(a) Explain six reasons for government participation in business enterprises
(b) State four demerits of governme-participation in business enterprises
Explanation
(a) Reasons for government participation in business enterprises are:
(i) Government participates in business enter prises when such a business requires a capital outlay so much that it is difficult for private individuals to sufficiently make available.
(ii) Government participates in business enterprises where there is a need to guarantee consumers’ protection. in respect of fair price and exploitation.
(iii) Government engages in business when the outputs are of essential goods or services which private individuals may take undue advantage upon by creating hardship for the citizen, e.g. telecommunications, police etc.
(iv) Government involves in business activities to bring about employment opportunities particularly for the citizens.
(v) When national security is desired, especially where such enterprises are owned by foreigners, government involves in business.
(vi) It reduces incidences of duplications of services which may bring about wastes, e.g. electricity.
(vii) Government participates in business enterprises to ensure or enhance the survival of certain vital industries, e.g. petroleum, steel etc.
(b) The demerits of government participation in business enterprises are:
(i) There is lack of profit motive.
(ii) It brings about political interference.
(iii) Bureaucracy (red tapism) in the process of the management of such businesses leads to delays in decision-making.
(iv) Workers exhibit nonchalant attitude (laissez-faire attitude) in such business enterprises because they know that they will be paid their salaries regardless of services rendered.
(v) Lack of competition leads to inefficiency.
(vi) Government’s participation in business denies consumers the right of choice.