Public Sector (Meaning and Explanation)

We explain what the public sector is, its characteristics, components and main functions. Also, how it is financed.

What is the public sector?

The public sector is the set of administrative institutions and organizations of any country that manage the State directly or indirectly, or that operate with a public budget.

In other words, It is that segment of the economy that is under the control of the State and that, therefore, pursues the satisfaction of collective interests instead of mere profit. The latter, in fact, constitutes its main difference with respect to the private sector. Furthermore, all assets and capital in the public sector are State property, that is, collective.

In general, the public sector It has a central importance for the support of the political, legal and economic order of any country although the size and powers of the different organizations that make it up are a matter of debate.

Some people believe that the State should be strong and have interference in economic and social affairs. On the contrary, others think that, on the contrary, the State should play a minimal role in society, taking care of only what is essential. In any case, the well-being of the population will largely depend on the efficiency of the public sector.

This sector is also a source of employment and usually its workers, called public officials, access positions through various test or bidding systems.

Characteristics of the public sector

Broadly speaking, the public sector is characterized by the following:

It is under the control and direction of the State either directly or indirectly, and uses public resources and capital to operate.
It covers state organizations and institutions, as well as public and semi-public companies in which the State is the majority shareholder.
It is not for profit, but pursues the well-being of the majority. That does not mean that it cannot be minimally profitable or that its organizations cannot be fully or partially self-financing.
Like the private sector, is subject to the laws of the country and the Constitution whose text normally describes the administrative, legal and political regulations by which it must be guided.
Unlike the private sector, its assets and resources are collectively owned that is, they belong to all the citizens of the country.
In the case of public companies, they They may have their origin in processes of nationalization or nationalization of companies or private property. The opposite procedure, that is, the alienation of public assets, is called privatization.

Public sector components

The public sector can be classified into two main types of components:

The centralized public sector also known as the fiscal sector, in which the organizations and institutions of the three fundamental public powers are located: the executive, legislative and judicial branches. These institutions are fundamental for social peace and the stability of the State:

The executive branch in charge of the political leadership of the State and diplomatic and international representation. This includes administrative and government institutions, such as the presidency, the chancellery, the governorships, etc.
The legislative power in charge of drafting laws and supervising public power, representing the country's political forces. It usually consists of a parliament, which can be single-chamber or bicameral (senators and deputies).
The judiciary in charge of supervising the application of laws and doing justice, reviewing and interpreting the constitutional legal text. In this case it is about the courts, the courts and the Supreme Court of Justice.

Main functions of the public sector

public sector functions — The public sector can alleviate the basic deficiencies of the less fortunate.

The main functions of the public sector have to do with the defense of a state of collective well-being, that is, the protection of the fundamental interests of citizens and the historical legacy that every country represents. Broadly speaking, these functions consist of:

Promote stability and the rule of law. This means that the public sector is responsible for creating a social, political and economic framework in which the population can prosper and live in peace, governed by a common and objective body of laws.
Ensure justice and equal opportunities. Which means that the State must try to alleviate the basic deficiencies of the less fortunate so that anyone, in theory, can obtain fair rewards for their efforts.
Intercede in the economy if necessary. This is a point on which there is usually little consensus: should the State intervene in the economy to correct the defects and inequities of the market, or should it trust the latter to take its own course until a balance is reached?
Maintain an effective bureaucracy. Every State has its own bureaucracy: a way of standardizing and regulating the procedures and operations that it makes available to the people, and with the latter provide support and response to their fundamental needs: identity, representation, education, justice, etc.
Ensure the redistribution of wealth. Through taxes and subsidies, the public sector seeks to create the conditions so that the disadvantaged have a real opportunity for advancement, promoting a more equitable society with less concentration of wealth in a few hands.

How is the public sector financed?

The public sector generally finances itself through the collection of taxes from citizens, as well as more or less lucrative initiatives like public companies. However, profitability is not usually among the main values of the public sector.

Another common form of public financing is the issuance of debt (bonds) by the State that is, the request for loans from private investors, other nations or multilateral organizations (public debt).

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