301–310 of 609 posts
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 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…
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…
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.
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 trans…
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.
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”.
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> "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 sh…
How are shareholder returns and profit different?
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.
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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.
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You can for example buy back shares
The money to buy back shares has to come from profits.
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...
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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).
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 All while extracting management fees etc too
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.
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.
No there is a middle ground called socialism.
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.