Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Privatisation has been a costly failure in Britain

economist.com

Post reply on HN
Print view View original

221–230 of 609 posts

Re: Privatisation has been a costly failure in Britain

#221

Post by jfengel »

lotsofpulp wrote: post #202
m-i-l wrote: post #170

Earlier quoted context omitted.

> "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?

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.

Re: Privatisation has been a costly failure in Britain

#222

Post by DFHippie »

dffdsa432 wrote: post #168
timmb wrote: post #100

Earlier quoted context omitted.

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…

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.

Re: Privatisation has been a costly failure in Britain

#223

Post by walthamstow »

username332211 wrote: post #163
rob74 wrote: post #5

The Economist, publishing an article (even just an opinion piece by a guest author) about privatisation being a failure? Wow...

Oh, that's nothing. The Guardian carried articles against rail nationalization[1], because it was Boris Johnson that proposed it. It's a post-ideological era that we live in. Nobody cares about taxes, incomes and the like any more.[2] The conflict is now red vs blue. [1] https://www.theguardian.com/commentisfree/2021/may/20/great-... [2] Apart from the occasional oligarch who buys a newspaper because he really cares…

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.

Re: Privatisation has been a costly failure in Britain

#224

Post by jacquesm »

ilikerashers wrote: post #125
jacquesm wrote: post #53

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 th…

Would love to see that happen but no government can stop that train now. Too much money is required and they can't just seize the assets.

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.

Re: Privatisation has been a costly failure in Britain

#225

Post by PartiallyTyped »

scrlk wrote: post #23
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

Cynical take: they don't want an overeducated population as that poses a mortal threat to the system.

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.

Re: Privatisation has been a costly failure in Britain

#226

Post by friendzis »

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 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?

Re: Privatisation has been a costly failure in Britain

#227

Post by arethuza »

aembleton wrote: post #209
iso1631 wrote: post #150

Earlier quoted context omitted.

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

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).

Re: Privatisation has been a costly failure in Britain

#228

Post by sitharus »

Kiro wrote: post #164
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.

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'…

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.

Re: Privatisation has been a costly failure in Britain

#229

Post by gnfargbl »

aembleton wrote: post #201
gnfargbl wrote: post #117

Earlier quoted context omitted.

> 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.

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.

Re: Privatisation has been a costly failure in Britain

#230

Post by iso1631 »

bambataa wrote: post #191
iso1631 wrote: post #142

Earlier quoted context omitted.

> shutting ticket offices Why should I pay higher prices/taxes to keep ticket offices 90% of the country and increasing don't use open? International Airlines finished moving to e-ticketing 15 years ago

Why should I pay to maintain a road I’m not using now, or a fire service I haven’t used yet?

Because ticket offices are a costly relic from the 20th century that simply are not needed, as evidenced by the collapsing usage of them.
Post reply on HN