Custom «Privatization» Essay Paper Sample
“Denationalization also known as privatization is the act of a changing a government run firm into a private sector firm” (Hayek, 1977). This process is only possible when the government sells or redistributes the firm previously under its control to the general public in an equitable manner. Money is one of the products that are being denationalized in modern day world. Initially, the main reason for government monopoly in money was in the sense that money is a sensitive matter and simple errors with respect to the same could bring a near fall of the economy. The problem in the early days was to teach people how to quantify money. During the same time, there existed some sort of uniformity in terms of money with respect to different areas. At first, most governments were and still are very keen on being a monopoly in the production of money. However, some governments are beginning to permit private institution in the production of money in an attempt to shield their economies from the speculative and unpredictable economic factors.
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Due to the advances in the technological world, money has become very dynamic with the inventions of electronic cans and digital money. This implies that money is one of the products in the world that has undergone tremendous evolution. One of the key influences for the denationalization of money is electronic cash and the presence of competing currencies. One of the immediate effects for the denationalization of money is the government would have reduced powers to tax therefore freeing the markets while at the same time increasing liberty and productivity. One of the main pioneers of the concept of denationalization of money Friedrich Hayek analyzed the approach of having one currency as opposed to the idea of having competing currencies. According to many analysts, the approach of having competing currencies threatens the concept of centralized government institutions and state control
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There are certain economic effects that resulted from the denationalization of money. One of those effects is inflation. Basically, inflation is as a result of an increase in money supply. However, inflation if not monitored closely triggers an economic imbalance affecting all the other factors such as unemployment and a distortion of relative prices. We must not forget the fact that economic stability is so much dependent on inflation levels. In this respect, the concept of competitive currencies is considered an economic booster while at the same time not so good venture if not watched closely.
On a positive note, denationalization of money solved the problem of economic and political problems. One of the main problems that were solved by denationalization of money was the balance of payments. In this regards, denationalization of currency oversaw the problem of balance of payment most significantly in the Euro block countries. This is going by the fact that the balance of import inflow and export outflow is measured on the basis of territorial boundaries. However, the non-existence of these territorial currencies would also imply that there would be no longer the concept of balance of payment which is considered to be the sole cause of endless monetary policies.
The overall benefit of denationalization of money is that instead of being politically influenced by the government, competitive pressures became the sole determinants of the value of competing private currencies. This is set by many financial analysts to be the rational future of the monetary system. Some of the regions and countries that adopted denationalization of money can testify that the instability by the government due to fiscal and monetary policies have become the thing of the past. In this regards, interest rates have ceased to be the key instrument of monetary policies being replaced by the demand and supply of money.