I am a deep believer in free markets as the most efficient mechanism for distributing goods and services, creating better offerings and lower prices through competition and encapsulating risk in innovation.
Unfortunately, none of these apply to the privatization of inherently public commodities that run on top of an underlying network infrastructure. This can be streets, railway tracks or water pipes - whenever there’s a shared, standardized network that needs to be maintained by all market participants a lot of the mechanisms that make privatization appealing don’t apply anymore and you basically end up with the same tragedy of the commons only in private hands.
I believe the best way to make this work is by keeping the network itself in public hands and then having a competition of contributors to the network - e.g. electricity providers that add energy to the grid.
It's even simpler than that. All of these privatized entities are incredibly efficient... at extracting profits from the public. Of course their goal is to extract profits. And you don't extract profits from a rail line by offering the best service. Bonus points if you can convince the government to bail you out and provide some extra cash.
> "It's even simpler than that ... their goal is to extract profits"
According to the article, profit has not been the primary goal for the utilities though, because there is limited scope for extracting profits from uncompetitive essential utility services - the focus instead has been on maximising shareholder returns. So in the case of the water utilities, they "borrowed £53bn in debt while distributing £72bn to shareholders", which of course is what the issue is now interest rates have risen significantly. The article describes this as "the tension between generating strong returns for investors in uncompetitive monopoly conditions and providing high-quality, affordable infrastructure to the public". The end result is still the same though - transfer of wealth in a socially destructive direction.
Specifically table 1 on page 2, "The ten industries with the highest profit margin", has the spots 1 (elec: 42.5% profit), 2 (gas: 40.5%) and 8 (water: 32.1%) being utilities.
Sounds like good "modern" governance. You've got assets? Use them as collateral to take on debt so you can free up capital and give it back to the shareholders. Value!
That is inevitable with super low interest rates for a super long time, especially near zero. Your options are to acquire appreciating assets quicker than your competitor, or you get left behind.
See people who bought homes at 5% down versus people who waited to have 20% down. The people who took on more debt were rewarded nicely with huge gains, and the people, who were prudent, now decide on paying a few hundred thousand more, if they were even able to keep up with saving a larger down payment.
This is a very naive reading of the situation - it almost comes across as twisting in knots to avoid placing the blame on the responsible party: the company and its owners who were responsible for this.
> Your options are to acquire appreciating assets quicker than your competitor, or you get left behind.
This is wrong twice over! First of all, they are effectively monopolies, they have no competitors in their industry. The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens). Second of all, from the article, they aren't spending the raised money on capital investments.
> For example, South East Water—thousands of whose customers were left without running water this summer—spent more on dividends and servicing its debt than on infrastructure in the two years to March 2022. Water bills for Britain as a whole have increased by around 360%, more than double the rate of inflation, since privatisation. Over that time, annual capital investment by the ten largest water and sewage companies has fallen by some 15%, according to research by the Financial Times (FT).
Privatization is an utter failure here, just as would be predicted given the situation, and it's crazy to see an attempt to rationalize it away.
> This is wrong twice over! First of all, they are effectively monopolies, they have no competitors in their industry. The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens).
I think that's what the poster above was trying to say - they're not competing for customers, they're competing for investors. Effectively their only products are ROI and share value.
And when I say it out loud, I get a little shock, as I realize how much all industries are trending that way. No matter how consumer-facing your business is, the real competition is for capital investment. Consumers had better hope that capital investment depends on their happiness, because if it doesn't, their happiness is going to slide far down the priority ladder.
The irony is we might all be complicit in supporting this dynamic by choosing to invest in whichever 401k/pension fund option offers the highest returns and lowest expense ratios.
Utility companies in Illinois are private & can only charge X% (10% for electrical) more than they invest. Frankly, the power & rail network here are amazing, in large part because that system incentivizes maximum reinvestment as they can then charge more money and return larger amounts to share holders.
Competitors who take large loans and fail to deliver are out competed by alternatives who went a more efficient route.
The profit margins are fixed, but everything is still competitive.
>The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens). Second of all, from the article, they aren't spending the raised money on capital investments.
The owners of the company are competing with others in society to buy land/houses/cars/services/etc.
If the owners want cash they can do the same thing, take out a loan vs the value of the stock to buy more X. The advantage when a company does it is your liability stops at the value of the stock where leverage isn’t.
Except, not every investor wants every investment to be highly leveraged in this way. The entire point of utilities in most peoples portfolios is as very stable dividend stocks. It’s the people running the company who have incentives to do these kinds of transactions.
This is highly specific to the period of time with rapidly rising interest rates - not generally true. It does sting though as someone still looking to buy a house.
The lenders will come out alright. Even if the utilities end up being renationalised their debt will be converted into government bonds. The mugs here are the public, which end up paying to service the debt that has been used to issue dividends.
> That The Economist, the City of London's answer to Pravda, published this article at all is telling.
Do you mean it's extremely left wing? Or pro-authoritarian capitalist? Or the most left-wing publication you can find in an otherwise capitalist group?
Pravda is both the Russian word for ‘truth’ (правда) and was/is a publication advancing the interests of the USSR/Russian state establishment.
The ‘economist’ implies a similar ‘truthfulness’ (it must be right about the economy if it’s an economist!) and advances the interests of the London financial establishment.
I'd assume they meant (generally) uncritically pro City of London corporations and the London influenced strain of economic liberalism which they represent.
But I do think it's a bit of hyperbole in a way, although I'm only tangentially familiar with the publication.
Profit is the gain made by the enterprise. Shareholder returns are monies paid out to shareholders.
When the board is more like a group of Huns than a Shepard, you find that after you pay out the shareholders, the enterprise is toast. In some cases, like most recently in big box retail, the private equity investors are running an obvious and odious, but legal, fraud.
With utilities, the business is all about capitalization and cash flow. They should be stable and boring businesses. When they are exciting, the management is burning the candle at both ends.
Shareholder returns can come from profit, or selling off assets, or taking on loans, or underfunding pensions, or probably other ways financial experts can invent.
The financing agreements surely require business assets and equity as collateral. At the end of the day, any cash flow that goes to the owners has to come from long term profits from the business, which comes from extracting money from customers.
Maybe not today or this year or next year, but everyone is always going to
want a return on the money they put in, whether it be owner or lender.
Unless I sell off assets. Or take loans now, give the proceeds to the shareholders and get a bonus for it, and leave before the company declares bankruptcy. Or leave a unfunded pension obligation.
Or run a nationally important service into the ground and then need emergency government money to keep providing it.
If it's buying goods and services. I would not treat it as a customer, and instead one of the unenumerated other ways of generating shareholder dividends, if it paid money to keep a nationally vital industry from imploding under the weight of its bad choices.
Borrowing is accounted differently from earnings. But yes, at the end of the day the people getting rich don't care which pile of money it comes from, and the people getting poor service are equally unhappy.
No lender is going to lend a business money just so it can pay the owners.
They must have used the debt to finance operations, as opposed to cutting the dividend or even putting more money in.
This allowed them to continue to have profits in the short term, at the expense of higher interest costs in the long term (which probably cause higher prices for customers in the long term).
> No lender is going to lend a business money just so it can pay the owners.
Of course they will! There's an entire industry (leveraged buy outs) built around it. And more generally, lenders will let you do dumb things with the money they lend you. As long as they expect to get paid back.
So, could a small business borrow money to pay it's owners? Probably not, it's not likely to get paid back. Could a multinational corporation borrow money to pay dividends? Yes, it's happened.
Money is fungible. Lending should only be used for capital investments, not operations or maintenance. The lender's money may have been used for what little capital investment is still happening, but the money they would have otherwise used was diverted to shareholders.
In the case of the UK water companies the parent fund was often involved in getting or making the loan e.g.
Water company does a debt bond issue, parent owning fund takes a % of the issue (enough so that the bond issue is a success at a good price), parent fund extracts all the funds raised as a dividend, and sells the % of the issue it own too
Right, so the “parent” posts a profit, and it comes (either tomorrow or next year) from revenue earned by the “child” that borrowed, trading revenue tomorrow (going to lenders) in exchange for cash today (going to “parents’” owners).
Without getting into the weeds, my point was that in order for owners to end up with cash in their pocket, the business has to earn a profit, at some point. And that profit must come from revenue (higher prices for customers) minus expenses (lower quantity/quality for customers).
You can insert a lender in there to shift when those cash flow changes happen, but the money must come from customers, eventually.
Barring any research and development that results in technology that will allow for lower expenses and/or increased production, but I do not think that is the case here.
No the business doesn’t have to make a profit it just needs enough revenue to service the debt
Of course what happens is many business geared this was don’t make a profit, fail their banking covenants, interest on the bond rises and eventually they go bust leaving lenders out of pocket
This is how a lot of the private equity industry is funded. Shareholders are "de-risked" taking the proceeds of a refinance out of the business upfront. The financier offers the upfront loan in return for a consistent stream of their cash flow (the interest and capital on the loan, and sometimes not even the capital). These businesses tend to have very steady cash flow generation.
Instant Brands went bankrupt because it could not pay its debts in a timely manner, so lenders decided to take the collateral.
It is possible lenders did not do sufficient due diligence, or maybe they got unlucky, but they did not lend Instant Brands money specifically so Instant Brands’ owners could pay themselves (maybe they did if there was corruption in this case, but it is not the norm otherwise why would anyone lend to anyone?).
And of course, Instant Brands’ owners will lose equity and credibility in the bankruptcy, so it is not like any dividends made possible due to the financing were “free money”.
Loading up orgs with unnecessary debt is what private equity (neé corporate raiders) does. The financiers who underwrite the raids certainly get paid. All the other stakeholders lose.
It's just fancy accounting talk for theft. A shell game. Like u/Spooky23 states upthread.
It's wrong. It doesn't make any sense. And yet here we are.
You can return value to shareholders that doesn’t come out of profits. For example, selling off your assets doesn’t make you profit, but gives you cash on hand. If that money is returned to shareholders, you’ve changed your balance sheet, but haven’t made any profit. An even simpler example is just selling the company to someone else. The shareholders get whatever the agreed on price was to take it private.
> For example, selling off your assets doesn’t make you profit
if it's on the balance sheet and you sell it for more than it cost you, then you have to book it as non-operating income, i.e. capital gains, i.e. profit.
Ok, so you make X percent profit but the proceeds are more, and you distribute the proceeds to shareholders. You can also sell at a loss and still make distributions to shareholders. This is Private Equity 101.
It can come from a claim on future profits which aren't realized, which is the case here.
When does profits don't materialize, the company goes bankrupt, the government rescues it (can't just cutoff power and water!) and everyone is happy! Well everyone but the majority of taxpayers who aren't also shareholders of the utilities...
Because revenue is pure income without taking costs into account.
So you could still be giving away money to cash out that is owed to someone else? If your revenue is based upon fictional income then these privatised public services will become tax payer problems because they can't be shut down.
- buybacks are taxed when a person gets money for their shares, as capital gains tax
- lots of corporate tax is about exactly the opposite of what you say; i.e. reaching inside a company's bank account and taxing its profits directly, rather than waiting for the money to flow out and taxing it as VAT/income tax/cap gains. A huge amount of money and effort is spent on balancing this correctly, with R&D credits, structuring profits to appear in the correct year, etc etc.
You left out the "to shareholders, the majority of whom are international investors".
A water company caring about some international investors more than the people they serve, and siphoning money out to those foreign interests, borders on treason.
Yeah exactly. In fact anyone who believes in markets should laugh in the face of private natural monopolies as an obviously terrible idea.
The UK structures water provision as regional monopolies. This should be a hilarious joke but it's the reality. You can't change water company without living in a different region. There is no effective market competition for water provision in the UK. We already rely on price caps to keep this state of affairs in check.
Pretty much the only argument that almost stands up for them is that they're quite good at contributing to private pensions as a byproduct of being good stocks because people need water to not die. We gloss over where the rest of the money goes, possibly into PR management around frequent sewage dumping.
No, that's not it. They make sense as investments for things like pension funds because what those pension funds need is basically the other side of what's needed to have infrastructure like water and sewage treatment: the pension funds have a bunch of up-front money that they need to turn into a reliable income stream, whereas providing water and treating sewage has a bunch of up-front cost to buy/build/upgrade the infrastructure but only receives money slowly over time from people using that infrastructure. The British media has been obfuscating this because for partisan political reasons they want to convince people that having to pay for things that they directly use and benefit from is somehow stealing from them, and that the fair solution is for Canadian teachers' retirement money to be used to deal with their literal shit for nothing in return. So far it's been working astoundingly well.
> The UK structures water provision as regional monopolies. This should be a hilarious joke but it's the reality. You can't change water company without living in a different region. There is no effective market competition for water provision in the UK.
This is how utilities/water work in the vast majority of the US. I’m unclear why you think this is strange? At the very least, it doesn’t explain the UK’s problems.
Yeah to an extent, I admit that last statement was a little bit of a barb although I felt the topic of dividends was implied by the part about stocks etc.
Isn't that the whole point of privatisation? By introducing a profit maximisation goal you (supposedly) create a more efficient operation.
I've worked in both the public and the private sector and can definitely understand the argument. In my government job it was way easier to slack off and no-one really cared about the results. There was no actual pressure from above to hit targets. You had your budget and it didn't really matter what you produced. Not hitting deadlines was no big deal.
Compared to my normal jobs where there is a constant stress from management to be lean, efficient and hit goals. I hate it but the team spirit is much higher and I probably produce 10x in comparison.
It's only cheaper for the consumer when there is a forcing function for price. In a competitive marketplace - lets say breakfast cereal - if you're inefficient another manufacturer can undercut you while maintaining profit margins. There are ways around this of course through product differentiation, but something basic like cornflakes all hover around the same price point. All manufacturers are trying to improve efficiency because they know if they don't their competition will.
Now pick something that's a natural monopoly, like water supply. Consumers can't choose water suppliers - deploying pipes is prohibitively expensive - so there's no incentive to lower prices. Instead the efficiency goes to paying shareholders and management. Additionally these companies often have set leases on the infrastructure. If you have a 20 year contract and you know the pipes will start to fail in 25 years if you don't do maintenance... why do maintenance?
Government departments might not be the most efficient, but we can demand they're open and report what they spend money on.
I recently learned about electrical utilities in the US - the only way they really make profit is through building new infrastructure (power prices are set by a control board). There’s zero motivation for them to do maintenance, which is how we wound up with some of the devastating California wildfires a year or two ago.
When something is of public importance, like a utility, it really seems that running it as a public service instead of a private company seems like the right call
> Isn't that the whole point of privatisation? By introducing a profit maximisation goal you (supposedly) create a more efficient operation.
Right, but efficient at what? The answer is almost invariably 'efficient at making money' - that's the whole point; competition normally forces alignment of incentives, wherein 'better' service (for some value of 'better') results in higher income. Thus a business that provides better service is more efficient at making money - the free market hypothesis. When there is a captive audience, as in the case of public utilities, there is no incentive to provide a better service, but the company goal is the same - make the most money - and they are freed up to do it in the easiest way possible, usually by cutting costs across the board and paring down the services to a bare minimum. This is still efficient in the sense that they maximise income for minimum outlay, but it's not in any way desirable for the customers who are forced to use the now crappy service.
/extracting/. Efficient at /extracting/ money. This is the metric that is being rewarded, and therefore this is what gets optimised. You also see this pattern when an asset stripping firm buys an ordinary competitive free market company and runs it into the ground. To align this with /making/ money, just having a free market isn't enough - the controlling entity has to be in it for the long term, and has to bear responsibility for the downside of any decisions it makes. Otherwise it's just plunder and flee, just as with the usual kind of private equity firm corporate raid.
Quite a lot of the nationalised water and sewage systems elsewhere in Europe don't even seem to be managing the bare minimum though, it's just that without the privatisation angle the media doesn't care so they appear better. For example, Ireland tried to privatise their water industry a good while back in order to fund necessary investments and gave up due to protests - this was widely seen as a success that protected them from the disaster that hit the UK. Except that they've still completely failed to build basic sewage treatment in a bunch of urban areas that was meant to be built a long time ago according to EU rules, and which the privatised English water companies did manage to build. Plus they have the same problems that British water companies do on top of that. It's just that no privatisation means that there's no easy target to blame that fits people's existing beliefs about the world, so it's not front-page news and most people don't realise it's happening and happily believe their sewage is so much better handled than in stinky Britain.
That being the case then, I wonder what's different about countries that get it right? Better public sector management? Privatisation with stronger regulation?
A well managed parastatal/state owned company. The shareholder returns can be pumped back into the business if they fail and management sacked. A get out of jail free card/the profits aren't being siphoned off to a select few and indirectly, the commodity is potentially cost efficient for consumers.
> The answer is almost invariably 'efficient at making money'
That's because it's a more general category, not because it's a better category. Going the other way: privatisation can for example invest money up front to make operations cheaper.
That example does result in "better at making money" but that money can then be used to lower prices / increase quality / pay shareholders dividends / pay employees higher wages.
> That example does result in "better at making money" but that money can then be used to lower prices / increase quality / pay shareholders dividends / pay employees higher wages.
Out of these, we often just see
> can then be used to…pay shareholders dividends
During the welfare capitalism of the early 20th century, we did see lower prices, higher quality products, and higher wages. Then Jack Welch and his ilk discovered that you could axe entire departments, lay off thousands of workers, and pay that money to shareholders while your company crashes and burns.
Why invest in making better products than “the commies” if you can make cheap products on par with imports and fire factory workers/QA/research? They learned that if the consumer doesn’t have a competitive choice for a product that will break in 1 year vs one that will last decades, then why not sell 10s of the cheap one over and over?
"Often" seems like weasel words? Look at e.g. tech worker salaries rocketing up. Or the year on year improvements in key items such as cars and phones.
What you're saying doesn't jibe with my understanding of the 20th and 21st centuries' explosion of innovation and quality of life improvements.
If you think Fords and VWs are no better than Ladas, or SpaceX rockets aren't better than Soyuz rockets, or people flock to countries run by "the commies" vs, say, the US, due to the better products and wages in said "commie" countries, then we might just have a fundamental disagreement on the state of reality. But my understanding is the opposite is true.
> why not sell 10s of the cheap one over and over?
Companies can do that, but in a decent economic environment a competitor or twelve can spring up and offer products at different prices and levels of quality. E.g. not every restaurant is McDonald's. Why is that?
I guess I should have qualified that it’s not always the case, but we have also seen a lot of factory and middle class jobs gutted by corporations who favor profits over people. Jobs in manufacturing that paid well and offer good benefits don’t seem to be as common as they once were. The fact that a single income can’t support a family for a lot of Americans is a sharp contrast to previous generations.
That’s not to say that good jobs and food companies don’t exist, as you pointed out we have tech jobs that lay well and other sectors. The divide between what’s achievable for the middle and lower class now vs the upper is staggering though. Having to worry about affording a mortgage, health care, food, etc is a reality for many Americans while a handful simply have to say what they want and they have it without batting an eye or considering the cost.
We can both pick and choose which sectors to look at to support either the idea that jobs are great or that wages are bad, my point is that there has been a very tangible shift for a decent number of companies to move away from good wages and benefits to giving C-levels and shareholders more money than they know what to do with.
Also the other side of the coin, little opportunity for growth, you serve an area with a certain population and a commoditized product like water offer little room for improvement, once you run out of quick wins to keep up that growth, you either increase prices or skimp on capital expenditure.
> Right, but efficient at what? The answer is almost invariably 'efficient at making money'
They don't make any money unless they give the customers what they want, that's the whole point. It's so basic even animals have an instinct for it. That's why government and private business shouldn't be mixed.
Animals have the instinct to shit in front of you and not feel the slightest discomfort doing so too. Should we all start shitting in front of each other to more closely align our behavior to animal instincts?
I've also seen many public places where people are efficient, and also stressed because of the amount of work to do. I feel like your experience is not very applicable to all situations.
What's more, a private company which has monopoly does not really have special incentive to respect deadlines and everything: it is the only choice, so customers won't deal with any competitor and are stuck with this private company.
Absolutely. My experience is completely anecdotal, and even if it's true that you get less bang for the buck in the public sector I still think it's ideologically sound and worth it. My country has a huge public sector but I think it's good.
What's normally the driving motivator in public companies to be efficient?
My experience with the public sector is the same. People must spend all their budget or it will be cut next year, so they do. Processes calcify and no one is incentivised to improve them. It's hard to fire people or make them redundant, so people get shuffled around between departments, costing far more than they contribute. Pensions are often very expensive. Strike action is more likely, as it's a big mass of people who can shut things down.
Fundamentally, it's the principle-agent problem. The customer isn't the one paying the bills. The customer is a politician or two who can heap money on the department or not, and they get praised for heaping money rather than saving money. The people paying the bills, taxpaying individuals and businesses, must do so or they go to jail. So why be efficient when your customers cannot legally avoid buying your service?
Public infrastructure doesn’t need to make a profit, that should never be the goal. It should be to deliver good reliable service/results at a consistent price.
That is often at odds with “making profit” either from over hiring so there’s always fallback people on call to overbuilding so in 50 years your still under capacity.
The goals are entirely different and so should the incentives
When the government is the customer, and the private company is maximizing profit, the company's effort goes towards figuring out how to 'raise' rates.
This might sound like free market, I'm just trying to increase prices while reducing my overhead (efficiency). But in practice you end up paying a lot for a little. So instead of government workers slacking off, you have even less well payed people slacking off, with managers making a lot of money.
If you ever had to go to a 'privatized' DMV you can see it. Just awful everything, because of cutting corners. Yet the company gets paid a lot. The money goes to the company leadership, it doesn't 'trickle' down to operations to do a better job.
You never invest in infrastructure - in 30 years since privatisation, water companies in Britain haven’t built a single reservoir, lose 30% of water to leaks and dump raw sewage on the beach where children swim
Profit maximization does not inherently create efficiency for all consumers.
A profit maximizing company may reasonably say "oh this population is super expensive to serve so we will let services there stagnate or even remove services for that population because it is more efficient for us to focus elsewhere."
Or consider a subscription service that makes it considerably more difficult to unsubscribe. That increases profit while making the product actively worse.
Profit incentive leads to efficiency of profit extraction, which is only loosely correlated to efficiency of services for consumers and occasionally runs in total opposition to efficiency of services for consumers.
I think that the differences between your experiences at government vs private might be correlated with the size of the organisation. I've worked at very large publicly traded companies that operate kinda like government institutions: too big to fail, tons of bureaucracy, endless meetings, silos / walls / not-my-job.
> I've worked in both the public and the private sector and can definitely understand the argument. In my government job it was way easier to slack off and no-one really cared about the results. There was no actual pressure from above to hit targets. You had your budget and it didn't really matter what you produced. Not hitting deadlines was no big deal.
Cuz that never happens in the private sector, lol. Guess where I'm at now...
There was a week while consulting pre-COVID I tried to see how many hours of Skyrim I could play on Switch, both in the office and remotely. I got to about 11.
>By introducing a profit maximisation goal you (supposedly) create a more efficient operation.
Yes but one way that happens is by ignoring unprofitable customers. That's great if you are a car dealership and sell higher end cars to wealthier people or run a botique grocery store with fancy all-organic produce, but terrible if you are (for example) trying to provide healthcare or education and decide that the profit margins aren't high enough for you to serve various segments of the population.
Anecdata: I used to work for public academia. I got out after a burnout due to massive overwork. I've worked in a couple of start-ups, among others, and found them all much more relaxing.
Sure, there's lots of pressure, but, at least for someone with my profile, it's limited by the fact that it's easier to walk away.
Seems to me like an incentive issue. I can't see why it'd be impossible to recreate a good incentive structure for employees in the public sector so that they'd perform similarly.
Your reply is a cynical take on GP’s comment that was providing a clear, concrete and simple solution to the problem at hand that most countries, especially in EU, are facing.
Your comment on the incentives of private companies missed his point about the competition aspect.
This is a pet peeve when market maximalists talk about how public services are "inefficient". Efficiency in economics refers to profitability. If a public service isn't profitable, that actually makes it efficient in a practical sense because a public service being profitable would mean it is overfunded (i.e. it's receiving more funding than it needs to operate).
In practice this often means politicians will squawk about how a given public
service that is inherently a cost center is "inefficient" (which is true in the economic sense because it is designed to use its entire budget and thus doesn't extract a profit), impose austerity by cutting its "bloated" budget (which is justified by also cutting the workforce and other cost factors) and then repeating this process until the public service is inoperable and its failure is seen as a demonstration why it must deseperately be privatised and sold to the highest bidder (who can now get the monopoly position at a fraction of its potential value). Potential extra steps along the way involve creating a (government-owned) corporation to make it easier to complain about its bad business performance.
On a related note, there is an independent "tax payers' association" in my country that makes a big deal about "tax waste" by highlighting (usually fairly small) public works that most often have legitimate uses/explanations but may seem absurd/wasteful at first glance but largely prefers to stay silent when it comes to business subsidies and such. They have a clear ideological bias and while the media seems to be somewhat aware of this, it's always interesting to see journalist report on inadequate welfare programs in the same breath as mentioning (and using b-roll of) the public "national debt clock"[1] installed by this association.
[1] The most recent example was a segment on youth debt stemming from welfare overpayments their parents received (which under the legal system at the time was partially imposed on underage children in the same household even if they didn't have any money - the law was recently changed so they could only be held liable for the amount of money they owned at their birthday when reaching the age of maturity). Ironically this debt was the direct result of the kind of legislation to cut "tax waste" (in this case: welfare overpayments) the association generally advocates for. The hook was something like "the government can be billions in debt but for a young person a much smaller amount can be life-ruining" but the lack of reflection was astonishing.
> This is a pet peeve when market maximalists talk about how public services are "inefficient". Efficiency in economics refers to profitability. If a public service isn't profitable, that actually makes it efficient in a practical sense because a public service being profitable would mean it is overfunded (i.e. it's receiving more funding than it needs to operate).
Ehhhh... nah. There is still a cost vs. return.
Postal Services, for example. $10 ships 1.1 packages on average, or they get efficient and $10 ships 1.9 packages, etc.
You absolutely see this in things like Medicare where $100 worth of spending doesn't get you 90-100 generic aspirin, but more like 20 pills, and the rest of it goes to pay middle men.
Yes, but economic efficiency measures profit, not "number of packages shipped per dollar". Also that metric may not even be meaningful in isolation and optimizing for it may lead to worse (social) outcomes.
The problem with Medicare in the US isn't that Medicare is inefficient. The problem with Medicare in the US is that the US has a private healthcare system and Medicare exists on top of it. A universal public healthcare system wouldn't perform the same way in terms of bang for the buck because the dynamics would be very different.
This is one of those times where the math is so simple that it's baffling that anyone misses it. When a private company must 1) do the same job as a public service while also 2) coming up with surplus bags of cash to hand over to investors and shareholders, how can it possibly be more efficient?
Minimise investment to maximise profits, which you take, whilst running the minimum service required to avoid contract penalties or publicity so adverse you lose your contract.
Then threaten to go bust and get bailed out by the government when the infrastructure starts to break a few years later.
> The passenger train operating company had failed to inform Railtrack and the signaller that the automatic warning system (AWS), which warns drivers of adverse signals, had been turned off in the cab of the HST.
But Ladbroke Grove was Railtrack's fault entirely (within the first few years of its creation). Meanwhile it's been 20 years since National Rail was created, when do we get to blame current governments and National Rail for bad infrastructure?
Not disagreeing, but words are important here to get at precisely what happened.
> Railtrack made a lot of money
"Made" implies creation, growth, increase.
This is the opposite of what happened.
The money wasn't made. It was /extracted/. They /extracted/ a lot of money.
Railtrack doesn't have that money. Their succeeding entity doesn't have that money. The government doesn't have that money. The taxpayer doesn't have that money. None of that money was invested such that any of these entities might benefit from it in any way. It was removed from the system into private wallets.
The private owners plundered and fled, and the remaining skeleton was socialised again so it might regrow a bit of flesh from public taxes for the next extraction cycle.
What about losses from federally funded corporations like USPS and Amtrak that are bailed out every year? Amtrak loses over $1 billion/yr and they are still "nationalized." USPS loses multi billions per year.
USPS costs billions, public services don't need to be profitable they just need to be paid for. Taxpayers pay for it with their taxes.
When we sell our public investments for a quick buck we complain when the real cost of the service gets priced in. The trouble is, we pay the same taxes still, they just no longer go to the service we privatised, so we feel it in the pocketbook individually.
Presumably those taxes are going elsewhere now, but I was very happy with them going to core public services.
The USPS is "loosing" money because it was told to prefund it's Healthcare having to set aside $100 billion in 10 years (unlike any other company) . Moreover, it's much more a service than a business, e.g. it can not really set its own prices.
I don't get it. The USPS has lost billions due to government policies and can't enforce prices due to government policies. They are forced to deliver to unprofitable routes and have prices set to inflation due to government policies. Private delivery services like Amazon and Fedex are generally profitable and don't have these issues. Why is a government alternative better?
> They are forced to deliver to unprofitable routes and have prices set to inflation due to government policies. Private delivery services like Amazon and Fedex are generally profitable and don't have these issues.
I, for one, think it's a good thing that people are entitled to their mail regardless of the profitability of their mail route. That's the point of a public service.
A cynic would say Congress's actions, loading the USPS with costs while denying it control over prices, is so that people ask "Why is a government alternative better?"
Is it your opinion that some people simply shouldn’t get their mail, or that people who live in rural areas should pay exponentially more to get their mail delivered? Why is either of those things desirable?
USPS is not a business, and it’s a fundamental mistake to pretend it is, solely for the sake of slandering it.
None of the competitors offer a similar service to USPS.
Among other core competencies, USPS has nationwide daily coverage of the entire United States and centuries(?) of experience interoperating the the respective mail services of every country in the world and then some.
None of the competitors are allowed to offer a similar service to USPS.
That said, the service provided by the USPS nowadays is primarily delivery of paper waste into a receptacle I am obligated to empty because very occasionally they also use the same box for packages.
Welcome to the world of privatising public services. This has been a scheme of free market politicians for years; call public services too expensive, strip them of funding and hamper them in other ways, then call out how they are not delivering on their promise. Then sell the off at bargain prices, often with additional government guarantees on revenue. After privatisation services don't improve and cost never go down, but somehow the public is better off?
We need to rearrange our brains. USPS provides a valuable service to the country. It does not need to make a profit. It should be evaluated based on the value it generates for the people. Why does something like the mail system get treated differently than something like road development, which is not expected to bring in any revenue at all let along a profit?
Amtrak is the least subsidies mode of Transportation. It has to compete with road transport and the subsidies given to highways, roads and parking is orders of magnitude larger then what Amtrak gets.
I think you may have conditioned by HN to assume that any comment is a refutation. I brought it up because it’s an additional piece of the explanation for why amtrack can’t support itself on ticket prices alone.
Mostly because it’s the single biggest thing that keeps me from using Amtrak. The last few trips I’ve taken, we ended up sitting waiting on freight trains for many many hours.
Each big city we came to we had to stop and wait without having any idea how long it would take for “freight traffic to clear”.
I love train travel, and I’m not price sensitive at all, but the delays were completely absurd.
I expect the maximum profit sweet spot actually includes a small amount of penalties. If you don't get any penalties at all, you are probably leaving money on the table re service cuts.
By running your lines on a shoestring budget, how else would you? The contacts have a fixed life time, keep your expenditures low and you can extract the highest profits. Long-term maintenance in particular suffers after privatization, because why would you, that doesn't align with your goals. And the risk is nill, because the government needs to provide the services so if things go awry you have little too worry about. They will have to bail the line out. Just find a way to move money from the entity to shareholders while you can and you're good, they are not clawing that back.
Offering shitty, expensive service. It's not like customers can use a competing rail line, so every dollar you invest in customer service is a dollar out of your pocket.
My experience of American railways as a tourist is having to show my passport to book a ticket from Davis to Sacramento (I assume I also did that on other trips like to SFO but don't remember), and it being expensive.
My experience in the UK and Germany is show up, pay, go, and it being cheaper.
US consumer rail way is a quasi public corporation (Amtrak) that has lost money for decades and is still funded to the tune of over $1 billion per year. You are confusing that with private US rails.
US private rails own the railways and, while in theory they are required to give way to passenger rail, are so long and take so much time to cross that in practice passenger rail is forced to adhere to the time-schedule of private rail.
This is arguably illegal and only exists because the govt refuses to enforce the obvious interpretation of the agreement.
Meanwhile, the US DOT has historically always taken the approach of "the solution is more highways. What's the problem?", losing far more than $1B/year.
There are 3 million rail cars moved per day that haven't produced apocalyptic skies and chemical rain. You misrepresent the overall safety of private rail lines.
We're talking about passenger rail here, not cargo. Amtrak has a legally mandated monopoly, so you can only compete with them by building your own rails or using a different travel mode (e.g., bus or air).
If you find their service to be good and cheap, I can only assume you've never ridden a train in Europe.
By stripping and selling off as many assets as you can and borrowing as much as possible leveraged on the income from future fares. There is no incentive to spend this on long term investment or contingency planning. The railways are an essential service so the government will always have to step in when the private company reaches breaking point, so no money is saved by the state in the end. It’s just disguised debt with terrible interest rates.
Amtrak, a public rail company gets over a $1 billion in public funding. Private rail lines do not. Amtrak has operated at a loss for decades unlike private rails.
You are comparing completely different services, though, right? Private freight lines versus passenger? Amtrak runs on lines owned by the freight companies. I've been on an Amtrak train that had to sit on a siding while a freight train passed. The passenger service has to have a published, predictable schedule. The freight moves when it is needed and breaks the Amtrak schedule, leaving a crap passenger service.
I think the extent to which freight shoves aside passengers varies from region to region. My worst experience was going to West Virginia from DC. I find the Vermonter keeps its schedule pretty well.
A "loss" here is just a politicized framing of the fact that government pays Amtrak to do something of use to society.
You might as well say that the US military makes a $1 trillion loss per year. No, they supply something which is required by the govt and which has a cost.
1.) Force other competitors to go belly-up or buy them to create a Monopoy or if the authorities don‘t let you do that, try to end up in a duopoly situation where you and your competitor come to some silent agreement to not overly compete.
2.)
Raise the regulatory bar to prevent startups from entering your field.
Milk whatever half dead infrastructure you have and people depend on.
Oh and raise prices every odd year while still not investing in the rotten infrastructure.
Somehow investors need to see growth and dividend payments.
Due to 1.) there is no competitor left that could offer a better service. People cannot simply switch.
Die to 2.) you are not in danger of ever having to face situation 1.) again.
Job of the government is to not let 1. and 2. happen.
Cutting corners and costs e.g. shutting ticket offices, doing just enough to barely offer the service. It's not like your passengers have any sensible alternative. If that doesn't do it then you can also load the company up with debt and pay yourself a nice dividend until rates rise.
> load the company up with debt and pay yourself a nice dividend
I am new to this. Doesn't a dividend come from profits? What profits are there if you need debt? And who will loan to you if your business plan is to exit scam?
> What profits are there if you need debt? And who will loan to you if your business plan is to exit scam?
If you’re a water company, after government bailed out the banks, chances were good you’re not going bust. What are they going to do? Let the entire population of London die of dehydration?
And since a lot of investors in large utility companies are international, should the government somehow not make them whole (or worse, just expropriate), there would typically be repercussions - with international arbitration courts adjudicating reparation with processes that are typically stacked in favour of businesses.
And they should thus pay the extra cost for that privilege.
30 years ago Terry Wogan was using his radio 2 breakfast show telling the 40-60 demographic how to send emails and watch his webcam. That demographic are now 70-90. I do sympathise for independent 95 year olds who can't use a ticket machine. I'd rather we spent the money in a far better way -- increasing services for example.
I dont think this is true, but suppose it was - so what? If I am travelling eith my daughter I often need advice from the ticket office folks. It does not matyer how they aquire it.
Additionally, often the ticket office gives better rates -
It could possibly be achieved here if our prices weren't so arcane and difficult to understand. There's tickets you can't get from the machines etc. There was a photo yesterday of a queue of 10 odd people waiting next to 4 idle ticket machines. It's solvable but nobody seems interested in actually doing it, presumably because it costs money to fix. International Airlines I assume gained some competitive edge by that move, there is no competition in a lot of our privatized industries so no real incentive to do anything but the bare minimum.
You asked how profits are extracted, and I answered your question. Now you're bringing up monopoly vs free market, which has nothing to do with the question.
The award of the contract to run that particular collection of routes is ostensibly free-market. Once it's awarded, they hold a monopoly for the duration of the contract though.
Actually, the very widely replicated experience of most challenger utilities is that the entrenched utility will stop you, sometimes in collusion with the government or municipalities. Try getting permits to dig up the road to put your competing pipes alongside the current monopolists.
In Britain, British Telecom spent around 20 years making it impossible for other players to supply an internet service to consumers. They used various anti-competitive practices and had very good capture of the largely toothless regulator OfCom. This is all documented.
By making sure there’s no water fountains on the train platforms, yet plenty of kiosks and vending machines that sell water.
I was just at EWR last night waiting for an arrival and there was an old man looking for water. He asks an employee where to find some and she looks at him like he has two heads.
“You have to buy some. Or you can drink out of the faucet in the restroom”
Can you imagine that? Telling an old man at 1am he has to drink out of a bathroom fixture to quench his thirst.
In my mind, I was hoping he was flying to a more civilized country. Because that’s the system we’ve built for ourselves. In a better present, the man would have access to a drink for free. But because a profit needs to be made, the entire airport is organized around little nickel and dime scams.
This is the way the world works now and anyone who disputes the justification of it just gets neatly added to the pile of "complaints" burned by elites for warmth.
By competing to make the best rolling stock, online booking systems, catering, cleaning services, etc. These contracts should be put out to tender and should the promised level of service not be delivered then contracts should be lost and/penalties applied where necessary.
Most important is that the target service coverage, quality, etc should be decided by government (who should be seeking to please voters), not corporations who are seeking to please shareholders.
Sell off assets, get subsidies, understaff, rundown and don’t maintain equipment. Provide a shit service. When bankruptcy comes up you’ll be bailed out.
Rail lines have inherent competition in form of trucks and boats (for transport of goods) and cars, busses and planes (for transport of people) and rail is often outcompeted by these as they don’t require large station in expensive real estate.
So the example of rail doesn’t really apply to this branch of the discussion.
However, once you’ve bought a house, it is very difficult to to but in new pipes from a different water works.
Thames Water's CEO has a $1.5 million pay package which is lower than CEOs of corporations of the same size. The funding for public unions in the UK is $233 billion. Great comparison there.
> The funding for public unions in the UK is $233 billion
That’s a pretty amazing figure, how was that calculated?
Are you seriously arguing that that the Thames Water CEO was underpaid? They have been mismanaged extraordinarily. Their debts, losses, costs, service and environment records are so poor that nationalisation is being discussed. They have been paying dividends and bonuses throughout.
CEOs of corporations of the same size quite often have to find and retain customers in competitive markets - which is hardly the case with Thames Water?
What is your point? $1.5 million is used to attract a CEO who can manage a large corporation. That is less than many players on second tier English clubs who are riding the pine. That is a rounding error when considering $233 billion paid to unions.
Yes they do, from rival businesses, superior and new technology, just look at Chat-GPT potentially putting programmers out of work, or telegrams being made redundant by pagers, and text messages and email.
@arethuza
>CEOs of corporations of the same size quite often have to find and retain customers in competitive markets - which is hardly the case with Thames Water?
Water companies are delivering a minimum standard of water, call it the least toxic form of water considering the energy constraints and logistics of delivering water en-masse compared to other methods of obtaining water.
Mains water from a very young age always made me sick, so where possible I use bottled spring water in the kettle, but am currently considering a reverse osmosis water filter, to deionise the water in the house as much as possible.
Deionised water is the best tasting, sweetest tasting water I've ever experienced, and if I listened to the medical experts I should be dead on numerous counts of their assertations. So two fingers up to them as well! LOL
I don't think you understand what these companies do if you believe Thames Water is in competition with Evian or Brita. Remember they're not just providing drinking water but handling the treatment, recirculation and safe disposal of wastewater too. So in addition to having inadequate fresh water storage for some parts of England and cutting back maintenance to the extent that they lose an enormous amount in leaks, one of the bigger problems is how they're failing to adequately dispose of wastewater. As a consequence of this there are some rivers, lakes and beaches in England + Wales that are now unsafe but which weren't before they were privatised.
> As a consequence of this there are some rivers, lakes and beaches in England + Wales that are now unsafe but which weren't before they were privatised.
Carefully chosen words, someone has done their research!
Thats what happens when new standards come into force and improve upon the old standards.
"The purpose of this dataset is to present a summary of bathing water compliance in England between 1988 and 2014 against the old bathing water directive (76/160/EEC), which was repealed on the 31/12/2014"
However I'm not against better standards, but I am against some of the "engineered" methods used to gain those standards....
You're going to have to do a bit more than hand-waving about a bathing water directive being repealed back in 2014 and dumping a couple of links. If you want to make a point, make it.
There's lots of factors at play here, it could be brexit related because the beachs have become soiled so people go to Europe for a break, we dont know who is invested in Thames water, are these british pension funds or other types of investors. Is this a sexism thing, what with a female ceo, has she been wrongly advised, manipulated with data presented in a particular way.
There's so many factors potentially at play here and some of it we wont get to ever know about, but life has taught me there is manipulation in many guises.
Wait before you were certain I was some sneaky trickster doing wordplay and that you had a slam dunk of a response, now “there’s lots of factors at play here”?
Nothing has changed, I simply didnt document all my thoughts on here straight away because its not a Rorschach test, besides I let google suggest some of the links, because I've noted how manipulative it is at shaping public discourse.
In the examples here, no, CEOs don’t face real competition. Water companies are sold off public utilities. They way they make profit is to degrade service and raise prices. No one is going to install a competing water system. No AI is going to do that anytime soon.
The Economist has a political bent, but they are clear on how privatisation has gone: ‘Dogmatic adherence to privatisation in the face of its sustained failure suggests ideology, not pragmatism, was the motivation.’
> Water companies are delivering a minimum standard of water
No they aren’t. That’s a key point in the article.
> They way they make profit is to degrade service and raise prices. No one is going to install a competing water system.
So that other technologies, like rainfall capture systems and water filtration systems can be become financially viable through economies of scale. If you have a roof you can top up water tanks, water filtration systems clean the water and can recycle the water. Reverse Osmosis filtration which deionises the water is about as pure as you can get, so pure nothing can grow in it, which is why colony forming units (CFU's) aka TVC's are so low, lower than spring water.
Not long to go.... standby for some more "engineered" news.
>The Economist has a political bent,
Whilst its easy to say, privatise problems, Thames water has its own unique problems, but when looking at something like the coal miners, what did it do? It shifted people away from using coal to other less large airborne particulate laden forms of fossil fuel, the latest being air source heat pumps 1w in 4watts out at best, solar power 15-22% efficiency, and nuclear with the debate over the use of different nuclear fuels, like plutonium and thorium. Sort by Specific Energy (MJ/Kg) at this link https://en.wikipedia.org/wiki/Energy_density#In_nuclear_reac...
Anyway some things are engineered including things in the news like Thames Water.... Someone's getting a shake down!
I'm in Scotland so I have perfectly pleasant tasting water from the state-owned Scottish Water whose CEO get paid a small fraction of what the Thames Water CEO gets paid (~£295K plus
bonus).
"Paid to unions"? Do you mean paid to staff who might be members of unions? And if so why you are comparing money paid to a specific company to money paid to union members across the entire public sector?
I don't think you want to point at English football clubs if we're talking about sensible compensation, not least since one of the issues highlighted in the article are the debt load of these English and Welsh water companies.
This is a nonsense delineation in systems thinking. That railroad shareholders are also the public doesn't justify ripping them off.
Unions are beholden to the same impulses towards monopoly and rent-seeking as corporations. Swap members (i.e. sellers of labour) for shareholders (i.e. sellers of capital) and employers (i.e. buyers of labour) for customers (i.e. buyers of goods and services) and union management starts looking remarkably like its corporate analog, churning undifferentiated workers into a differentiated and thus premium block of labour as truly as a mill grinds forests into houses.
My country recently (2019) privatized the electricity supply. The infrastructure is owner and operated by a government entity, but the company you buy electricity from is a private entity, and you can choose which supplier you use. Generation was already privatized a long time ago.
It was advertised as being able to offer lower prices to the consumer through competition, but all it has done is provided more ways for private companies to extract money from the general population.
Previously electricity prices were overseen by the government, and I don't really understand how a private company could do that any cheaper. There was already a market for the spot price that electricity was sold at by producers, so all the entity you bought it from had to do was balance the books. Any excess would have been put towards the balance for the next period, but now it goes to the owners of the company.
In the UK, we have a similar system, and for a decent time it actually did deliver low energy prices for us. The way this worked was that a new energy provider could easily set up and offer low tariffs, backed by private investment and a gamble that long-term prices would stay low. Of course, when prices rose, that gamble failed... and who picked up the bill? Why, the taxpayer, of course! [1]
The overall effect of this game was that more astute consumers, who tended to switch to the lower-cost providers, were ultimately subsidised by the less-astute consumers who stuck with the traditional players. Or to put it another way, the rich were subsidised by the poor.
> Or to put it another way, the rich were subsidised by the poor.
I agree with most of what you've said but I don't agree that this conclusion follows. If anything when I was less well off I was far more inclined to put up with the hassle of changing providers every few months to minimise the costs than I am now.
I do think there were some efficiencies generated, it's just hard to figure out if a nationalised entity would have gotten there eventually. The online only account management for example probably saves a bunch over call centre staff and sending people around to read the meter.
> but all it has done is provided more ways for private companies to extract money from the general population.
Then the system is operating as it was designed to. This is the coercive law of competition in action. And regulation won’t help in the end. Ultimately, without an overarching ideological project beyond capital accumulation, the motivation to accumulate wealth dissolves all social bonds that enforce trustworthiness, so regulation is doomed to fail
due to bribery and petty corruption.
"Laws are sometimes broken therefore why even bother having laws?"
We don't make murder legal because it still happens, and the existence of corruption doesn't make regulation a bad idea - it means we need to clamp down on corruption.
White collar crime has good PR representation, and that needs to stop.
I think both of you are correct, but what this implies is a different system - we would need to put resources into figuring it out how this system would work.
Same thing happened in my country. Fortunately someone decided to create a cooperative and now I can avoid contributing to the profit margin of some private company
I once worked for a co-operative, and it was by far the most poorly run company I have ever worked for or with. The control of the company was so far removed from shareholder control that the management was basically only accountable to their creditors (i.e. banks). The company had every corporate pathology you could imagine and then some. It was orders of magnitude worse than a Fortune 500 dinosaur I also worked for.
The cooperative was performing poor profit-wise while middle management lined their pockets. If it was not a cooperative, their share price would have been in the gutter, and someone would have bought up enough shares for cheap to fire the leadership and replace it with people who are competent, and then benefited from the increasing share price of having the company ran competently.
I definitely don't think they are inherently better. I'm sure some of them are good, but the real problem I see, as I already pointed out, is that shareholders have less ability to hold management to account than in more traditional business structures.
How do I hold the the CEO of Cable One to account, let alone better than I can hold my electric co-op to account? On my co-op I have a voting share, can run for office, directly lobby other co-op members directly, etc etc.
> On my co-op I have a voting share, can run for office, directly lobby other co-op members directly, etc etc.
If you are a member of the co-op, sure. Not everyone who trades with a co-op is a member. If you are a shareholder, in a company, most likely you have votes, as I think less than 10% of companies have different share classes with unequal voting rights, and of those most still have some voting rights. So in both cases (with limited exception), shareholders have voting rights. So there is no difference here, in fact all of the things you listed is valid for more traditional businesses.
The main difference, at least for the cooperative I worked for, was that no individual can have more than 1 share, where as in other incorporation models individuals can have more than 1 share. This is advantageous as one individual can expend resources to buy shares, then use the control granted by those shares to improve efficiency and the value of the shares they acquired, and everyone who is a shareholder benefits from this. No similar mechanism exists in a co-operative.
Maybe, with a cooperative, on a small scale, you can lobby enough people to effect change, but it takes a lot of time, and usually the people with time to fiddle with the politics of a co-operative probably should have as little as possible say in how it is run as they likely have nothing more productive to do.
I do vote in some co-operatives, I even vote in the co-operative I worked for, I look at the candidates, and I can clearly tell that there is no way they will change anything, never mind do something as drastic as replace the inept leadership. I could of course expend lots of time to try and convince them, but this is a massive gamble.
If I see a company is ran poorly, and I have money to buy enough shares to change it, the gamble is a lot smaller. I know it takes X resources to aquire Y% of control.
There were quite a few small energy co-operatives in the UK, mainly set up by municipalities.
When wholesale energy prices spiked last year, followed by a cap being applied to the prices that they could charge, they weren't hedged and several ended up going bankrupt.
The way I would put this is that I would expect a system with competitive generators and retailers mediated by a well run "free" market to more accurately discover the "natural" price for electricity than a public committee unilaterally setting the prices.
But those more efficiently discovered "natural" prices may be higher or lower than the prices previously chosen by the public committee. It's possible that the committee was setting artificially low prices subsidized by the public purse, and it's possible they were setting them higher than necessary. Either way, it could just be an accident - that they tried as hard and in as good faith as possible to pick the right prices, but just didn't have all the information or didn't model it exactly right - or it could be that they were responding to political pressure, choosing low subsidized prices because it's popular with voters, or choosing high prices because it's popular with lobbyists from utilities.
Markets certainly come with their own trade offs, and they certainly don't do price discovery perfectly either, but where they do have the advantage (in my view) is in spreading out the information-gathering, modeling, and incentive-following responsibilities across all the market participants, rather than concentrating them in a public committee that is inevitably a small group.
But this is really just the generic age-old argument between central planning and market structures. I tend to find market structures more appealing because I can contribute my ideas and my work into them as an employee or entrepreneur, whereas I'll almost certainly never be a central planner. But it's not a panacea by any means. There is a good reason we keep penduluming between more centrally planned solutions and more market based solutions in different areas; there are real trade offs between them and it's never obvious what the right balance is.
There are two tests that privatisation has to pass. 1. Would it result in a monopoly, if so that’s a fail. 2. Does privatisation add value to the consumer? The evidence on that one so far is absolutely not.
In general public services exist as public entities because they would otherwise necessarily be monopolies, and the only lever the public can therefore have is some kind of democratic process.
In the case of UK privatisation it’s clear that the policy was merely a wealth-pump designed to extract value from a captive set of consumers.
> Does privatisation add value to the consumer? The evidence on that one so far is absolutely not.
I’m sorry but it is a fiction that capitalist seizure of public goods are primarily intended to add value to “consumers”. If this does happen, it is an side effect,
and I would argue a temporary one experienced while the system is coasting from the inertia of past public investments. You see the same thing with the victims of leveraged buyouts by private equity.
In the end without an ideological project that transcends personal or familial accumulation of capital, all
collective enterprises are
doomed to failure. This is because people alienated from the motive forces of the collective endeavor at some point stop caring about the forward motion of a system that at best only marginally and diminishingly benefits them.
> In the end without an ideological project that transcends personal or familial accumulation of capital, all collective enterprises are doomed to failure.
The public sector is unfortunately a terrible place to pursue ideological projects. Especially in a democracy where the ministers with leadership authority of a department change every 2-3 years and very wide groups of stakeholders need to endorse any substantial change.
But what is the definition of a public good? Is it only to be limited to things that are natural monopolies/network systems (as you suggest) or should it also include practically non-excludable and non-rival goods (information)? I would argue we should go further. Some goods should be considered to be morally non-excludable goods. We should have the moral courage to assert that we cannot exclude health care to all people (interestingly the NHS is seemingly the last bastion of public goods in the UK, though the market fundamentalists have it out for it too). However, market fundamentalists usually don’t seem willing to take such moral stands and instead all moral decisions are implicitly left to the market. In the hands of such practitioners, markets are smokescreens for classism, racism, etc.
One definition could be that which is effectively required by citizens to exist and operate in a society. This would include utilities essential to life (water, heating, etc.), internet (given that the government essentially requires it for many things now), money (it's essentially required to have a bank account), healthcare, transport.
It's important to be realistic here and not fall back to technical truths. Yes, you could technically buy a house with physical cash. In practice, you need a bank account and to deal with the private banking system.
Another important factor for me is whether choice reasonably exists in the market. One of the great things about having a private sector is I can choose where to allocate my funds. I'm quite into music so naturally I have more instruments and sound equipment than most. But to afford this I must sacrifice other areas, like fishing. I don't own any fishing equipment because I'm not into fishing. This is great because it allows for a rich and diverse society.
But when the doctor says you need a £3000 procedure or else you will die, nobody chooses instead to allocate the funds elsewhere. There is no reasonable choice when it comes to healthcare. So it's wrong to treat it just like fishing.
I really tire of arguments based on ideology - both from left and right.
I wish we could just have a sensible grown up discussion about which services are best delivered by the private sector and which by the public sector - there are plenty of both!
I don't think it's so subjective. If a democratic government decided that policing, clean air or firefighting weren't public goods they'd be incorrect. Even if polling supported it.
Well, there two distinct questions: what should be treated as public good and what is a public good. In my view "what is public good" is defined by the very act of public funding and availability. What should be public good is entirely different, moral/political discussion.
Anarcho-capitalists would argue strongly that all 3 of your examples are no different from any other service provided to customers. I've seen them (or sympathetic sci-fi writers) think up all sorts of imaginative scenarios about how that might work.
Personally I agree with you, I think privatizing any of those things would be madness, because the real world never ends up working like the ideological fantasy, but it's hard to get everyone to agree on what's an objective economic truth.
> Anarcho-capitalists would argue strongly that all 3 of your examples are no different from any other service provided to customers. I've seen them (or sympathetic sci-fi writers) think up all sorts of imaginative scenarios about how that might work.
That's just silly, we've had the anarcho-capitalists perspective in the past, that's how the modern firefighting services were started.
Do you know how they'd work?
Firefighters would come up to your house and ask for half of what was inside in order to extinguish the fire, because there's no free market for desperate people.
Ooooor... they'd do the same to your neighbors, because if they wouldn't extinguish your fire, their house could burn down, too.
Ooooor... they'd set stuff on fire so that they'd have who to blackmail.
Ooooor... you could pay them a constant insurance/protection fee so that they'd actually help. And that insurance/protection fee would become widespread, because who wants their house to burn down?
At which point, why not just distribute the cost to everyone since 99.999% of buildings can burn down, and make it a public service?
Which is where we are now.
Anarcho-capitalists and libertarians are basically people who don't know history and would want to speedrun it with great pain and suffering for everyone, along the way.
> I believe the best way to make this work is by keeping the network itself in public hands and then having a competition of contributors to the network - e.g. electricity providers that add energy to the grid.
One area -- in fact, the only area that I can think of -- where privatisation has mostly worked in the UK is the telecommunications market. Here the networks are in private hands, but the providers are forced to offer somewhat equitable access to their competitors, e.g. by sharing masts, poles and underground ducts. That, plus the relatively low cost to entry of setting up as a new player, seems to be enough to keep prices down and service levels up.
This wouldn't work for transport of or on rail, road, water or gas, because there's no realistic way to force different entities to share the same infrastructure; you can't reasonably set up two parallel gas networks, or run two independent sets of rails. In those cases I agree that we have experimentally proven that socialising the infrastructure was/is the most efficient option. Now we need a government with the political chutzpah to accept that.
It's testament to how successful some of the early privatisations were that many people now don't realise that the businesses were ever in public hands - eg British Airways, British Petroleum etc. It seems ludicrous to think they were ever nationalised industries now.
Because of the Thatcher government wanting to "open the market" to American telecoms, in the 1980s they stopped the world leading Fibre rollout that BT had already started.
Decades later the UK is still behind the countries that took all the tech and continued what we'd started.
The main reason I think for why the telecom market succeeds under a fully free market model is the fact that you're buying network access, not a concrete product. To compare it with electricity - every house comes with access to the electrical network for free and the network is maintained by the government; what I pay for is for someone to put voltage on these wires. Whereas when I pay an ISP, I pay for the right to access to the wires themselves. The data is either free (e.g. this site), or paid (e.g. Netflix), but the ISP itself doesn't enter the equation, they are just paid to maintain the network.
This suggests that you could privatise both the electric grid and the electric supply, but only if you enforce strict separation of the entities owning the one and the other. I'm saying this just as a thought experiment, there seems to be zero benefit to privatising the electrical network. The main problems with a government run service boil down to possible inefficiencies raising the price above what a hypothetical lean business would do; the fact that changes at the government level happen slowly; and lack of consequence for doing the job poorly. For an old, established technology like electrical wiring, these are mostly theoretical criticisms - it is extremely unlikely for a revolutionary change in electricity delivery to happen any time soon.
Openreach should be nationalised though because it owns the poles and ducts that can't be duplicated easily. It has been forced to open up to competitors, but then the only way for them to extract value is probably by taking on debt much like the water companies have done.
I just don't see how the free market helps in the maintenance of poles and ducts. That should be owned by the state.
As I understand it, Openreach charge their competitors a fee for duct and pole access, so there is some way for them to extract value from their ownership of the network. Whether that's a better detail for the taxpayer than nationalisation, I don't know. I was really just pointing out that it appears (appears!) to be a sustainable solution.
The issue of privatised companies taking on debt whilst paying dividends is a pure failure of government regulation.
One thing that can be done for all these services is to allow any private company to offer the customer facing front end (payment, bundling, support etc) which plug into a common wholesale backend.
Yes, BT was divided into two business units to enable this process. They unlawfully colluded with each other in order to stop any reseller from being able to charge less than the BT retail offering. Result: terrible infrastructure investment and no competition.
Or the other way round - have a thin public service to interact with users, subcontracting all the heavy lifting to competitive bidders working to a rigid specification. You set up a monopsony rather than a monopoly, letting the public rinse the companies for once. This is how Transport for London provides bus and Docklands Light Railway services, and it works very well.
>where privatisation has mostly worked in the UK is the telecommunications market. Here the networks are in private hands, but the providers are forced to offer somewhat equitable access to their competitors, e.g. by sharing masts, poles and underground ducts.
Not strictly true, currently the Govt is subsidising infrastructure providers to the tune of £3000 to £4000 per household for every one that has fibre to the property (FTTP).
So a company like this one https://countybroadband.co.uk/ needs to get about 30 households signed up, they have 1 year to get the cables laid to their greenbox street furniture, and then then run fibre from village to village until it ends up back in London, probably telehouse.
So its costing about £90k per greenbox, and depending on where on the run you are, you might see a bit of a lag if you are at the end of the run in places like north norfolk, but if you live in a village somewhere in essex, ie closer to the main routing points in the UK, then the lags will be less noticeable.
This also ignores cloudfare type data centres which cache the most popular content and locate it close to your door.
But there's a govt subsidy here going to businesses, in this case infrastructure providers for home users.
Now if you take this place https://en.wikipedia.org/wiki/Cwm_Dyli its got fibre which it had to pay for and cost £200,000 a few years ago when it was strung up the poles. But its also benefited everyone in the area who didnt have to put their hand in their pocket, but the fibre is somewhat exposed on the telegraph poles imo.
There is actually alot of fibre already in use in the UK, because fibre doesnt really change, so the improvements in fibre come from lower costs and improved compression ratios by detecting the traffic type and then compressing it, which requires a level of oversight on everyone's internet traffic going in and out of the country. Goonhilly has been doing some of this sort of algo compression/traffic detection testing in the past. https://thefalmouthconvention.com/record-2/field-trip-report...
Rail companies push up the costs, much of it through clever accounting, setting up leasing companies for rolling stock, separate companies for man power etc etc. You'll be surprised how many foreign companies have a slice of the british railways. If you are fed up with the state of the rail services, beat up on the foreign countries and companies that have a slice of the pie.
Roads, builders all submit tenders, the unwritten rule (for all types of building work including schools, hospitals in the UK) is if you dont want the work, submit a super expensive tender, those that want the work price competitively.
The main advantage of privatisation, is you get new ideas being tried out more quickly than with socially owned or governmentally owned entities. In other words it brings diversity to the table, instead of conformity.
Legislation already brings conformity in many ways, but this is still after people but typically businesses have been consulted on for a govt white paper.
It also gives govt the ability to say its not my fault when something messes up, so if you really want to beat up on the govt, get everything taken back into state control, then beat up on the govt. If the govt is smart, it will push responsibility's onto other people who feel they have the chutzpah to run a multi million/billion utility company, in the words of L'Oréal "because they are worth it".
"Govt is subsidising infrastructure providers to the tune of £3000 to £4000"
I live in a rural area in Scotland, until recently we only had 20 Mbps down and 1 up. I had enquired to a specialist ISP about installing fibre and they quoted £7000 to do an estimate - which I interpreted as "please go away".
BT/Openreach came along and installed full FTTP - which I am very happy about but I did wonder how commercially sensible it was with us paying £50 a month or so...
Thames water has to be allowed to go bust, and the shareholders need to lose their shirts, because that’s what has to happen when a company is so badly run. Otherwise the abuse will continue.
However, I would like to keep my water supply so somebody has to sort this situation out quickly.
Sadly, as a customer of Thames Water, I can say there's 0% chance the gov will them fail.
It'll either end up with tax money being pumped in, or a shocking increase of the prices.
Business always strives to optimize but while I stand here waiting for the bus I have to witness 5 different package carries battle it out on the tiny road where I live.
Can't get more inefficient than that. What's next? Privatization of trash?
I have actually seen this with recyclable trash, several companies with different colored trash bags that pick up on different days littering the street. I'm glad some towns have already banned this. Worst part is that they let people mix all recyclables in one bag and then sort at the facilities adding another huge inifficiency. This is a huge eyesore in Switzerland where people will give you the "stare" if you through shit in the wrong bin.
Privatization of trash collection has already happened in large parts of Romania. Sometimes the results are good, sometimes bad, but it's always much more expensive.
Privatization nearly almost always is more expensive because there is the inherent profit/return on investment that doesn’t exist in public infrastructure
Here in Oslo they privatized trash collection. The contract period was up and the new winner had won because massively cheaper price.
Turned out the winner was massively cheaper because they had massively underestimated the work required. Trash piled up for weeks while the new trash collectors worked illegal amounts of overtime trying to get rid of it.
Now, this switch had happened just before local elections, which the right-winged parties who'd been in control soundly lost.
The new left-winged leadership ended up canceling the contract and bringing the service back in public hands.
Why do we have to relearn this over and over and over?
It's such a waste of money which the right should be the ones complaining about.
Unregulated privatization does not work because privatization means optimize to the max which includes cutting corners in labor laws to the health the citizens.
We don't. The right-wing know that ultimately this methodology is poor for provision of necessary services, they can still take money from the tax-payer using it and that is their goal.
Do more direct democracies have this problem?
There are several things in the UK that have been clear attacks on our democracy that it feels could have been avoided if it were possible to force a national vote on them. Proroging parliament. Neutering parliamentary standards. Tory party members solely being allowed to choose succession for multiple PMs. And so on ...
Allowing water companies to pay bonuses and dividends whilst putting up rates and pumping effluent into our rivers at massively increased rates ... a national vote would allow an opposition party to put a solution to stop that to the populous and it could be fixed, somewhat.
Although, with the levels of deceit and manipulation, just flat out immorality, the Tories have practiced in recent years maybe they could get the public to vote for more profits for shareholders and more shit pumped into the rivers. I despair.
> Unfortunately, none of these apply to the privatization of inherently public commodities that run on top of an underlying network infrastructure.
We tried this with the railways in the UK. In the mid 90s the tracks and signalling and most of the stations were transferred to a publicly owned and regulated company (Railtrack), while private businesses competed for franchises to offer train services. But within a few years the government was unable to resist the temptation to privatise Railtrack too. After that we had the inevitable phase of regulatory capture, followed by financialisation of the train operators, leading to position we had at the start of the pandemic where the operators were basically competing to offer minimal services for maximal revenue by subsidy farming.
In the absence of regulatory institutions that are able to withstand commercial pressures^W greed, then this approach will always fail.
In the UK, regulation of privately-delivered public services has failed due to decades of government by parties that view regulation (and public ownership) as simply undesirable.
As you're being downvoted, here's more info on the history of Network Rail [1]. From memory, it was formed after the Potters Bar crash and realisation that Railtrack was trying to squeeze to much money out of the network.
This reminds me of the "Do not fall into the trap of anthropomorphising Larry Ellison." rant - why are people surprised the private companies find any way to squeeze every penny of profit out of the services they run, it's what they do! And in the absence of competition that will be through underinvestment and shitty services (literally).
> why are people surprised the private companies find any way to squeeze every penny of profit out of the services they run, it's what they do!
Because companies bullshit their "missions" and "goals" everywhere and repeat after me, PROPAGANDA WORKS. Even if you think it doesn't, it plants a seed somewhere in the back of your head that's very hard to dislodge and clouds your "fully rational decisions".
After hearing from a myriad channels that companies want what's best for the customer, from a myriad authority or friendly famous figures, the average person is convinced they must be right. If you ask them directly they'll agree with you, and then their actions will show the exact opposite.
Railtrack was created as a publicly owned company in 1994 and operated as such until it was privatised in 1996. It was forced into administration in 2001 (after Hatfield) and in 2002 Network Rail was created to buy its assets.
> I believe the best way to make this work is by keeping the network itself in public hands and then having a competition of contributors to the network - e.g. electricity providers that add energy to the grid.
Even in that configuration, companies often have trouble fronting the money required to build a sizeable power production infrastructure. It can be seen in renewables, where investors build a lot of renewables production, but don't really care about what will happen once these renewables produce a large share of the network's power, and don't research and develop the missing pieces or the expertise to maintain.
You could argue that the public market regulator needs to better incentivize private companies to build the right thing, but at this point, the real value is the regulator's planification, not private companies buying and installing Chinese PV. So you have a capital-intensive private industry with little value-add.
> at this point, the real value is the regulator's planification
Exactly, in many of these markets a small team of public ally employed engineers could design a reasonable strategy in a week. Now you need a massive team of lawyers just to draft a contract with a private company that isn’t full of loopholes they are gonna abuse. Managing them is more work than doing the job directly. And government can always access cheaper loans
I'm assuming the main issue with government is that people keep electing politicians uninterested in statesmanship or running an administration, and with personal incentives to privatize.
I still don't understand how voters can choose to entrust public service to people that claim public service is inefficient: they can run it in the ground and claim "see, I told you!"...
It's entirely cromulent to believe in the usefulness of markets while also acknowledging that certain contexts cause markets to be inefficient, and thus reduce their utility, possibly to the point of utter uselessness.
Natural monopoly? The market is inefficient.
Inelastic demand? The market is inefficient.
Negative externalities? The market is inefficient.
Markets are just a means, not an end. We should apply them judiciously, not religiously.
This was obvious since the first wave of privatizations were kicked off in the 80s but somehow they still managed to build a cult around it. Now the investor cult is crumbling, but we're still supposed to acknowledge that there was a core of a good idea there and they just made a few mistakes and took it too far.
That's absurdly generous.
Even some of the supposed privatization successes really werent (e.g. British Steel, British Telecom). Even in markets where competition is possible, if the product or service is basic enough, keeping a state run competitor helps inflict market discipline on private actors who need to be kept in check. The UK property is a clear example of where this is direly needed but the cult both prohibits it and has its greedy eyes on the NHS.
I don't know in which country you live, but here in France, privatization and opening markets has been salutary.
- The phone lines state monopoly was broken, it cut the cost by a factor of 10, and made possible high speed internet.
- The packages delivery state monopoly was broken, which lead to a much more improved service, which delivery of fresh food or tracking minute by minute where your package is.
- The internal flights state monopoly was broken, which leds to low-cost operator who devided flights tickets by factor of 20.
Opening markets != privatization. There's absolutely nothing wrong with breaking a state monopoly if that's possible, but that's not privatization.
The free market cultists pretending that these two things that are very different are equivalent is half of how we got into this mess, in fact.
Whilst participants in the utilites market will often complain that it's "not fair" that they have to compete with a state actor, they're often the best way of exerting market discipline on them.
This is particularly true in utilities space where private actors unhindered by state competition try to bamboozle their customers into giving them fat profit margins with stupidly complex bills. State run companies that provide a bare bones low profit service that matches what most people actually want inhibit this kind of market abuse.
Free market works because of competition. When you are privatizing utilities and public services, most often you are creating monopolies, which means no competition.
I too believe that free markets are the solution to a great many of the conundrums of organising a society, but I also believe that a strong and socially conscious (by which I mean its prime directive is the enhancement and improvement of living conditions for all of those under its jurisdiction) regulatory hand is necessary.
The U.K. has plenty of regulations, and toothless enforcement of practically all of them, to the extent where ignoring them and the ensuing fines are just a cost of doing business.
With firm regulation, a free market could operate both profitably and fairly to run public services.
As long as there’s a commingling of commercial and political interests, however, this is an improbable reality. The changes would have to start in the culture of government.
Money is power. Regulation is a fig leaf. Think of taxation: the government makes all the rules on how much tax a business should pay under this or that circumstance. How much tax do the biggest companies pay? Next to nothing, pound for pound. Because they are able to use their money to exert power. Companies will always do this, so regulations will always erode over time.
This is a function of the form and culture of government - our current system, of professional politicians, is ruinous.
I have numerous thoughts on what would be better, such as sortition, or devolution and administrative federalisation, but as long as we have party politics and elections on mass scales, we will have corruption baked into the system. What we have worked reasonably well before mass communication, but with each step of communications technology, one of the core principles of representative democracy - representation - erodes, as the battles become tribal and personality driven on vast scales, and defy ration and reason.
I think we probably agree on a lot of things! I would prefer to increase the relative power of local councils and often think about how to implement some version of sortition. You might be interested in the concept of "random ballot" (that's the Wikipedia page title) if you don't already know it.
Exactly.
Many people seems to mistake "free market" with "anarchy".
Free market only works because there are anti-trust laws, anti-corruption laws, regulated lobbying. Otherwise, it is not a free market.
Free markets work for a lot of things, but they aren't the best for providing services that are needed by everyone. If there is something that everyone in the country needs, like clean water, electricity, roads, law enforcement and health care, then it's most efficient to collectively buy and provide these services. We appoint a couple of people to organise this for us. We call these people 'the government'.
In this kind of situation I often think of the government as the primary customer, as that's who effectively purchases the services of the rail operator via their contract. Passenger satisfaction is secondary (although theoretically that's mediated via the government regulator). Even more so because there's often no choice for passengers. If I want to get a rail ticket from London to Edinburgh I have to buy it from one rail company. If I want mains water, I have to pay a specific water company. It's the government who chooses, not me.
You're implying that putting capital towards having the "best" railway is the most optimal use of that capital. I think it's much more complicated than that, and coincidentally, market mechanics are one way of crowdsourcing the decision of how capital is put to best use.
I'm not saying it's always the best solution and free markets going unchecked can for sure cause more harm than good, but I think you're making it out much simpler than it really is.
> I believe the best way to make this work is by keeping the network itself in public hands and then having a competition of contributors to the network
Even then it doesn't always work out - UK rail services have that system - the infrastructure is maintained by a public body [1], but the operators are private. UK rail is quite expensive, and mediocre in quality compared to our EU counterparts.
One of the issues is that it's basically impossible to have competition on a single rail journey joining two large cities - there's aren't enough tracks to support it without making it unprofitable for operators. So rail networks bid every few years on sections of the rail network, and then have no competition for their term. Again the incentives that make the free market efficient are just not there. A nice video that summarises this mess here: [2]
> One of the issues is that it's basically impossible to have competition on a single rail journey joining two large cities - there's aren't enough tracks to support it without making it unprofitable for operators
Evidence from the new post-fourth rail package landscape seems to contradict this. Multiple places in Spain, Italy, France are connected with at least two competing high speed rail operators, to massive success (Paris-Lyon SNCF and Trenitalia, Madrid-Barcelona and Madrid-Seville by Ouigo, AVE, AVLO, Iryo; many routes in Italy by Italo and Trenitalia).
It can sort of work if you've got enough spare track capacity, but unlike buses or planes, with trains its quite easy to run out of capacity very soon, especially on mixed traffic railways (e.g. Karlsruhe – Basel at the moment only has capacity for two long distance trains per hour and those two trains need to be flighted together in order to leave enough space for local trains and freight). As soon as you reach that point, competition stops being directly about passengers and moves to the level of train paths instead (meaning you start getting some disalignment of incentives between the railways and the passengers), and consequently can't happen without actively worsening the service offered by the incumbent operator or even "innocent" third parties (local/regional trains as well as freight operators).
Competition also doesn't really work as soon as your journey isn't large metropolis to large metropolis and involves connecting trains, because a) if a connecting train only runs hourly (or at best half-hourly), it's impossible to have attractive connections from that one train to a multitude of competing operators and b) there are usually ticketing problems which start to matter as soon as one of the trains is delayed and you miss a connection.
Spain has, considering its size, economy and population a relatively generous high speed network (to a large extent financed by EU grants) that by necessity (broad gauage vs. standard gauge) is also completely separate from the legacy network and consequently isn't utilised super-heavily. Plus RENFE already sees its AVEs as a sort of plane on wheels and traditionally has a minimum connection time between trains of 60 mins (!) with only some exceptions, so there is still room for running additional trains and things can't get much worse even with competition and incompatible ticketing between operators on top.
France's and Italy's high speed lines are somewhat more heavily utilised, but you can still get comparatively far by staying exclusively on the high speed network. Plus in France the geography favours the simple Paris-to-province model with no complicated connecting services necessary, whereas Italy is favourable to a linear arrangement (Turin - Milan - Bologna - Florence - Rome - Naples are all along the same line).
In Germany on the other hand population centers are somewhat more distributed across the country, the high speed lines are of a more fragmentary nature and you have much more running on mixed traffic lines, plus a lot of network sections are effectively at capacity.
The result is that in Germany competition mostly isn't solely directly about passengers, but often rather about train paths, and almost any new non-DB long distance service that has been introduced in recent years (thankfully there weren't that many) caused varying amounts of havoc among local services running along the same sections of line, or in some cases even with DB's existing long distance trains.
Plus it means that e.g. RENFE and SNCF now see each other as enemies, so good luck booking a journey between Spain and France that involves a change of trains in one country or the other (or even worse, both of them).
Yeah, rail privatisation in the UK doesn't really allow operators to compete with each other. Since competition is the only thing that motivates good service, low prices, etc, that means those have been on the decline.
Not even the free market diehards can point out the competition in rail travel.
> I am a deep believer in free markets as the most efficient mechanism for distributing goods and services
> e.g. electricity providers that add energy to the grid.
And here you have a problem: different electricities are not equal. Suppose you have two large electricity-consuming areas (cities) physically separated by huge nothingness. One electricity plant can make roughly 1.5x demand of one city. There are two options: 1) build a plant physically near each city and 0-0.5x capacity interconnect between cities 2) build two plants near one city and have 1x capacity interconnect.
The question is how do you distribute costs of required infrastructure? This is a very non trivial problem, apparently. You may have sort of free market for "generic electricity" i.e. power/energy, but then the cost of transmitting that electricity falls on the grid and it may be a very significant cost burden. You may discount electricity of each provider by the network cost, but that cost is in practice dynamic, even more so with renewables. On one hand that would incentivize building of microgrids and small plants, but on the other hand that would disincentivize construction of base load generators, which are necessary for stability of the grid, especially with microgrids.
Datacenter connectivity faces the same problems. Say you need 1 gbps gateway to app, 10 gbps app to db, 40 gbps db to storage. How do you allocate network interconnects and node placement in racks? If some team has a spare storage shelf in another part of the dc, do you want to allocate that to app server in another part of dc without physically moving servers and instead routing extra 40 gbps fiber? Who pays for that?
> e.g. electricity providers that add energy to the grid.
It makes sense that energy production should be competitive. But for energy supply I can choose from dozens of companies that all supply the same gas/electricty, using the same pipes. These energy supply companies are really just billing operations. The actual supply of electricity is done by National Grid, another private company, but with no competition. Same for gas, and Centrica.
I can't even discriminate between them based on whether they're likely to go bust; when an energy supplier goes bust, some other supplier is forced to take on all their customers. That is an incentive to not run the company finances responsibly (whther you're the one that goes bust, or the one that is forced to take over).
Regulators are consistently hopeless. Regulatory capture is part of it - half the executives in these companies used to work for the regulator. But part of it is that you simply can't make a competitive market just by having a regulator tell you how much profit you're allowed to make.
From the article linked below comparing the 1960s nationalised rail service to todays privatised service:
"When Dr Beeching wrote his 1963 report, half the UK rail network carried only 4% of the passenger traffic, a third of the passenger fleet was used less than 20 times a year, and the railway employed 475,000 staff. British Railways annual deficit was then £87 million, or £2.3 billion in today’s money.
Today’s rail network is more intensively utilised and employs about a quarter the number of people. Yet in 2018/19, operational funding (i.e., less HS2 and enhancements) cost the taxpayer £4.7 billion or twice that of Beeching’s highly inefficient railway"
Also on the busiest West Coast mainline route London-Glasgow most trains still take around 5 hours the same as in the 1970s but with less legroom, more uncomfortable seats and highly extortionate ticket prices.
Free markets don't magically solve the problems of capitalism. You still have to deal with monopolies, entrenched market leaders, mergers leading to less competition, backroom non-competition agreements, lobbying for prefential treatment, revolving doors between regulators and market players, or just plain corruption and bribery.
What I see everywhere, not just in Britain, is the same old story over and over again: privatizing the profits, nationalizing the losses.
So, this might not be my strongest metaphor, but I see free markets a bit like the arena in fight club. Two people fighting, the others forming a circle that pushes the combatants back to the center.
We want the "fight" to occur. Economies are complex systems and humans have extensively proven that they're not good at running those. Free markets are the most effective way to facilitate technological progress and economic growth which indeed benefits everyone - although not in equal amounts.
However, we have to be mindful that free markets contain the seed to their own destruction. On the upper end, there's monopolies, price fixing and other anti-competitive behavior that disables the price finding mechanism.
On the lower end, there is poverty which prevents people from participating and discourages entrepreneurship.
Good regulation does just enough to keep the fighters in the arena.
> Free markets are the most effective way to facilitate technological progress and economic growth which indeed benefits everyone - although not in equal amounts.
When employed in the right place. It's very much not clear that train networks are that place, in fact I'd say it's quite clear in the UK that train networks are not that place.
odd to say problems of capitalism when none of those are peculiar to capitalism. and a regulated market in which lobbyists vie for preferential treatment is the antithesis of a free market
markets aren't features of the land that exist unspoiled until sullied by human hand -- what I see is that markets will always collapse into monopoly absent any countervailing force, for the simple fact that enterprise owners make more profit that way
The drug wars are one hell of a counter example. Although it has "regulation" in the form of military action being taken against the largest, especially when the cartel head gets too big for their britches.
But the point, yet again is that free markets aren't the goal. Market competition is.
Unregulated markets move away from market competition. They move towards monopolies, exclusivity contracts and similar items. Enforcing competition is the only effective method of benefiting society.
What you're describing is called a natural monopoly. Free markets fail in countless ways to the extent they never truly exist in practice. Some industries are close than others, though. A natural monopoly is one of the more obvious and easiest to understand failures. All natural monopolies should be public owned.
While free market is great, the purpose of a business is to maximize profits. The purpose of a public service like transportation, water or public healthcare is to help people with essential needs, not to maximize profits. Often the two might be incompatible.
They should be publicly owned but the money ring fensed and the prices rise depending on works needed. For example I think it would cost something like £100bn to sort out the sewerage system in the UK - we should just ask people what they want (continue as is or have higher bills) and charge people based on their assets an amount over say 5-10 years that covers it. So for rich people it might be several thousand £ per year and for poorer people a lot less. These sort of taxes that are needed can never be done currently so we continue pumping sewage into our waterways and seasides.
We know what people want, though: they want the sewage system fixed and to continue paying the same amount for water and sewage as before, and they've been convinced they can have it by cynical populist campaigners and politicians telling them that they were already paying for this and the evil, greedy privatised water companies just stole the money and used it for shareholder profits. (They were not. The amounts the regulators allowed the water companies to charge were way too low to cover it, basically by design since people weren't willing to pay that much and didn't consider it worth fixing until a year or so ago. All of the shareholder dividends post-privatisation were not enough to pay for it, and of course without those dividends no-one would invest anyway.) Oh, and they don't want the inconvenience of having their streets dug up to install the new infrastructure either.
The water companies could afford to address the problem, they just chose to afford dividends instead.
Absolutely, privatise and then increase taxation if needed to provide the service. But why do you need to, just give a water allowance per person and then adjust prices above the allowance to cover the cost of the service?
The rub is when it becomes run and managed by the state it becomes political. And it has a tendency to grow unbound as bureaucracies tend to. And then they organize and become a political force and they negotiate their next contract with the person they helped elect.
I agree that it’s in the people’s interest to own the infrastructure. But the management of the service on that infrastructure should be auctioned into the private sector with oversight from the government.
Singapore is doing something like this as they move to free market electricity. the network is owned by a government controlled company but everything else like maintaining the network etc as well electric suppliers are private. They all are charged a fix amount for network use. They tried it first with fiber internet and after successful implementation are not doing it slowly with electricity.
It's interesting, I haven't looked into the full history of it so I may not have this quite right, but from the museum's I've visited (Kempton steam museum for example) a lot of London's infrastructure seems to have been built by private companies.
I suspect though that when clean water was a new thing it probably cost a much bigger amount of people's income than it does now.
It also doesn't work for any product with inelastic demand.
People that need insulin need it regardless of price, so a 'free' market has the property that the price increases until the 'customer' is broke and then dead. It creates corporate structures that are based more around a 'leech' model. There is no incentive to create better or more efficient products.
Rail is different I think. Private companies successfully operate rail networks all over the world. The NYC subway system was built privately and only fell apart due to urban flight. Most of Japan rail network is private I believe, and more than a dozen companies. I think Stockholm's subway and regional rail systems are privately run and have been for ~30 years.
Anything or any good that is a necessity to live in society need to be publicly distributed and if cannot fully it should be highly regulated (especially the price and production).
This goes for basic food, housing, healthcare, transportation, education and so on and so forth.
So much life hardships would disappear if this was our reality and all it needs is political will.
Exactly. It seems pretty obvious, so the real question is, why aren't all privatisation efforts do it like that (keep public control of the infrastrukture, privatise service providers running on it).
I believe it's not done like that, because there is little opportunity to make huge profit on such privatisation. Would you rather own the entire rail network, or buy some trains and have to pay rent for rail access? No one will invest in the latter without financial history of operations in such environment.
To do privatisation properly the state should breaker up the infrastructure from the services. Split the services into separate companies (then do we want them to compete or each will have it's niche? Usually it's the latter). Restructure and run those service companies until they're profitable. Finally sell them, or better yet over the span of the years get the employees to get a sizable ownership share, give local go another sizable share, sell the rest on the stock market.
That IMO is roughly a good way privatisation could work, but it takes more than one electoral cycle to do it right, and which government wants to create gifts for their opponents? So we usually don't see anything like it.
> Restructure and run those service companies until they're profitable. Finally sell them, or better yet over the span of the years get the employees to get a sizable ownership share, give local go another sizable share, sell the rest on the stock market.
What benefit is there to the public/state of selling off a company that they wholly own and is subsidising their transport through it's profitability?
The only possible outcome is that the service declines and/or prices rise as money that once went to the benefit of customers is now extracted via dividends and share buybacks.
I have a hard time thinking of any privatization wins in the US, to be honest. Pretty much every example in recent memory I can recall was an abject failure. Can you list a few? I agree with you in principle, but I just can't think of any...
Isn't the efficiency of free markets supposed to be self-evident, thus making it weird to call oneself a "deep believer" in it?
"Distributing goods and services" also sounds as if these were inherently available in infinite quantities.
Problem is, they use finite resources. Such as oil, gas, soil, people.
So you are probably right and your belief is not a belief but a fact, but I strongly disagree with the implicit statement that this would maximize human wellbeing, present and future.
What is the empirical evidence for the efficiency of "free" markets (free from "externalities" too?), and what do they minimize, what do they maximize?
Clarifying, I'd agree with the implicit statement if all externalities were priced in. I just wonder if that's even possible.
For distribution of finite resources, I think free markets (without the scare quotes) are efficient.
But for something like public welfare, I don't think so, and I dislike that much is being swept under the rug regarding were the "value creation" takes place. I agree with GPs closing thoughts.
This sounds simple, but it isn't. In reality there are complicating factors. For instance, the introduction of New Public Management ideas can complicate things immensely. You fragment an organization into multiple smaller organizations, each responsible for some part of the business. Then you require each of them to be profitable. This also provides an opportunity to privatize by then having the resulting companies having to compete for contracts.
This sounds sensible the first time you hear about it. The reality is pretty awful.
This happened to the national railway company in Norway (NSB). The result was lack of investment, poor service, and a bureaucracy where nobody seems to be responsible for anything. Which means that rather than concerns being addressed, they get ignored. Because when, for most things, you can blame someone else, nothing gets fixed because nobody is really in charge anymore. As a consumer you do not really deal with one company anymore - you have to deal perhaps half a dozen companies that do not work well together.
NSB went from a somewhat poorly run public sector organization to an entirely dysfunctional failed NPM experiment. The reasoning behind this was about as sane as suggesting we terraform Mars rather than try to not screw up the Earth.
I have seen this in the private sector as well. I worked for a telco for a decade, and they are very similar to how New Public Management works in the public sector. (Which isn't too odd since a lot of them are former state monopolies, so they will be prone to the same sort of defective reasoning you see when NPM is applied in the public sector).
You fragment, outsource and then pulverize accountability. Telcos are usually fragmented from the outset. The restrictions on ownership models, a large telco will typically have separate companies with entirely separate cultures, technology stacks and business processes for every country they operate in. Yet within those countries they will fragment further - ensuring that you have siloed organizations working at cross purposes. Usually due to very localized prioritization to achieve goals that affect bonuses, ignoring the large picture.
One thing that is very striking in telcos is that it is really, really hard to find people who actually understand telecoms technology within them. And they rarely have much control over the technology. Which most of the time has exorbitant operating costs and extremely slow evolution when compared to large internet companies.
In the telco sector it tends to lead to an inability to make sensible use of capital to act on opportunities and evolve the business. You have companies that make a lot of money, but because of how leaders are incentivized and promoted, nobody wants to take risks and evolve new business areas because that might affect short term profitability or personal compensation for leaders. And even if you have leaders who want to, they will typically have very little manouvering space and anything that doesn't have a quick payoff will typically be sabotaged and then axed.
The way you "solve" problems in the telco sector is typically through mergers and acquisitions. The latter often having a very low chance of realizing much value. I've also seen a lot of examples of companies just selling their operations when, due to failure to respond to how markets develop, just have to give up and find new markets where their outdated strategy still works. (One way to look at this is to see what happens when a market reaches various saturation milestones).
In the 19th century the cult of the free market was used to justify exporting all of Ireland's food while the Irish starved to death. The cult has only grown in influence since then.
No, it's because those aren't essential services that people need with little option to competitively shop for. People can choose not to get cosmetic surgery, or postpone it significantly, or shop attorney between many different options.
They frequently can't for their health decisions.
Again, it's 'market competition' amidst healthy consumer choice, not 'free markets' that are beneficial for society.
And the healthcare providers make it hard to even see their prices up front. It's like going into a grocery store without price tags. You can't really compare prices.
Karl Marx showed us 150 years ago why your vision is impossible, and that is why we aren't taught about him in grade school despite him being the most famous intellectual in the world.
Under capitalism, private capital predominates; it decides the laws and the commons. If you think you've found a way around this, it's only a matter of time. We call it capitalism for a reason.
What's the alternative? State capital - controlled by politicians, media and swing voter/military segments - decide the laws and the commons in socialism/communism/fascism.
Obviously people made the same defeatist appeals about feudalism but here we are. Imagine if we popularized such pessimism about technological progress; we have plenty of cause to.
Edit: I suppose it's not as obvious if you only have an American education.
Railway tracks aren't privitised and haven't been for 20 years. The trains running on them were - at least until covid broke everything
The problem is that the government let companies like Virgin off when they broke their contract, allowing them to bid high, take the profits, then walk away rather than fulfilling their contracted duties. Privatise the profits, socialise the losses.
Nethertheless there is tons of competition on transport in the UK
1) To get from Birmingham to London you can choose 3 different rail providers giving 3 different cost/value returns. Faster more frequent ones cost more.
2) On top of that you can also take a coach, hire a car, drive your own car, or of course not travel at all
3) Manchester to London you can fly, take the coach, drive (car hire or your own car), take three different trains ranging from £50 return and 3 hours to £180 return and 2 hours.
"Railway tracks" isn't where the competition is, transport is, and there's tons of competition. I remember I used to commute from a commuter town into Manchester. I could take the train during the peak, or I could take it off peak, or I could take the slower train from a different company, or I could drive, or I could take a commuter bus.
When it comes to the last mile of say BT, you used to have a monopoly, it would take months to get a replacement handset connected. Today though "a phone line" isn't what you want, internet is, and there are options
1) BT/Opeanreach connection (fibre or copper)
2) Non-BT fibre (in many cities)
3) Wireless ISPs
4) Satelite ISPs (Starlink/Oneweb or Geostationary)
Each has benefits and drawbacks
I would agree that the last mile of water and possibly electric provision shouldn't have been privitised. Treatment works though -- why not? There's no real limit on the number you can have.
When it comes to long distance electric again why not. There is a lot of money to be made transporting Electricity in Scotland and selling it to the south east. Let multiple companies do that.
The problem is planning permission and nimbyism means it's impossible to actually build new lines.
You've cherry picked two routes Birmingham/Manchester to London where there is choice, but for the majority of the country there isn't. From my town there is one train company that has exclusive use of the route, and its motivator is profit extraction, not quality of service and encouraging more people off the roads on to the trains.
Also comparing trains to cars and busses as a positive competition is missing the point that our roads are over capacity. Moving more people off of the roads onto the train networks should be a priority.
> and its motivator is profit extraction, not quality of service and encouraging more people off the roads on to the trains
Which station? Or which TOC?
> Also comparing trains to cars and busses as a positive competition is missing the point that our roads are over capacity
Which roads? I had no problems driving the kids to school this morning, never are. Well that time fro about 2 weeks a year that the cows cross the road at that time of day after milking which adds a few minutes onto the trip.
If you doubled the passenger mileage on rail, you would reduce passengers on the roads about 10%. Rail isn't going to be a fix for general capacity problems.
I do feel you are using your own experience very anecdotally, I can tell you that a lot of the routes in wales are just one operator.
And also, your commute may be fine, but believe me, many cities in the UK are not... Edinburgh’s 41 per cent congestion level means a 30-minute journey will take 41 per cent longer than usual and I can tell you from personal experience that a lot of cities in the west-country are over capacity.
An interesting data point to discuss, but not much of a vote for privatisation (which I assume the implication is). In that time we have seen significant urbanisation, which means both more people living in cities and people having to commute to cities to work. Both of these (and limited road capacity) mean more rail travel.
In theory this extra cash and economies of scale should have been an ideal situation whereby rail transport could be significantly improved. In practice we've seen above-inflation fare rises and (in my experience) dreadful services.
When profit becomes the main motivator, quality of services always seem to drop.
I get that the government can be annoying, but I feel like there are many services that we should aim to provide as a society where profit isn’t the goal. For example, you don’t need to price gouge people for electricity, but charging enough to cover expenses and future infrastructure upgrades is fine and to be expected. No costly CEO or shareholder overhead thrown in there.
Exactly. Fake competition in utilities and services makes no sense. The "privatisation" of the UK railways is a prime example. I use quotation marks because it's just privatising the profits and socialising the losses.
The train operating companies are a particularly bad failure because like e.g. the water companies they get to channel the revenue but unlike the water companies they don't own the capital intensive bits but bid on how much they'll return during the franchise period. As a result, the capital need to start a train operating company is tiny in proportion the revenue flow, and their returns look modest related to revenue, but the return on investment looks decidedly less than modest. And so their parent companies can afford to risk outright failure of the franchise because the risk reward were tilted heavily in their favour even before the covid bailouts. The incentives for them are really perverse.
And one of the worst ironies is that some of our franchises are run by the state rail companies of other countries. Meaning we are subsidising rail travel in foreign countries.
Indeed, we do have a lot of state owned rail in the UK, just not UK state owned. I believe at one point even a majority of the franchises were held either by companies either wholly or partially owned by foreign state owned rail companies. Fewer now, but still.
Even in markets with competition, competition from the public sector is an excellent way of exerting market discipline on dysfunctional markets.
If you compare the average quality of housing in, for example, Singapore (where 90% of housing is public) and the UK it's like night and day. UK private landlords are among the laziest and most entitled in the entire world, the land use efficiency is terrible and the building quality is abysmal. Thames water wasn't the only victim of the cult of privatization.
Alas, the one UK politician that tried to fix this was treated like the a cross between the antichrist and a terrorist by the UK media oligarchs and that was enough to prevent him from fixing anything.
If anything the NHS is probably in the crosshairs of the investor cult.
My favorite example of this is telecoms in Canada. Both public competition and dysfunctional markets.
Saskatchewan has SaskTel. It’s a public telecom that provides internet (DSL, fiber, wireless)/POTS/cellular. They and their subsidiaries (e.g., SaskTel International) provide all sorts of other services.
When the CRTC removed rules about charging for data overages and things, they didn’t implement any additional charges because their mandate is to serve the people of the province not extract the most profit for shareholders.
They contribute money back into the government coffers every year while also being the sole telecom covering large swathes of the province, working through a FTTH rollout, etc.
When I went to sign up for a cellular plan with a different provider, the person on the phone kept telling me the plan didn’t exist—they had the same plan, but it was $30/mo more than what I was telling them.
Because they had the wrong province selected. All of that provider’s plans were 30-50% cheaper in my province due to the competition from the (profitable) public telecom.
I’ve been away a while, it’s probably gone to shit by now (when I left the government was trying to sell it off for a quick buck _again_), but at the time it was magical to live in the only place in the entire country with an even relatively sane cellular market.
i always cringe when i see Singapore used as a comparison point with developed nations. it's a single city and has an authoritarian government. how is that at all an apples to apples comparison?
Because the reason they implemented the HDB mass housing program had nothing to do with them being authoritarian or a city state. They are just nice commieblocks.
Lee Kuan Yew was afraid of the domestic communist opposition. This was a popular policy of theirs and they were getting dangerously close to power,so he ripped it off. It's a formula for staying in power that served him well.
Back when western leaders were deathly afraid of communists they used to build public housing as well. Then they stopped. Singapore continued.
Corporations want the pubic to think that governments are incapable of running services for them. Then the public service can be asset striped and run on a shoestring. When the private owners get called out for providing a bad service their veiled argument is "well at least the government isn't running it, that would be even worse!".
Obviously there are cases where the government fails and that can't be given a free pass, but this is too often assumed to be the outcome and the only solution is privatisation.
Even in the UK where there is the feeling that government is totally incompetent the NHS keeps providing at least a baseline level of medical care expected from a western country. This is despite being sabotaged at every opportunity over the last 12 years by the Tory party.
While I agree with you entirely, I'll propose an adjustment to the reason for this problem in the case of the UK:
When the government is ideologically opposed to ensuring sufficient public oversight, quality of services drops.
The problem in the UK is not merely privatisation, but privatisation in a way that privatises profits, often socialises losses, and that substitutes dealing with crises after the fact over strong oversight during, because of a string of governments that have not just been opposed to government ownership, but that has been opposed to regulation.
You could strip away the profit motive by making these all non-profit stakeholder led organisations of some sort, and you'd still have a massive problem because of the lack of proper oversight.
Fix the oversight issue and maybe some degree of privatisation would work (though I agree many of these services should still not be operated with a profit motive), but the double whammy of weak oversight and privatisation is disastrous.
The problem is that even if one government were able to fix the oversight issue, its hard to see how subsequent governments can be prevented from ripping up the oversight (e.g. under the rubric of 'removing red tape'). Even if you look at the most likely incoming government, they are reluctant to get rid of the water companies due to cost. Perhaps what is needed is some mechanism whereby the threat of re-nationalisation can be enforced at minimum cost to the taxpayer.
It is a problem largely created by granting them property rights instead of franchises or operating agreements. In a democracy we can never remove the risk of the next government messing it up, but as long as they grant time limited or restricted contracts the opportunity for reversal is there.
Which, incidentally, the cynic in me would suggest is the reason for why e.g. the water privatisation was done the way it was.
Compare to the train privatisation, where after the failure of Railtrack brought the infra itself back under government control, time limited franchises means that the government can at least regain control over time at low cost by simply ending the issuing of new franchises (and where the government have operated many franchises for various lengths of time due to outright failures of the franchise-holders to meet their obligations). You can even see it as allowing for shifting governments to change their mind without it becoming big all or nothing decisions (though the original franchise model is utterly messed up in how it aligns the incentives).
To be clear: I think the rail privatisation was also an utter disaster, but it's current incarnation is not nearly as bad with the water companies - largely, incidentally, because large early failures like with Railtrack ended up with the undoing of some of the worst parts of it. It's still shit, though.
They are both ridiculous propositions. There cannot be any meaningful competition where 99% of the involved activity is effectively fixed (water pipes and plants, rail tracks, rolling stock, even the ticketing system now). It's all an ideological play supported by big money.
Indeed, but the water privatisation is as things currently stands (but only because Railtrack crashed and burned so we're already rid of that abomination) worse in the sense that there's no automatic exit mechanism because the water companies own the infrastructure. The rail franchises at least expire so the "cheap" out is to just let them run their course.
But when the best you can say about one over the other is that it's cheaper to get out of it, not getting into it in the first place would've been preferable.
Weak oversight with nationalisation is even more disastrous. With a profit motive, the utility is at least incentivised to deliver the service so that they can get paid. If you have government-owned utlity with weak oversight, there is no incentive to even deliver the service.
Look at what is happening with South Africa's power utility (and other State Owned Enterprises like their post office and national airline) as a great example of what happens to a public enterprise with no oversight.
> With a profit motive, the utility is at least incentivised to deliver the service so that they can get paid.
No they are not! In Britain rail companies were bailed out during Covid.
Railways that had zero passengers reported profits and paid dividends!
> Look at what is happening with South Africa's power utility
South african society has various issues that are not applicable in UK/france/etc. Same goes for Russia. If suddenly French government does the kind fo shit Russian government does, half of Paris will be on fire before you can spell Baguette
With nationalisation you can at least vote out the people who mismanage it.
Privatisation makes this harder because you run into all kinds of issues with taking them over without paying market rates that acts as a massive barrier. E.g. this was a major factor in the arguments against Labour's 2017 and 2019 election manifestos in the UK, because the costs of buying out the private providers vs. the drastic risk to the economy of sending the signal that UK companies are at risk of uncompensated takeovers by the government were both used to hammer them with.
But yes, you need strong oversight either way.
> With a profit motive, the utility is at least incentivised to deliver the service so that they can get paid.
I don't really agree with this. Semi-monopolised privatised providers only care to deliver service to the level where they maximise their return on investment. This is why we've seen multiple train operating companies collapse in the UK, because they were low capital to set up and bid on terms designed to let their owners extract as much as possible, without care for whether or not they'd remain viable, because until Virgin and Stagecoach faced outright bans on participating in bids for some new franchises there appeared to be no consequence. Worst case you'd just start a new one.
It's also why we're seeing Thames Water fail to address a network of pipes that leaks an astonishing proportion of the supply because while you're right in as much as they've had to deliver service to consumer, they've not been incentivised to deliver the service to society as a whole that they were tasked with, which is broader than delivering water to consumers and includes stewardship of the capacity. A pure profit motive for a monopoly resource can often descend into looking for ways to extract maximal margins that are in the long run wildly detrimental both to customers and to society as a whole.
The other side of that coin is, with quality as the main motivator, the prices go up. There's no free ride either way through organising things differently, its a choice between quality or price (as opposed to getting quality at a cheaper price).
The other issue of course is in a public setting, there is no motive for efficiency.
A counter: The NHS is one of the cheapest universal healthcare systems among comparable developed countries. It's run on an utter shoestring.
In other words: You can set budgets and force your providers to do the best they can within them. No matter where you set them, people will be unhappy, but it's not like setting quality as the main motivator means you need to give the provider free reign to spend however much it wants.
PPP adjusted total UK healthcare spending is less than half of the US, despite a significant private sector acting as an outlet for a proportion of the situations when people are unhappy with the NHS. Incidentally US public money per capita going towards healthcare exceeds the per capita cost of the NHS (whether nominal or PPP adjusted). The low amounts flowing to private providers in the UK can be seen as a demonstration that most people considers the NHS service good enough - while many would not be able to afford going private, the proportion who could if it mattered is certainly far higher than the current takeup.
One of the assumptions that may be being made in this statement is funds can be borrowed for free, in a debt or equity setting. Whoever is lending/providing those funds does expect something in return.
Even a government that borrows, needs to pay something back with interest. And an investment by the way of shares the government makes needs something back roughly matching the interest rate too.
I don't really see an argument where a public setting is any more beneficial from what you're saying, if the international investor was the the treasury, it would still want something back by shareholder returns.
Assuming quality does actually go up, prices going up aren’t the worst thing ever. I would just want the utility to have programs for low-income households since we don’t want to price people out of a necessity.
Cuts both ways - people in general are largely motivated by profit, not just corporations and their executives.
Do people prefer to buy the package of ground beef that's $9/lb or the one that's $5/lb? When faced with a choice, most people want the cheaper one, disregarding the harmful externalities that make the lower price possible. Nevermind that the more expensive one is better for their bodies and the environment. Most people and corporations are married by the same motivation: to make and save as much money as possible with no regard for the harmful effects.
If profit-seeking consumers shift their motivations, profit-seeking corporations will naturally starve, and something higher than profits will prevail. But people won't change. Nobody is going to vote for the government to ban the cheaper but more harmful beef farm.
> Nobody is going to vote for the government to ban the cheaper but more harmful beef farm.
What do you think the FDA is, but people having voted for more expensive but healthier beef? Like, as bad as you think it is now, imagine how much worse it would be without food safety regulations.
Add education to that too. It should be pretty obvious to everyone that quality education is a matter of national security but here we are, with people proudly uneducated, who - in their wilful ignorance - harm others.
Thank you to everyone who flagged me and now I can't respond or comment in this thread <3
I think education is actually case where the free market would solve a lot of issues. Making schools compete for students would incentivise schools to provide a more valuable education.
We do see this in Switzerland, Finland, etc. But this is due to a competent Department of Education, which simply doesn't exist in the UK. Infact the UK DoE isn't even just incompetent - it is quite clearly maliciously sabotaging education, there is no other logical conclusion for the farcical policies that are in use.
Or you have state-run education as another competitor. Or you can have the state sponsor promising but poor students. You can even incentivise private enterprises to give bursaries to promising but poor students.
You want to provide quality education to __ALL__ of the population. I don't mean university level education.
I mean real world education, such as how their body works, how to navigate society, critical thinking, cognitive biases, how probability works. If humanity is to survive we need to move away from empiricism and dogma, we need to move towards an educational system where kids grow into rational adults.
Public schools complete for government funding, the better the school the more funding they should receive to educate as many children as possible.
The competition should be the grades attained by the students or their entry into higher education/vocational training. Not value on the stock market or the directors total comp.
Measuring pupil attainment is harder than comparing share prices, but it's certainly better for society.
Could you elaborate? There are at least 2 interpretations of “over-educated” people being a threat to “the system”.
Overeducated as in having university degrees and being “highly skilled” which demands imports of “unskilled” workers which causes integration problems.
Or overeducated as in understanding how “the system” works and are aware of the class war they were thrown in since their conception, how the system pits the working class against each other while the ruling class enjoys a paradise.
The second interpretation of my comment is what I was attempting to allude to. I am reminded of this particular quote from Orwell's 1984: "Until they become conscious they will never rebel, and until after they have rebelled they cannot become conscious."
(not) sorry to say that when a company has a strong ethos of providing great service it is primarily motivated by profit. even if it is known ahead of time that the profit won't materialize for decades.
Why prefer a private non-profit to the government?
I like non-profits in some cases. They're great at funneling money into specific causes that people care about. Especially small ones (a local theater group is the go to example) or politically charged ones. But "the trains running" doesn't seem like one of those. Why not have the government oversee it?
As opposed to the unaccountable board of a non-profit raking in significant income? Where they can pay themselves a nice bonus if they make more money for the non-profit?
Its a completely unproductive answer. Why do you assume a non-profit set up for a cause will predominantly exist to pay it's directors bonuses?
Lets deconstruct the three options on the table:
1) for-profit private -> exists to make money to their shareholders
2) government -> exists to (on paper) provide services to the people, but has a plethora of other reasons of existence (provide jobs for people, provide ego boosts for politicians working in the system)
3) non-profit private -> exists to provide a legal structure around an agreed cause
It is certainly possible someone establishes a non-profit to pocket the money for themselves, but it is a very clear violation of the purpose of the whole structure. In the other two, it is completely acceptable to bounce out of the cause of providing a service to the people, as there are other "goals" for the underlying system.
Whining about directors paying themselves bonuses a low-IQ bait to start flame wars.
The entire premise of your comment is false, since energy retailer margins are sub 5%. Considering the UK government has directly been engaged in numerous schemes which have dramatically increased the wholesale price of energy, a 5% cost saving won't even help anyone. Prices are rising by 4x that yearly with the money printers and war machine turned up to 11.
I can’t speak to the UK directly since I live in the USA, but all of my experiences with privatization of services has been awful. I lived in one city that handled trash and recycling as a part of your property taxes. It was a good service. No complaints. Where I live now, you have to find your own trash and recycling service. Prices are higher and the service is far worse.
The UK is increasingly resembling the rest of the world's rentpig. The UK government has made Britain into one massive investment vehicle for foreign capital -- our utilities, leading firms, football teams, landmarks and property all serve to enrich sovereign wealth funds in the Middle East and Asia. These foreign investors have all received lavish incentives and grants, and in return we have been allowed to live way beyond our means for decades.
It's alarming to note the extent to which our resources have been sold off. The Conservative party, for instance, facilitated the sale of nearly 10% of Thames Water to China, and a further 10% to the Abu Dhabi Investment Authority.
Effectively, the country is being turned into a dividend machine for foreign capital, while our government debt continues to soar, now standing at over £110 billion and threatening to surpass our entire education budget [0]. This rampant exploitation of our national resources and the escalating debt crisis are alarming indicators of our economic vulnerability.
The country's economic situation is gravely concerning. Our mounting debt issues are additionally exacerbated by the looming crisis in our public services, which are showing signs of failure and are predicted to become significantly more costly. For example, we currently allocate 38p of every pound spent on public services to the NHS. However, projections show the number of Brits aged 85 and older doubling in the next 25 years [1]. Despite these alarming statistics, nobody in government or the media wants to have an honest conversation with the public about what this means.
There are also limits to how much more redistribution can be done. As per 2019/20 data, the top 1% of income taxpayers, earning above £180,000, received 13% of all income but contributed 29% of income tax receipts. The burden is even more evident when considering that the top 10% of income taxpayers were responsible for approximately 60% of all income tax receipts. In contrast, the lower half of income taxpayers, those earning less than £26,000, accounted for only 10% of income tax receipts, suggesting a significant tax skew towards higher-income earners.
The problem in your analysis is that you are thinking about the money rather than thinking about the resources. All those people haven't gone anywhere and all the capital (as run down as it is) still exists. The wealthy are not very useful when it comes to contributing, because they don't have that much more to contribute than anyone else (even purloining their additionally consumed resources doesn't contribute very much). In truth, what needs to happen is the government needs to realise that what limits our wealth is our resource constraints and enact policies on that basis, instead of fussing about artificial financial constraints.
> In truth, what needs to happen is the government needs to realise that
> what limits our wealth is our resource constraints and enact policies
> on that basis, instead of fussing about artificial financial constraints.
Indeed, the government must understand that wealth hinges on available resources, not financial limits. Policies should reflect this.
Yet, the UK seems hesitant to utilise natural resources, develop housing/infrastructure, or encourage investment in capital or innovation.
We've been rich and industrialised for so long we have forgotten that wealth isn’t created out of nothing. Our attitude towards fossil fuels is particularly indicative of this. Coal made this country an industrial superpower. We forgot that the key to our economic power started and will always start with energy -- and that this is often dirty.
Today we a country of financial services and coffee shops, because we believe we are above the truly productive sectors of the economy.
Taking money from foreigners for things which necessarily remain located in Britain and available to the British public seems like a pretty good deal. Football teams, for instance - billionaires want to pour money in, we get to watch an incredibly competitive league as a result. No downside.
It's true but also older people are addicted to destroying the economy here, constantly demanding decisions that impair the ability of the country to build houses, build businesses, build new infrastructure, etc, all while expecting high living standards. The only way it could be financed was by selling off the country's wealth.
One of the [many] problems with privatisation-by-tender is that the public provider doesn't compete. And they can't compete because they can't commit budgets up to y10.
If you actually let public services take their gloves off, they'd shred most tender offers on sight. With few exceptions, hiring people to do things is ALWAYS going to be cheaper if done directly, and it's stupid to pretend that Serco, G4S, etc are delivering value.
There's still room for private providers, and even room for multiple providers (some public, some private) operating in constant competition. Central government should compete on centralised services. Does every hospital in the country need patient management software? Then write some centrally! Does every council need to send out letters and notifications? Then do it centrally!
It's all so stupidly simple. It's a travesty that the people making these decisions have been profiting from doing things the wrong way.
The intention of privatization in the UK was never to improve service. It was to transfer wealth from the public to the private sector. From this perspective it's been successful.
From the perspective of the British public it's been a complete disaster.
Fortunately, largely owing to our free press, the British public has now learned their lesson and such unfortunate situations will almost certainly be avoided in future.
Especially when it comes to our healthcare system.
Yes, and the conservatives have been clear on this from the beginning. I remember watching Question Time a decade ago when I was turning 18 and people obviously asked about austerity and the conservatives response was not "we need to stop spending in order to help the economy which will then help poor people", it was "the goal of our government is simply to grow the private sector".
Thatcher even said that the eventual goal of the UK was for all the labour to be highly skilled. The vision is a nation of software devs, engineers, financiers, lawyers, and managers driving their car to work or paying whatever for the expensive train ticket.
We even have a pipeline that takes you directly from university graduation to these high end jobs. These jobs then re-educate you with their own bespoke courses.
Basically, the point of austerity was always to try and starve all of the public aspects of the country. It is almost all by design.
Choice is a necessary condition for free markets. There is little to no choice in water, roads, phone lines, rail transport, etc. I still don't understand why the UK went down this path.
The UK was going into the dumps before Thatcher even came along. That's why she was elected. I couldn't imagine how bad it would be if Labour hadn't been kicked out and the far-left economic approach hadn't been abandoned.
But "2 + 2 = 3 is false" is not an argument for "2 + 2 = 5 is true".
(FWIW - I've seen arguments, in a broad range of periodicals, to the effect that the current generation of British politicians - if not the entire British ruling class - are dysfunctional sh*t, and the UK's future looks pretty bleak.)
Almost the entire western world did, starting in the early 90s, and those of us who tried to stop it at the time were derided as clueless naive economic illiterates (and still are.)
And the west pushed this Privatize All The Things model into the former Soviet bloc, too, where mass brutal privatization of the huge portfolio of state assets created the kleptocrat economic they have there now.
Nobody ever denied that the free market is efficient. The question is: efficient at what?
No, the west didn't "push" eastern European kleptocrats into stealing everything in the privatisation drives, they didn't need any outside encouraging.
Its really disconcerning how many people simply assume that small nations have no agency whatsoever. It's this kind of thinking that births ideas about Russian/American zones of influence around Europe and similar very dangerous antiquated nonsense.
Oh, we did get (and still do get) lots of „consultants“ from West advising us to privatise all the things. Some paid by West governments, some paid by private funds (= big businesses).
As for zones of influence... It is very real. That's why we jumped into NATO at first opportunity. A lot of companies were privatised looking for capital from, e.g., specifically USA, to make sure they have more interest in our survival. And any Russian investment is seen as a possible risk.
Public utility companies were operating very inefficiently at the time, the motives behind privation obviously had a political element but there was some good intention behind it.
In hindsight, much stricter regulation regarding reinvestment of profits would have been a good idea.
The thing is, by the time you have made the regulation strict enough to avoid any and all tricks Goldman-Sachs and friends can come up with, you've basically nationalized the companies.
One reason was to increase investment. In water's case the infrastructure had been under-invested in under public ownership for decades, due to it always being a low priority from a political point of view.
The regulatory structure of the privatized industry says the water companies can only make profits if they make capital investments, and so the amount invested in water infrastructure in the UK (particularly England) has duly gone up a lot since privatization and has been comparable or higher to other nations since.
From this point of view, it's less about choice and markets as a way to structure the regulation and ownership so that capital investment actually happens.
Privatisation increasing investment means one of two things, either the investors are getting ripped off or they're going to get a profitable return on their investment. Assuming no government would admit to the first and no investor would intentionally invest in the first, let's assume the second is the plan. In which case, if the investment will yield profits, there's no reason the government shouldn't make the investment themselves so that the public get the profits (as well as the benefits from increased investment at the start).
Canada privatized our railways in the 1990s. While it created a hugely profitable company for shareholders, it has been a pestilence on Canadian society since. Canadians do benefit from a somewhat more efficient freight network, but overall we've seen an unsafe, poorly maintained, but highly efficiently run rail network.
It is no longer possible for Canadian provinces or cities to make any effective use of infrastructure that we had built and maintained for over 100 years. My city had developed a plan for light rail, but required some access to CN tracking, and CN refused to even review a proposal. They also launched a major lawsuit against the city/town to try to get out of their commitment to maintain some safety infrastructure around their property. Their attitude seemed to be "we have deeper pockets than you".
In my own neighbourhood, there is a track that runs through a railway cut. A group came together and had built a beautiful multi use trail. They asked for an easement on a part of the CN right of way/property that was nowhere near the trackage and had been used as a path since time immemorial. What did CN do? Within weeks they erected a 6 foot fence around the entire property. They never even responded to the letters.
They freight business absolutely did benefit from private ownership. The workings of the capital markets have created an efficient machine.
The trackage they run on should never have been privatized. In return Canada will never have any decent passenger rail and no city pairing in Canada will ever be able to build a reliable or reasonably fast rail network.
Failure of privatization is in a lot of ways a failure of aptitude, or an exercise in grift. I'm not sure which exactly. It was either not well thought out, or very well thought out... depending on which side of the table you might have been sitting at.
At the same time, private carriers are losing out to trucking because trucking doesn’t pay a fair cost for the use of roads and RRs have to pay to upkeep their tracks. In the end, it may have been better for them to be able to offload the infra costs.
Due to this, they followed the model of minimizing infrastructure, equipment, and crew expenses which left them with slow service only good for a sliver of shipping. The freight RRs are efficient from a monetary cost standpoint but people are willing to pay more to get something quickly and they can’t compete on speed.
If someone else owned the tracks, and leased capacity, the track owner would try to maximize the use of tracks and clear trains quicker and provide new services. We’d see the complete opposite effect, the return of passenger trains, improved signaling, and maybe even electrification.
re: trucking. I agree the industry essentially gets "free infrastructure", although in their defence the "gas tax" concept was designed to cover these costs and heavy users are the top payers of that tax. (I do realize gas tax is now just general revenue pretty much everywhere)
It's actually even worse than this - in the case of Water, the original water companies were built by local government providing clean water to their own residents and paid for by long-term loans. First, the Labour Party nationalised the local water companies with no recompense to repay the local government debts. Then, the Conservative Party sold off the "nationalised" water companies, but kept the money raised rather than handing it back to local government.
In many cases it can't even be described as "privatisation" because the resulting industries have been bought by other people's governments. It is literally the worst of all worlds.
The Economist holds to it's guns, until it's proven 100% the other side of the argument in fact is correct. After which they change tack. It's not only value but ALSO data driven publication. Although it's in some positions ridiculously conservative, it's also an excellent bellweather on the current 'accepted norms' in discussions on "macro scale economy stuff".
They changed tack on climate change and ecosystems disasters about a decade ago. After that it was pretty obvious the current trend on full economy scale climate action (starting from Wall Street using ESG in major fashion as a criterion) was coming.
This piece directly references Howard's article (complete with link) and debunks it.
The case for privatisation rested on two claims, reiterated by Michael Howard, writing recently for The Economist. First, the bracing force of competition would improve utility management and hence overall outcomes. Second, it would unlock access to private capital to fund much-needed investment that would otherwise be held back by short-termism and scarcity—supposedly endemic to public ownership.
Neither claim stands up to scrutiny. Private management and weak regulation have delivered a crisis-ridden sector and chronic underinvestment. Water companies have made clear that investment will be funded mainly by increased bills, undermining the idea that private capital is essential for investment.
Oligarchs don't buy newspapers because they want to lower their tax bill. They already have the best accountants for that. They use them to gain power and influence in the host country. Usually with great success, as I'm sure Baron Lebvedev of Hampton and Siberia will attest.
The failures of this one have become a bit too obvious to deny.
The Economist is a bit like RT - denying that everything is going wrong in Kharkiv to a point but beyond a certain threshold they eventually stopped and admitted reality.
I'd be curious to see what their views were about Thames Water privatization were in the past before all this stuff came out. That'll give a clearer picture of their true views.
Is this surprising? People have been crying out about the effects of privatisation for years. When basic services mandatory for modern human life like water, ISPs and energy are privatised you end up with funds that could end up going towards investment or towards funding other public services are instead funnelled out towards shareholders.
The generational wealth the UK had in the form of North Sea oil passed off to private interests for their own profit rather than used for the creation of a sovereign wealth fund like the ones Norway has is a perfect example of the sort of backwards situation you end up in. That oil could have been used for the benefit by every member of the UK public and instead is used only for the benefit of the few while the public suffers under outrageous energy and cost of living increases.
Well parts of Scotland are. As arethuza said, in the North East of Scotland saw some local benefit. A few people became very wealthy, and many people hopped up one or two social classes through the jobs that were created (and bought nice cars + homes, sent their kids to nice schools). But it wasn't anywhere near the sort of multi-generational wealth that Norway built up.
Shetland managed to do a little bit better and built up a pretty sizeable fund (something like GBP20k/resident), but I'm not super familiar and don't know what they do with it.
The North East of Scotland around Aberdeen certainly did benefit from the oil and gas industries. However, I doubt if this made up for the collapse in heavy industries elsewhere in Scotland.
I didn't say human life, I said modern human life. At this point, and especially considering the recent pandemic and the lockdowns that lead to large swathes of the public having to work from home, internet connections are a non-optional component of participation in society. Especially as more and more services go digital only, for example bank branches closing in favour of online only services.
However, you're right that ISPs aren't the right target, open infrastructure for the network to operate on is closer to what I meant.
I don't think that is true. The biggest consumers of health care are the elderly and many of them (possibly most) don't have the ability to navigate online services.
Then book a doctor's appointment at a library, café, or if you truly have to do it at home a neighbour would surely spin up a hotspot for you in the 5 minutes it takes if it's a dire emergency.
Someone with no home connection to the Internet is still way ahead of anyone in the 20th century, where you often needed to travel in person to various government offices throughout the year for things that can now be trivially done online.
No, but internet access is a requirement for many mandatory interactions with the government and various service providers so even if you can breathe without internet access you're going to be doing so from a cardboard box. Unless you want to lead a normal life you are not able to live without internet access in many developed countries. Bit by bit all alternative pathways to interact with parties that you have to interact with are phased out.
Just browsing the comments on this one, it struck me how users of this website, an incubator for new technologies and ostensibly private businesses, seems to not believe in the capacity of private businesses to provide the most socially-useful goods and services.
My basic woke laymen POV is that the in last 150+/- years, we figured out 100% of how to sustain humanity at scale and even offer some perks like efficiently traveling huge distances. Greed/nationalism/willpower get in the way from time to time, mucking up the works, but creating opportunity for well-timed industrialists on borrowed wealth to come in and provide "solutions."
This is all viewed through glorious, rose-tinted hindsight, but what even are we doing here?
> Just browsing the comments on this one, it struck me how users of this website, an incubator for new technologies and ostensibly private businesses, seems to not believe in the capacity of private businesses to provide the most socially-useful goods and services.
I've spent my entire life watching private shareholders rape companies sold off by successive Conservative governments.
I've grown up hearing of workers buying homes on minimum wage and that the majority of families could support themselves on a single income. Yet despite huge advancements in automation, computing, and productivity I do not live in such a world.
I've seen the ways in which private business treats people who have no other choice: with no regard for their wellbeing, their humanity, or the law.
Private business serves as a useful means of parallelising and (somewhat) decentralising decision making, but unless brutally controlled it ravages society.
I love the free market. But when it comes to education, health care, public transport, utilities, law enforcement + associated services I've yet to see even a single example of where the free market made things better for the public. As a rule after privatization prices go up, the service level drops and people suffer as a consequence whilst being given a fake increase in choice.
This is one of the big failures of the last 30 years and can't wait to see it rolled back.
They actually can. Nationalization is a thing. And if they do it would also put a nice big dent in any future privatization plans because there is a good chance that the shareholders of those privatized companies would lose money in such a deal. Rightly so, after all they plucked the system.
In NL we had pretty good public transport, good healthcare at low costs and good prices for utilities. Then the privatization wave happened and all of that went out the window whilst a lot of entities (foreign as well as national) lined their pockets. I'm all for clawing it back. And don't get me started on selling KLM to Air France and Hoogovens to - eventually - Tata. Short term thinking with long term massive negative consequences.
Absolutely. Recently lots of Russian assets got nationalized in Germany on account of German national security in light of the energy crisis and the war with Ukraine. In NL we nationalized a bank (SNS bank) that failed, and one that would have failed (ABN). In Japan, in the wake of the Fukushima disaster there was an energy company nationalized. The USA (though they don't like to call it that) nationalized a bunch of stuff in the wake of the financial crisis.
The city of Berlin rebought its water supply from the private owner. It will also rebuy district heating and gas network. All this can be done, but it is quite expensive. It would have been better to not sell monopolistic infrastructure in the first place.
Sure, Margaret Thatcher accidentally did us a favour by killing the coal unions.
But just in case you thought "Good, no more coal" the Tories actually authorised a brand new coal mine not so long ago, because sure, it's a terrible idea but it will make somebody wealthy and as we see here, their priority is to make the wealthiest people even wealthier.
The new coal mine is actually a green energy scheme. They plan to attach a dynamo to Maggies corpse - the expectation is it will be spinning pretty rapidly in her grave.
Privatization can, and has, worked well in several monopoly utilities, where the privatization is structured appropriately. Forced percentages to be set out for infrastructure improvements, profits capped by regulation, debt cannot be piled on willy nilly but has to be approved by a regulatory body, and finally common access allowing for competition.
Even then it can be a challenge to structure this correctly, but if a government and populace are willing to tolerate an iterative approach an optimal solution can be reached. I'm not entirely convinced it's better than the public alternative, especially since most of the public failures were prior to the internet and the increasing popularity of freedom of information acts, which have allowed the public to gain knowledge and influence the operations of public agencies in a way they, for better or worse, couldn't before. But at the very least such a solution could come functionally close enough to operating optimally.
But none of this is true in the way the UK privatized its water networks. The water privatization is an embarrassment of how to do privatization as wrong as possible. Alternatively, considering a primary goal of the Thatcher govt was to transfer public wealth to private purses, one could argue this privatization was done as efficiently to achieve that goal as possible.
Privatization can, and has, worked well in several monopoly utilities, where the privatization is structured appropriately. Forced percentages to be set out for infrastructure improvements, profits capped by regulation, debt cannot be piled on willy nilly but has to be approved by a regulatory body, and finally common access allowing for competition.
Critical national infrastructure should never have been placed in private hands, their only interest lies in minimising expenditure and maximising profits for either themselves via nice bonuses, or to the shareholders. It's never been about delivering the best service to the customer for the most reasonable cost.
Power, Water, Road, Rail, and Healthcare should remain and have remained under public ownership - those are a public service and should not be run for profit. Telecoms is about the only one to have worked - ish, but it took decades and a lot of lobbying and regulation to make it happen.
I was a big proponent of privatization in my South American country and I'm reversing some of that position. But I still don't regret or recant the underlying theories that made me a proponent in first place. People are going all Ken Loach on this like this has been obvious all the time, but it wasn't; privatization arose as an approach to paralyzing problems (here, a phone number was an asset, like a car; you could rent it and there was an income tax law for that) and there's no outstanding alternative approach to address them.
More broadly and less strongly, the same is true of globalization. The fact that these haven't lived up to promise means we are frakked. The witch was right, there is no alternative.
You need competition to create a market. You cannot have competition on a natural monopoly. You can create the simulacrum of a market (that was the EU and UK approach), but you cannot create a real market.
It's better to keep water, streets and telecommunications public. Privatizing them is a waste of resources.
It's worth noting that partial privatisation isn't privatisation at all. Take a closer look at most so-called failures in this category and the half-assed situation generally becomes apparent. It'll be "private but one organization is given a government enforced monopoly" - or "private but price is fixed by government" - or "private but expansion is limited by government force". The list is endless.
I find it astonishing Thames water were allowed to rack up billions in debt while paying huge dividends and compensation packages and they are about to go bankrupt.
I don't see a problem with them going bankrupt. Shareholders would get wiped out and debtors would go to the back of the queue. The administrator would run it until new investors were found. If they can't find investors then that is a reasonable justification for nationalising it on the cheap.
From my standpoint its obvious privatisation has been a failure for service quality, and I am glad that major institutions are finally catching on. In spite of attempts to introduce choice (see the way British Rail was privatised into rolling stock owners/operators, since scrapped railway operators, and brands) there is no efficient way to introduce choice with fixed infrastructure.
Unfortunately, this will take a lot of political capital to change. I can see there being a lot of debate about how the UK compensates private owners for nationalising the infrastructure again (likely at an inflated price). It will likely be another situation where the average person loses out, in favour of private owners, and will be made to pay the price by inflated water prices to offset the lack of maintenance and expansion that should have taken place, instead of extracting maximum funds to shareholders.
I wonder also how this will be spun - as a one off 'market failure' or as a systemic problem with extracting maximum profits at the expense of the users (i.e. enshittification).
I think competition driven by low-cost carriers produced enormous value by lowering fares. From my admittedly uninformed viewpoint, I am not sure why airlines market can produce competition benefiting customers and rail market can't.
With airlines, it is comparatively easy to just plot a new route between a new destination (given that there is an airport). The airports also tend to be in popular areas where there is enough demand. Air routes are also generally not essential forms of transport (where they are, such as Alaska, US or remote islands in Scotland, they tend to be very subsidised). The airplane is often the superior option for the cost and time too, over rail or car.
The train is the opposite of all of this.
The people that can afford it, are able to get a car and drive there at little perceived expense and better flexibility (people don't often factor in the cost of the car, road, road maintenance, MOT, road tax, repairs to their journey). So public transport ends up being for those who cannot afford it, or is convenient enough for.
Not all routes in the UK are profitable. Closing unprofitable routes is unpopular with constituents, and disrupting and isolating if the residents do not have the financial means to get a car, causing social incohesion. So to balance this out, companies had to have both unprofitable and profitable routes balance out, in the hope that they will find more efficiencies than being state run. Existing routes are also very difficult to shut down in the UK.
Keep in mind, budget airlines pioneered enshittification because there are few equally convenient alternatives. RyanAir infamously charges for everything. In principle this seems fine (pay for what you use), but then the poor UX hits. In some airport, if your suitcase wheel sticks out 2cm - you get a bill for £50. It costs £4-10 to sit with your friends. What also is working is that the budget airlines have not yet colluded to only run certain routes, and older, premium alternatives still exist. Once the old airlines either change or go out of business, and the companies start colluding, it will be high-cost, unpleasant stagnation.
I know of a Dutch waste processor that got privatized but the municipalities that the plant serviced stayed the majority shareholders. As far as I know (my source, its former boss, surely is biased) this worked very well. It was a for-profit company, could pay competitive salaries, people got bonuses etc if they out-innovated expectations, but the majority of the profit landed at the municipalities, which also meant that if it did profitable but shitty stuff, they’d get forced to course correct.
I wonder why this isn’t a more common model. If a utility is effectively a regional monopoly, having said region’s governments be majority shareholders aligns pretty much all the incentives, no? And still helps keep stereotypical “civil servant” working culture out the door
Regardless of what everyone thinks, the real situation on the ground is that companies like Thames Water have been siphoning off profits rather than using them to keep the infrastructure up to date/repaired.
When I moved in to where I am now in London (early 2020, whew), TW were already digging the road up literally every 2-6 weeks, as they'd fix a water leak, then a new leak would spring up down the road (because the newly repaired point was strong enough that other weaker points became exposed) and so on and so forth when what they really need to do is RIP ALL THE OLD PIPES OUT AND PUT NEW ONES IN.
The way that road repair seems to be done in the UK is that potholes are ignored until the road is full of them, then the entire road gets resurfaced. My road was resurfaced during this time, it was beautifully flat and new...and then FUCKING THAMES WATER CAME AND DUG IT UP TO FIX THEIR LEAKS. Newly surfaced road, now scarred with dozens and dozens of ugly patches where TW has not done their fucking job.
And now, apparently all of this obvious shit is coming to light and people are increasingly aware that water rates are bound to go up as TW finds a way to pay for all the pipes that are completely fucked because they haven't been doing their job this whole time.
What an absolute disgrace. As a Kiwi who's living here, the worst part of the UK is both sides of the useless government and the apathetic population here who doesn't outright demand more from it; I wish they were more like the French.
This is really an eternal debate because both public and privatised services fail in numerous and various ways. The answer is a hybrid model, but because of complexity, there are always examples of failure to point at. So we’re doomed to swing between these models forever.
Do you mean socialism or democratic socialism? They're very different and people tend to use the terms interchangeably. Socialism is an authoritarian system of social control which requires that the means of production, distribution, and exchange be owned or regulated by the community as a whole. Democratic socialism is, in effect, restrictions on free markets and democratic control over tax redistribution. Most Western nations (arguably all of them), including the U.S., are democratic socialist nations.
Socialist nations have a long and sordid history of failing at managing public infrastructure, so I assume you're not referring to socialism, but democratic socialism. If so, the distinction doesn't help us here. We still need to figure out the right balance of control and independence.
This is how the majority of the planet outside of the USA, Russia and former USSR states names these ideologies:
authoritarian capitalism -> fascism
democratic capitalism -> capitalism
democratic socialism -> socialism
authoritarian socialism -> communism
From the mixed economy wikipedia:
> Common to all mixed economies is a combination of free-market principles and principles of socialism.[5]
From the socialism page of wikipedia:
> While no single definition encapsulates the many types of socialism,[13] social ownership is the one common element,[6][14] and is considered left-wing.[15]
If you don't have to pay tolls for the majority of the roads that you drive on, you are living a mixed economy because those toll free roads are owned by the state, not by private companies or individuals, and are paid for by taxes. Which makes them a socialist element, most likely within a majority capitalist system. Which makes what you live in a mixed economy. The vast majority of countries on the planet are mixed economies.
It astounds me how this keeps coming up on HN over and over again.
I think to Europeans – especially Germany, France, Scandinavia… socialism refers to what you call Democratic socialism. Wheres the far ends of the spectrum are Communism vs Capitalism. I think this actually used to be a very natural distinction although the Neo-liberal movement have done a good job to paint out any form of socialism to be equal to Communism.
> The practice of loading a company with debt to distribute cash to shareholders and managers
One thing I don't understand here is: who's on point for that debt? Who's willing to lend that money, and why - are they just betting that there will be a bailout at some point?
Privatisation and everything that goes along with that (eg deregulation, "small government") is nothing more than a scheme to extract money from government to private corporations. There is a revolving door of politicians and civil servants who go from overseeing and enabling privatization to the industries they privatize. It's why Ajit Pai, former FCC Commissioner, now works for Verizon.
Privatization for key services (eg public transit, health care, power generation, housing) has been an unmitigated disaster, almost without exception. It's mystifying why anyone still supports it for any reason other than self-interest.
About the only "successful" privatisation in the UK was of telecoms.
The main infrastructure company that operates country wide (OpenReach) are heavily regulated by how much they can charge for last mile termination. So that means there's a floor to how cheap services can be, but gives wiggle room for charging more in return for better customer service (e.g. Zen, AAISP). I pay £53 a month, with no yearly price increases, for 900/100 FTTP - which is still pretty pricey compared to other places in Europe, but from what I've seen of the likes of Comcast in the US, is pretty decent. No data caps either.
I just want to chime in and say that most "free market" ideologies have been engineered, spread and astroturfed by the robber baron classes to siphon as much money from the many to the few while distracting everyone with tension and circus - so much that this fact is hard to even find in the anglosphere.
It's an incredible feat of psychological engineering spanning over a century, and now people love to believe in the absolute fairy tales of rags to riches, ideologically instead of realpolitically or resource driven geopolitics and meritocracy instead of the realities of an ever increasing gini coefficient.
BT (British Telecom) is perhaps a good example of where a UK company could have succeeded (more), but this quasi-privatisation-yet-public-commodity thing has held them back.
The current market cap of the company is around a 1/3rd of the value of its pension scheme. Any takeover would be under intense scrutiny from the regulator.
Thankfully when it comes to water, in Scotland we did not privatise, nor is our water metered. We also continued to build onshore wind farms, unlike in England where it was effectively banned.
I'll say the quiet part outloud. It doesn't work.
Military, Health, Social Services, Justice, Power Generation, and Regualtion are all things that at their core function should be done by the state at a cost to taxpayers (in a progressive way).
The private sector can make widgets and sell junk, as long as they can do it without harming people.
I know it seems simplistic, but generally the private market is full of corruption the poor can't really avoid. So they just end up victims to it.
Many comments here say the key to maintaining a fair free market economy is regulation. I’m curious how that works for other countries. From a US perspective, regulation is next to useless.
The FDA and USDA are captured by Monsanto et. al. The FDA is captured by pharmaceutical companies. The FCC is run by telecom companies. The FTC is a toothless shell of itself which cannot stop any but the most blatant of anticompetitive measures (and often not even those).
What is the public to do? They can exercise choice in the market, but not when an oligopoly exists, which often only offers the illusion of choice under different brand names. The regulatory bodies have no elected positions and thus no accountability to the public. The public can elect new officials who hopefully appoint new officials to the regulatory entities, but the politicians put forth are only two flavors of the same pro-corporate regime. The media, which is deeply entangled with politicians and their will, degrades every third-party or outsider candidate at every chance they get to ensure the public never sees anything else. So even if the party at the top changes, it is still the party setting the tone, mostly, and they are funded to huge extents by all the largest corporations; and thus we have the inmates running the regulatory asylum.
Direct election of heads of regulatory bodies seems like a decent solution, but it could fall victim to the same issues as the major political parties. We could fight to get money out of politics, but with both sides benefiting from the current state of affairs, it seems impossible.
As far as I can tell, our hands are tied. I’d love for someone to tell me I’m wrong, and that it isn’t the world of multinational companies, which we just happen to live in.
Maybe counterintuitive privatisation of infrastructure often leads to inefficiencies in resource consumption. E.g instead of a single phone line for a house, multiple private provider will built multiple phone lines. Instead of a single cell phone tower every provider will build its own one. Instead of a single delivery car on the street there will be several (and are sometimes blocking each other). I believe a well managed monopoly is often more resource efficient and cheaper, because it doesn’t need to pay for all that redundant infrastructure.
It's been a while, but iirc you increase leverage of a company (by putting the company in debt) to be able to deduct taxes using tax shields on the interest.
Infamous example are leveraged buyouts, i.e. finance the takeover of a company by putting the company in debt. I think Twitter was an LBO.
Well it kind of demonstrates the problem here. They've taken on an enormous amount of debt, slashed essential maintenance and paid out a ridiculous amount of dividends. To be able to do this prices have skyrocketed across the board.
What you're describing just sounds like a clever little tax dodge - to shuffle things around so that you can do a bit more with less for a period. But what consumers are actually seeing is a decline in service for an increase in prices, that's the opposite.
Scenario 1 - Decisions are based on the opinion of Mathew Lawrence and, by proxy, the editors at the economist.com.
Scenario 2 - Decisions are made by people shouting at each other.
Scenario 3 - Decisions involve a big review of some successful energy grids in other countries and starting with one that works really well as a baseline.
A big shouting match to decide what a successful energy grid looks like is a good idea. But fixed infrastructure is long-lasting and hard to replace - it would make sense to make the decision rationally rather than making political guesses at what might or might not work.
I think it's funny when people lump all privatization other. Yeah, it can be done poorly, but I would argue that's more implementation than some condemnation of privatization all together.
A good example is when people say "look how bad private healthcare is in the US!". Yeah, it's horrible because of the framework the government put around it. If you look at things like vision correction or plastic surgery, you have none of the problem you have in typical private health coverage - surprise billing, inflated costs, etc, etc.
The major difference in you’re example is that plastic surgery and vision correction are elective procedures. When your choice is eating the cost of an inflated procedure or permanent disability/death, it’s really not much of a choice at all. Most people will opt to pay outrageous prices rather than the alternative. Privatization may work for non-essentials, but when essential public services are privatized, it needs heavy regulation (which, in itself, is not a permanent solution as it is subject to lobbying and regulatory rollbacks). Without strict regulations that are lasting, a company has little incentive to keep reinvesting in itself/improving its services when it has a captive customer base that is rooted on a basic human need. Essentially, the public has little choice but to use the privatized company’s costly but increasingly broken services.
Apologies. I meant cosmetic or optional surgeries (which is what you originally referenced). Elective surgery just means that it is scheduled in advance, not that it is a trivial or unnecessary procedure. Elective surgery covers everything from cosmetic surgery to non-emergency procedures like mastectomies.
But I’m not sure what point you’re trying to make here. Many medical procedures are necessary even if not urgent, and healthcare costs in a privatized system like the US are astronomical. Emergency procedures and life-sustaining medications like insulin, that cost a fraction of the price in other nations, are bankrupt-worthy events in America. And people have no choice but to pay it. People’s health are being held hostage by these companies.
The number one priority of a functioning healthcare system should be the care of their customers, which is antithetical to a company’s priority of delivering value to shareholders and executives. And when your product is a basic essential and you have a captive customer base, it’s really easy to make huge profits by cutting costs and jacking up prices because you’re customers have no other options.
Most nations care about the health of it’s citizens, hence why every single developed nation has some form or other of universal healthcare. Because a healthy population makes a robust workforce and actually substantially reduces healthcare spending by the government.
Most nations care about the health of it’s citizens, hence why every single developed nation has some form or other of universal healthcare.
You realize that most countries have some form of private healthcare, right? For example Europe? There is the public system, but also a parallel private system.
Apparently that doesn't work because which is antithetical to a company’s priority of delivering value to shareholders and executives".
Yes, I do realize that many countries that have a public system of healthcare also have private options. In those countries, the public system sets reasonable healthcare rates and the private companies have to compete with those publicly set prices so we don’t see insane prices like we do in private only healthcare systems.
I always use train infrastructure as examples of infra that should remain public, as it's so essential for modern day cities. Privatisation seems to inevitably lead to service degradation and reduced utility, even corruption.
But my favourite example of trains done right is Japan, and to my surprise, their expansive rail network is dozens of private companies. It turned a lot of my assumptions upside down.
I still don't think we should privatise core rail infra, but obviously it can be done right. So we can at least try to do that.
> But my favourite example of trains done right is Japan, and to my surprise, their expansive rail network is dozens of private companies. It turned a lot of my assumptions upside down.
My impression is that in Japan, there are social repercussions for people who work for a company that acts against society. Which is why we see public apologies from executives when things go wrong.
On the other hand, your ability to fuck over wider society seems to be a point of pride in many western countries. See the various scandals in the UK over COVID contracts, or PPP fraud in the US.
I'd like to see proper consequences for those people, of the kind that gave us the term Boycott at the very least.
One good thing is that homeowners, don't really have to pay for water in the UK - it is not possible to cut off a non-paying customers. Also, once your water bill debt grows, the debt is sold to a collector company, that have little power in the UK, so you just need to ignore threatening mail and you'll be good. I've practiced it for 5 years, I'm not too proud of it, but the water bills were a crime in the other direction.
We have state enterprises, and they are all colossal failures today because it is so easy to hide corruption when the books is not open and they don't have to answer to shareholders.
State owned enterprises are fine if something needs massive capital investment to start off and nobody has the resources but there must be a plan for the state to disinvest.
Then again I prefer subsidies like the US does for semiconductor plants.
Public sector companies are audited by a state institution and the reports are tabled in Parliament where the oversight committees are majority controlled by the corrupt ruling party.
Members of said committees are usually clueless about financial affairs.
The article asserts that water bills have gone up 360% in Britain since privatization, then that "bills are lower in Scotland, whose water company is government-owned".
I'm not in the UK, but searching for what those is Britain and Scotland pay for combined water and sewage annually I found claims of an average of around £410 and £320, respectively.
I think it's kind of a mistake to focus too much on the principles of this story than on the execution. Sure, we can make arguments about how it should be more efficient to run water privately because of a profit motive, or how it's a natural monopoly. But if you look at the details the claim is very simple - that the water companies charged high prices, didn't invest and paid out huge dividends. Well there's a simple answer to that: we have a regulator who can control that. It's very simple. The government didn't go "Here private enterprise, have a monopoly! Off you go!". The key here is that whilst private enterprise might be more efficient at acheiving it's goals than government enterprise, but that becomes a problem when it's goal is finding ways to screw money out of people despite the regulator.
If you look around at the British state it's very clear to see, the issue isn't whether X Y Z is private, the issue is the state spent 2010-2020 systematically ensuring the state was incapable of acheiving anything. And then decided in 2016 that they were going to repatriate a tonne of regulatory power from the EU. The result is a state that's got a lot to do, and no way of actually doing any of it.
But this is the fundamental problem with the way these privatisation deals are structured. If it relies on a strong regulator to make it work, then as soon as a 'red-tape' cutting government comes in that is being lobbied hard enough the whole thing breaks down.
Exactly the same problem with public ownership though - as we've seen. All it takes is one libertarian or corrupt government to sell of whatever it is into the private sector and once it's gone it's practically impossible to ever buy back.
A lot of folks seem to have a view which is as simple as “government is inefficient, and companies are efficient.” There is certainly _some_ truth to this statement, but it’s so simple as to be effectively meaningless. And such simple takes on this issue can lead to some pretty adverse and unintended effects.
If you wanted to asses the success of privatization based on observations alone, then you would need an alternate universe in which it did not occur.
Also, according to Wikipedia, the largest shareholder for Thames Water is a Canadian public pension fund, so it is at least partially public, just owned by another country.
When I worked in a medium sized municipality in Denmark I was exposed to a lot of cases where good intentioned privatisation ended up being very expensive. I don’t have a good solution in mind, and I’m not for or against private and public services as a general rule, so you should read this as more of an insight into some of the issues you face with these things.
One of the things it made sense to privatise was transportation. If you have some sort of disability you can apply for public help for various things. This can be the elderly going to play bingo, it can be parents of a disabled child getting a taxi service to and from school, and a range of other things. The financial “issue” is that it’s rather expensive to have a car park and drivers on staff, and it’s an area where some years you’ll need a lot of drivers and cars and other years you’ll need almost none. There is also a “scheduling” thing where you’re most likely going to need a lot of drivers/cars in “rush hours” and then none the rest of the time. For a range of reasons, the public needs mix very well with the private needs for taxi services. You and I will need a taxi on weekend evenings and the city will need a taxi when you and I are at work. On paper this is a very nice match. Especially in the rural cities where you can also help subsidise the taxi companies.
Here is where it gets expensive. Because taxi companies come and go. It’s hard to make money in that business, and it’s also sort of “easy” to get into it because at its most basic all you need is 1 car and 1 driver. Yes, it’s much more complicated with the various licensing and so on, but you get the point. What the city would do is to buy yearly contracts from companies. Sometimes many different companies, which would add a little to the bureaucratic “burden” but not much, and if things ran smoothly then it would be a massive win for everyone. But things don’t run smoothly. Sometimes a taxi company is going to bankrupt, and sometimes this can happen with very little warning. But you still have to get your citizens to where they need to go. In the perfect world, you would call a different taxi company and have them take over. But in the real world, there isn’t a different taxi company with available rides, because why would there be? In our bigger cities, sure, you can do this, but in around 90 of our 98 municipalities you can’t. So now you’re looking to have a 100 citizens driven around to things they can’t miss. Some things like the weekly bingo can be cancelled, but doctors appointments can’t. And the only option you’re left with is often going to be to reach out to one of the larger taxi companies in one of those 8 municipalities that don’t have your issues. Which is expensive. Sometimes it’s so expensive that a whole decades worth of savings and local investments go up in smoke compared to having just run a public car fleet.
Like I said in the beginning, it’s a hard nut to crack. Because politics aren’t going to operate on a modus where it expects things that look good to fail. Maybe someone can argue that it should, but it won’t. Because we don’t. You and I are going to look at the business case and want our cities to work with the taxi companies. Not only to be able to use public funding smarter but also because we will want to have a taxi service. We may even know a person who runs or works in the local taxi service and will want to support them. So the fix isn’t going to be to stop privatisation. At least not in all cases. I’m personally still not sold on why our waterworks should ever be privatised. But for some things, it’s just always going to make sense. So what can we do? You can’t buy insurance, and unless the companies in your area happen to be well managed and capable of producing stable profits, then you’re likely always going to sit with a situation where the best intentions turned out to be part of the road to hell?
Why not run the "baseload" yourself and then top up using taxis? If usage varies between 15 and 30 drivers at and one moment, and 10 of those are for medical appointments then you run your own fleet of 10-20 drivers and supplement with taxis when demand gets high.
Then if the taxi company goes bust you've got your essentials covered.
Because the plan is to never have excess or idle workers. I used taxis as the example, I could’ve used elderly care where things are run similar to what you suggest. Well, 80% of its is run by public nurses while the other 20% is run by private companies. The issue is sort of similar, the small companies go bankrupt and then the public side needs to cover for them, but you don’t have staff to just scale up and run another 3% without using subs, which are often 3-10x expensive than on staff nurses.
You and I can agree that it’s sort of silly. The data will certainly show the net benefit of having idle workers, but you’re not going to win an election by wanting to have “too many” workers, even if the data shows that it is in fact not “too many”.
Business's will have infinite money and time to influence Countries to eventually incorporate some form of privatization so they can make even more money. Were literally paying them to eventually screw us over.
It's only been a failure if you think the goal was to better serve the public. In terms of extracting money from people with no alternative, it's been a resounding success.
yes a divi recap of a utility is pretty shit but this opinion piece is a rare-miss from The Economist, Mathew Lawrence is not worth listening to, nor the deranged leftists in this comment section.
Wait, so you're saying that somehow, transferring the responsibility for a service from an organization who merely need to achieve net zero, to a for-profit organization is not going to result in a better service? Wow, who'd have thought.. </LiberalSocialistScarcasm>
From my user's perspective, it seems that privatization of Germany's phone and Internet market has worked pretty well, and lowered prices all around.
Though I don't know if that was because there was a huge boom of Internet access around that time, and telephony prices would have dropped anyway, or if that was one of the examples where it did work, inherently.
Because your telecom regulator has teeth and there's competition? When German T-Com bought Slovak Telecom monopoly they continued just like that. Forced old ISDN tech on everyone for high prices (probably to clear out stockpiles) and suppressed DSL for a few years, till some last mile access for competition was required by law.
BTW was in Germany myself many times and it's surprising how bad coverage there's outside city centers.
LTE/5G data is extremely expensive in Germany compared to essentially everywhere else in the EU.
Here’sa comparison what 30 EUR per month for you in terms of LTE data volume in 2016, and I don’t think there’s any real contracts with unlimited volume available for 30 EUR still: https://imgur.com/NXu0ZoP
Getting a contract for unlimited data with the German Telekom costs 85 EUR/mo currently, while it would cost 35 EUR on t-mobile.nl
Funnily enough, in my experience Germany has the same (actually seemingly worse) issue as the UK; many people have poor home internet speeds due to the fact that the local (copper?) legacy infrastructure is privately owned by DT/BT, and there is little to no incentive to have that upgraded
Well I'm glad telecoms were privatised, we have great competition, I shop around every two years and end up with a great deal. Compare that to the early 80s waiting god knows how long for a phone line.
Railways were privatised because government couldn't afford the investment required. But because of rail unions I'm currently subsidising rail travel I don't use.
Energy market competition has been destroyed by price controls (thanks Mrs May).
I can't read all the article because of the paywall. Nothing on archive.org yet. Maybe these points have already been addressed.
