What is the role of the private sector?

The public, government and private organizations play an important role in creating and maintaining a strong society. In this article we look at the role of the private sector in society and why it is one of the most important functions of businesses.

The word “public” comes from the Greek word “polis” which literally translates to mean the “collective” and is used to describe a group of people livingin the same area or nation.

Governments are the “collective” of people to govern themselves. They carry out duties and projects for the benefit of citizens. Public institutions include the police, fire department, educational and religious institutions, libraries, military, etc..

  • Governments collect taxes from citizens and use these funds for running their functions.
  • The government collects taxes from businesses that sell products and services and use these funds torun their operations.
  • Citizens can contribute money to the government which they give for various purposes. For example, they can pay their taxes, donate to charities, vote for political parties or participate in political protests.

There are advantages and disadvantages of government taking an active role or leaving some of the work to be carried by the private sector.

The Role of Private Sector in Society

Therole of the government is to come up with policies and laws that allow the free flow of businesses and economy. The government is responsible for providing infrastructure – roads, electricity, water, sewage, internet, communication,etc. – to the society. This includes the public administration services such as tax collection, registration of companies, conducting elections and drafting laws. The government is also responsible for setting rules and regulations that govern the actions of people. This includes traffic rules, taxation, immigration,health and safety regulations, workplace safety and other standards. Businesses have the freedom to operate within the law. If it is done in accordance with government policy, it is known as an “industry”. Otherwise, it is known as “illegal” businesses and can face punishment from the government.

  • A company, for example, can register as a company and can set up their office premises as per thegovernment rules. It can buy goods from the market and sell them to its customers. The company is responsible to abide by government policies to operate. The company needs to follow all federal, state and local laws and pay taxes. Every country has their own set of laws and they must comply with these laws to operate. As long as the company follows the rules and pays thetaxes, they are able to run their business freely. Final words on policies should be left to politicians to make trade-offs.
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Legal Business

  • If the government passes a law that is not in line with their business operations, they are free to protest and campaign against this law. In the same way, citizens have a right to protest against any law that affects them. Government is answerable to voters for any bad or failed policies.

Economic Development

  • As part of government regulation, businesses are also not allowed to collect personal information from customers without their consent. They also need to protect customer privacy and ensure safety and security of payment information.

Customer ProtectionOne of the main roles of government is to protect our national security. It includes maintaining law and order, providing defense forces and protecting the country from foreign invaders. There are different types of government departments that deal with security issues. Law enforcement agencies and national intelligence have to be operational at all times to maintain good security conditions. For example, theFBI or National Security Agency (NSA) in the U.S. has to protect the national interest and acts accordingly. Similarly, the MI5, MI6 and CIA in the UK or CSIS in Canada have the responsibility to gather intelligence data for protecting national interests.

It is important that the government agencies have the necessary technology, equipment and resources to carry out their tasks. Thisincludes land and building space, vehicles, communication devices, weapons, etc. These all need to be purchased by either the government or private companies. Depending on the level of corruption, government funding is used by many agencies to buy cars, electronic gadgets and other equipment.

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Whether it is the police department or a local government body, all government employees have to be paid fromtaxpayer’s money.

In an effort to cut cost, governments are increasingly outsourcing work to private agencies. For example, a company can bid for a contract to build highways for the government. As a private firm, the company will hire their own staff, buy equipment and materials and build the highway. They will get paid by the money collected from taxpayers to build andmaintain the road.

If a company does not do a good job, the government can withdraw the contract from that company and give the work to someone else. Because of this, the companies always try their best to carry out their task in a proper manner and improve their quality through training and competition.

The advantage of privatizing these tasks is that politicians and civil servants do not have to spend their valuable time in carrying out these administrative tasks. There are employees and suppliers who are specialized in performing these tasks. It is also beneficial for the employees as they can work in their own field and get paid a higher salary orcommission.

Overall, when a government outsources some work to private enterprise, it will save taxpayers’ money. There are many tasks that a private company can perform more efficiently than a large government agency. This is because private companies have to hire, train, motivate and pay their employees. The private agency is able to get the job done more quickly than a government agency because their employees have the responsibility to create value for their own company. They are accountable to their managers, owners and stakeholders and thus they will put in the necessary effort to get the job done. Meanwhile, government employees are accountable to thepolitics, bureaucracy and inertia of public sector. If an employee is promoted or loses the job, it does not affect or impact the service provider’s bottom line which will potentially affect their performance. Private companies are also responsible for their well-being and reputation. The employees are held responsible for their actions and mistakes.If they make a mistake, their reputation and career can be affected. In contrast, a disciplinary measure or firing of an employee will not affect public service agency. The governments can also save money by hiring external consultants.

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Using External Consultant vs. Hiring Employee

Contribution of Private Sector for Society

Most of the costs for society and governmental facilities are covered with themoney contributed by the private sector. The businesses have to pay taxes to the government and in return, they get use of roads and other infrastructure. The funds accumulated by the government are used for funding their various functions and operations. Businesses also contribute by providing jobs and income to the society. The money earned by a business is kept in the company and this money isused for buying products and services. This cycle of money from business to government and back to business again is called the “capitalistic cycle”. This cycle ensures that there is a continuous flow of money in the economy and public services are funded.

Dannie Jarrod

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