How to write up and justify a good thesis - Iloka Benneth Chiemelie

INTRODUCTION

The public sector is that portion of society controlled by national, state or provincial, and local governments. In the United States, the public sector encompasses universal, critical services such as national defense, homeland security, police protection, fire fighting, urban planning, corrections, taxation, and various social programs

In economics, the private sector is that part of the economy which is both run for private profit and is not controlled by the state.

Private sectors tend to need the help of public sectors in terms of bailout, when their companies go into recession. This is period of low sale and high debts to their stake holders, making them unable to pay off their debts to customers.

THESIS

Should public sector share the pain of the private sector?

Our answer is ‘NO’. This is because; it is unfair to the tax payers, since they are the one who are going to be responsible for this bailout money.

Private sectors should be allowed to suffer their pain alone because, it would enhance a more responsible management, reduce the risk of recession in the near future and it would make the pain tangible, fast and sharp.

PRO 1

Allowing the private sector to suffer their pain alone would lead to proper management and making the executives more responsible. Let’s consider Fannie and Freddie few years back. The government refused to bail them out and they had to merge with other organizations for survival. This will make companies more responsible and enhance coordinated management especially in capitalist society like US. If the public shares the pain of the private, it would make the private dependent on the public for help during tough times. Thereby, creating an irresponsible and uncoordinated management system and the effect could be disastrous like national debt, recession and inflation. (Sacramento Bee, May 7, p.A24)

Let's start with some facts. Steve Tatton of Incomes Data Services (IDS), the pay monitor, finds virtually every category of public sector worker would be better paid if they worked in the same job in the private sector. Cabinet Office figures for senior civil servants show a grade 5 deputy director gets 22% less than their equivalent manager in the private sector. A grade 2 director general, one step below permanent secretary, gets 64% less than their private sector opposite number. (About.com, economics 2009)

The graph below shows the salary and wage rates between private and public sector. It is clear that the private sector earn lots of money when compared with the public sector. If they are able to pay their staff huge wages, then there is a clear and distinct fact that they have the money to maintain their position in the market. Allowing them to suffer their pain alone would enhance a responsible management system in the sense that, they will either reduce their staff wages or salary by some certain amount or deposit it into the company’s treasury to serve as a saving which could be used to rescue the company in times of recession or economic problems. By so doing, the problem of recession could become things of the past and the company would be able to survive both in times of economic doom and growth.

Figure 1 chart of salary increase between public and private sectors from 2006 – 2008

PRO 2

Another reason why public sector should not share the pain of the private is because; it would reduce the risk of the pains occurring in the future. The problem of recession and inflation did not start today. It has long been here with us since 1717, with repeatable occurrence period of 20 years or more per every recession. If the public sector shares the pains of the private, it would increase the chances of it occurring in a no distance time. (Sacramento Bee, May 7, p.A24)

One of the more troubling aspects of economic performance in the UK since the recession has been the persistence of high levels of public sector borrowing. Borrowing reached a peak of 7.1 per cent of GDP in 1993-94 and has since fallen to 4.5 per cent in 1995-96, with a further fall to 3 1/2 per cent in prospect for this year. Continued borrowing at high levels has raised public sector indebtedness. On the Maastricht treaty definition, general government debt has risen from 41.9 per cent of GDP in 1992 to an estimated 54.2 per cent of GDP in 1995 so that much of the leeway below the 60 per cent reference level has been used up. The overall net worth of the public sector has declined from 28 per cent of GDP to 14 per cent over the same period.

The durability of borrowing at a high level raises questions about the sustainability of current policy towards public expenditure and taxation. And all the pains are incurred by tax payers, majority of who are in the public sector and have nothing in connection with the doom facing the private sectors.

If private sectors are allowed to share their pains alone, it would reduce public sector indebtedness, as well as prevent such incidence from happening in the future.

Figure 2  Number of employees losing their works

PRO 3

Finally, private sector should be allowed to suffer their pain alone because, it would make the pain fast, sharp and tangible. If the public sector were to help the private sector, it would incur more pain in the shape of national debt from the international monetary fund (IMF), and this debt would take long time to pay. But if the private where to incur their pain alone, it would make the pain fast, sharp and tangible, in the sense that, private companies can sell some of their assets to solve their problem, or merge with other companies.

We understand that there is no “pure -ism”, socialism, capitalism, communism, the list goes on. But let’s just use the basic understanding of capitalism. A company whether large or small thrives or ceases to exist based on the management of its assets and products.

The idea that the public should help the private sector is what we have aborted, because for the government to help the private companies, we have to understand that this money sometimes surpasses what the government has in the treasuries. If they private sector where to help themselves or bail themselves out from this economic mess, it would make the pain fast, sharp and tangible when compared to the time and process involved if the government where to bail them out, as well as the time it would take to pay back the money used in this bailout.

Allowing private sectors to suffer their pain, would make them learn from their mistakes, and made the pain fast as well as sharp without resulting in further pain.

Figure 3 differences between private debts of private and public companies 

COUNTER ARGUMENT

Many people would argue that the public sector should help out the private sector, because most companies like AIG are ‘too big to fail’, and they are too integrated into the rest of the economy, that allowing them to fail would be catastrophic in terms of job insecurity and high rise in un-employment rate. (Kottler, 2009)

YES! This is a clear and real fact in the sense that private sector alone employs about % 60 of the US working population and allowing them to fail would be catastrophic in the sense that it could trigger a damaging layoff of staffs, resulting in increased unemployment rate and rise in poverty. This staffs in other to make a living could turn out to be social and environmental nuisance because some of them could go into criminal acts like armed robbery, prostitution and other acts that are against the law in other to find a means of survival.

On the other hand, it would be eye wetting to see what this the decision not to help the private companies would result into, in terms of economic downturn, and GP loss, because private companies like AIG, KFC, GM MOTORS, FERMIE AND FREDDIE etc, are so integrated into the nation’s economy that their profit or loss could be the a clear distinction between where the nation is and where it would be tomorrow in terms of international business and profit. 

REFUTATION

It is unfair to tax payers - since they would be the people responsible for the bailout money, while the executives that made the messes get to escape with their golden parachutes! By deciding to bailout private companies, it would result in rise taxes, and these tax payers have nothing in connection with the messes caused by the private companies on themselves.

AIG and other big companies, are required to do same as would be required of any American (capitalist) – to sell off enough assets to cover their obligations and I so doing, become smaller company they really are without all the leveraged illusion, hidden risks, over-valuation, and other means by which they have pretended to be much larger and solvent.                             (About.com: economics, 2009)

There is nothing like ‘big to fail’ companies. All companies by their virtue of existence should be responsible to all that the face, whether good or bad. Companies that think they are ‘to big to fail’ should either merge with other companies and still stand on their own. This can be seen from Sony and Sonny Ericson. By so doing they would make good use of their assets to be able to maintain and improve their current market position.

“Liquidly problem “is just another way to say “give me more”. In reality, not all companies who claim to be in recession are really what they claim to be. Some companies tend to take advantage of the situation just to get money from the government and invest these funds either in their market shares or company assets. (Professor Reinhardt, 2009)

If the public sector should help the private sector, it could create a ‘let me in’ strategy from small companies, because they could plot a scenario in the future in terms of industrial action or limited production just to seek the help of government.  

CONCLUSION

In conclusion, the private company should suffer their pains alone, because it would create a more responsible management system; make the pain sharp, fast and tangible.

We have come to understand that the idea of letting the private companies suffer their pain alone could be disastrous when it comes to job security, gross profit and international business. But, the pro weighs more than the cons, and that is why private companies should be left to suffer their pain alone.

REFERENCES

Phillips, K 2007, Economies of private and public sector, 2^nd edn, Mc-grill, New York. ‘Should government bailout private companies?’ 2008, Sacramento Bee, 7 may, p.A24-A25.