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Privatisation has been a costly failure in Britain

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Re: Privatisation has been a costly failure in Britain

#201

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…

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.

Re: Privatisation has been a costly failure in Britain

#202
post #170
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.

> "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?

Re: Privatisation has been a costly failure in Britain

#203

Earlier quoted context omitted.

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.

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.

Re: Privatisation has been a costly failure in Britain

#204
post #39

Earlier quoted context omitted.

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: p…

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 econ…

> 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.

Re: Privatisation has been a costly failure in Britain

#205
post #170
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.

> "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…

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!

Re: Privatisation has been a costly failure in Britain

#206

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.

Re: Privatisation has been a costly failure in Britain

#207

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…

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 com…

I'm unclear what your argument is here.

Having rail be so expensive or badly run that people decide to use roads instead doesn't seem like a win for privatisation.

Encouraging people onto roads or even flying is also a disaster for tackling climate change.

Re: Privatisation has been a costly failure in Britain

#208
post #77

Earlier quoted context omitted.

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.

The USA's rail lines are privatized and they're anything but "shitty" and "expensive" considering they're lower cost than trucking.

US rail is okau for cargo, but there are third world countries with better passenger services.

Re: Privatisation has been a costly failure in Britain

#209

Earlier quoted context omitted.

> 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…

Other way round. Railtrack was a private company on the FTSE. It killed people. Network Rail then took the rail infrastructure back in house.

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.

1. https://en.wikipedia.org/wiki/Network_Rail

Re: Privatisation has been a costly failure in Britain

#210

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…

>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".

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