The history shows that public ownership in any social system and political regime is one of the key pillars of the state and is the most important part of the government. State ownership of the country allows it to act as an independent subject of economic relations with other countries, and being the guarantor of the relevant treaties and agreements.
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The presence of state ownership helps to ensure the favorable macroeconomic conditions for the success of the private sector, state ownership guarantees the functioning of non-profit social environment (Bozeman, 2004). This property supports the national security (funding from law enforcement to the maintenance of the army). Finally, realizing the ownership of natural resources (especially land), the state creates a stable relationship with many local institutions, business entities.
In recent times public organizations as a particular form of the business performance has gained a great deal of significance. This became a result of the active government participation in industrial, business and commercial activities. The public organization is an enterprise which fixed assets are state-owned, and the leaders are appointed or employed under contract by state agencies. Corporations are considered public corporation created by the state to carry out certain functions of government. Public corporations or organizations are created to achieve, certain public and government purposes.
These organizations refer to the system of the state apparatus, endowed with appropriate powers and carry out their functions within a defined territory. Every public organization created by an act of public authority (the U.S. Congress or the relevant ministry USA), which defines the legal status and identifies the goals and objectives established body control, set activities, competence and structure. Public property (state) organization formed by the state, although it is possible the formation of the property contributions of different levels of government entities or other entities of public law. Separate property organization, which meets its obligations, it remains in public ownership. Public organizations can be financed on the principles of self-sufficiency, to be profitable or unprofitable known. Most often, these corporations are funded by budgetary resources of the federal or municipal level. However, the statutes and other normative acts of some organizations give the opportunity to profit from the use of property, issuance of securities, provision of services and other activities. The financial statements of public organizations are submitted annually for review and approval of the authority responsible for the execution of the budget in the appropriate state agency.
Public Organization as a Unit of Production
Public organizations combine features of commercial business and budget organization. Most often, public organizations take the form of joint-stock company, all the shares of which are owned by the state. The state determines the program of action, covers the losses and expenditures, regulates prices. Normal profit belongs to the state, and extra profit directly owned by the merchant. The basis of the application of state ownership of the economy are those in which the great need for direct centralized management, public investment, which focus on profitability is not a criterion, that relies its sufficient for the operation in the public interest. Public organization is a unit of production, characterized by two main features.
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The first is that the property of such company and its management fully or partly in the hands of the state and its institutions (associations, ministries, departments), they either own the capital of the enterprise and have unchallenged authority to dispose of and make decisions, or combined with the private entrepreneurs but the impact on them and control them.
The second is the motive for the operation of the state enterprise. In its activities, it is guided not only in search of the highest profits, but also the desire to meet public needs, which may reduce the cost-effectiveness or even lead in some cases to the loss, which, however, are justified.
Relationship with the Central Government
The next characteristic is seen in the unique financial relations, their organization and management. The main source of finance of public enterprises is determined by their relationship with the central government. On the one hand, they, like all businesses and companies in the country are required to pay taxes to the state and local budgets, on the other - to receive subsidies from the central budget to finance its operations. In many countries, in order to finance the formation of public organizations, central governments legally reduce their taxes (or completely exempt from paying taxes). In the U.S. public organizations fully exempt from tax, and in some countries, however, only such public organizations pay taxes to the local budget.
Monopolistic status of some public organization is the next obvious characteristic of the public organizations. This kind of monopoly is called natural one and is defined as a kind of monopoly, which occupies a privileged position in the market because of the technological features of production (due to the exclusive possession of the necessary resources for the production, the extremely high cost of exclusivity or logistics). Most often, public organization that have the natural monopoly are the ones that control the labor-intensive infrastructure, re-creating that for other companies is not cost-effective or technically impossible (water supply systems, power systems, etc.).
Natural monopoly is officially recognized the inevitable monopoly on the production and sale of goods and services for which the monopoly is due to either natural rights of monopoly, or by considerations of economic benefits to the country and its people. This is due to the fact that in the public interest to have a single profitable pipeline, power grids, and rail lines. The state monopoly also occurs in those areas where its presence is due to reasons of public safety.
State as a Senior Manager
The next characteristic of the US public organizations is its management particularity. In relation to the organization that have to be exclusively in state ownership, the State acts as a senior manager, make key strategic and operational decisions for the management of enterprises (Toole, & Kenneth, 2011). Including state determines: that the company will produce, to what extent, at what cost and how it will be funded enterprise. In this case, the manager is required to ensure the production of products or services, the required quality, given the volume and profitability under certain conditions in accordance to the government plans.
In relation to the public organizations that are wholly or partially owned by the state, the state acts solely as an investor (co-owner). In this case, the entity of the state is the object of investment; therefore, the principles of management should be based on the methods and approaches used in investment management. The purpose of the state as the investor is to ensure maximum return on invested capital and increase the market value of the property (shares) and to implement government plans through the effective system of the organization management.
Tools of Economic Policy
Public organizations are a tool of economic policy. The presence of public organizations can solve the problem of employment, to carry out projects that have a high degree of risk by reducing the prices of products of public enterprises and non-profits in periods of rising inflation, the state carries out anti-inflationary measures (Rainey, 2009). Therefore, public organizations are assisted by local private producers to supply raw materials and components for a lower price and ensured a steady market.
In this case, public organizations by virtue of their national objectives are certain guarantees of the state - of various kinds of subsidies, protection against bankruptcy, waivers on import, the benefits of public procurement.