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Privatisation has been a costly failure in Britain

economist.com

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Re: Privatisation has been a costly failure in Britain

#111

Post by andyjohnson0 »

wolframhempel wrote: post #9

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…

> 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.

Re: Privatisation has been a costly failure in Britain

#112

Post by ClumsyPilot »

markus_zhang wrote: post #83
wolframhempel wrote: post #9

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…

Privatization of public sector has nothing to do with free market. Free market has been dead since the 19th century.

Is that roughly when we could freely trade humans and every bank could mint their own currency?

Re: Privatisation has been a costly failure in Britain

#113

Post by [deleted] »

mrfumier wrote: post #62
juujian wrote: post #25

Earlier quoted context omitted.

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.

"And you don't extract profits from a rail line by offering the best service." So how do you extract profits then?

[deleted]

Re: Privatisation has been a costly failure in Britain

#114

Post by bluescrn »

veltas wrote: post #92
mnd999 wrote: post #82

Earlier quoted context omitted.

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. At least that’s they playbook they’re all using.

The infrastructure isn't privatised though, it's maintained by Network Rail.

"Privatise the profits, Nationalise the losses!"

Re: Privatisation has been a costly failure in Britain

#115

Post by magicalhippo »

jacquesm wrote: post #57
sschueller wrote: post #51

Earlier quoted context omitted.

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 h…

Privatization of trash collection is already a thing in many places.

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.

Re: Privatisation has been a costly failure in Britain

#116

Post by phatfish »

brutusborn wrote: post #18
PartiallyTyped wrote: post #6

Earlier quoted context omitted.

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.

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.

Re: Privatisation has been a costly failure in Britain

#117

Post by gnfargbl »

wolframhempel wrote: post #9

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…

> 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.

Re: Privatisation has been a costly failure in Britain

#118

Post by frereubu »

wolframhempel wrote: post #9

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…

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.

Re: Privatisation has been a costly failure in Britain

#119

Post by avidphantasm »

mrcartmeneses wrote: post #89
wolframhempel wrote: post #9

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…

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 pr…

> 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.

Re: Privatisation has been a costly failure in Britain

#120

Post by pydry »

jack_riminton wrote: post #19
tnel77 wrote: post #3

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…

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. "from March 2020 to February this year, the Government paid out more than £7.3 billion in operational support to private train operators" - https://bylinetimes.com/2021/05/18/7-billion-covid-bailout-f.…

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.

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