of Privatization of Energy Sector in Great
Britain
The impact of privatization on welfare is part of economic evolution. During the
1970–1980s era in Great Britain, the rate of inflation skyrocketed, and as a reduction
measure, they implemented large-scale privatization and its key feature, allocation
efficiency, which although allows us to have an ascending trend on prices, the slope
decreased and stabilized them in the long run. For utility companies in Great Britain,
the governments targeted price ceilings until 1989, and although it was seen as a shift
of the burden toward the consumer, the ceilings limited investments from the private
area and pushed public investment which was supported by the taxpayers (Bodislav
2015). In Great Britain the distribution system for natural gas reached its privatization in 1986 and resulted in lower prices for the final consumer but also targeted by
the state with price ceilings. British Telecom was privatized in the same period and
price ceilings were established, but the outcome was different compared with
previous situations; although the company increased to its maximum tariffs because
of the lack of competitors, the overall tariff level decreased because it was a
liberalized market. These opposite results on the same situation are a result of the
macroeconomic perspective of policies and consumer behavior, but all changed with
the evolution of technology, especially in the telecom industry. In the waterworks
utilities sector, costs rose rapidly as an increase in new environmental policies and
healthcare measure for the consumer. One big component of privatization was
restructuring that can be largely implemented, but with huge financial and social
costs, in the case of British Coal, the European Union modified the structure of
obtaining classic thermo-energy by not only using coal but also by adding other
fossil fuels to the mix, and in this way the ratio evolved from 92% coal, 7% oil, and
1% natural gas to 63% coal, 32% natural gas, and 5% oil, components that had a
higher cost (Bodislav 2015).
9 Creating Sustainable Energy for Future Generations
149
is not healthy from an economic perspective because the first one doesn’t have as key
performance indicator targeting a big profit margin. The North American healthcare
system is based on cost principles, but has different output targets, and the stateowned medical system firstly targets increasing the quality of life and secondarily
reaching breakeven on costs; meanwhile the privately owned healthcare system
follows the idea of saving the patient, but being cost-effective, and also reaching
as secondary goal a bigger profit margin and of which a huge part is reinvested in
research and development (Bodislav 2015). According to Milward and Parker
(1987) and Stiglitz (1988), the state-owned healthcare system uses 2% of its income,
while the privately owned one uses 30–40% of its income. Stiglitz also underlines
that there are sectors of the economy that could be only covered by state-owned
companies, because they are the only ones that could internalize the losses.
9.4.1 The Impact of Privatization of Energy Sector in Great
Britain
The impact of privatization on welfare is part of economic evolution. During the
1970–1980s era in Great Britain, the rate of inflation skyrocketed, and as a reduction
measure, they implemented large-scale privatization and its key feature, allocation
efficiency, which although allows us to have an ascending trend on prices, the slope
decreased and stabilized them in the long run. For utility companies in Great Britain,
the governments targeted price ceilings until 1989, and although it was seen as a shift
of the burden toward the consumer, the ceilings limited investments from the private
area and pushed public investment which was supported by the taxpayers (Bodislav
2015). In Great Britain the distribution system for natural gas reached its privatization in 1986 and resulted in lower prices for the final consumer but also targeted by
the state with price ceilings. British Telecom was privatized in the same period and
price ceilings were established, but the outcome was different compared with
previous situations; although the company increased to its maximum tariffs because
of the lack of competitors, the overall tariff level decreased because it was a
liberalized market. These opposite results on the same situation are a result of the
macroeconomic perspective of policies and consumer behavior, but all changed with
the evolution of technology, especially in the telecom industry. In the waterworks
utilities sector, costs rose rapidly as an increase in new environmental policies and
healthcare measure for the consumer. One big component of privatization was
restructuring that can be largely implemented, but with huge financial and social
costs, in the case of British Coal, the European Union modified the structure of
obtaining classic thermo-energy by not only using coal but also by adding other
fossil fuels to the mix, and in this way the ratio evolved from 92% coal, 7% oil, and
1% natural gas to 63% coal, 32% natural gas, and 5% oil, components that had a
higher cost (Bodislav 2015).
9 Creating Sustainable Energy for Future Generations
149