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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

#281

Post by Aaargh20318 »

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…

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'.

Re: Privatisation has been a costly failure in Britain

#282

Post by pyrale »

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.

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.

Re: Privatisation has been a costly failure in Britain

#283

Post by AndrewDucker »

devjab wrote: post #44

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.

Re: Privatisation has been a costly failure in Britain

#284

Post by vharuck »

dffdsa432 wrote: post #265
cycomanic wrote: post #240

Earlier quoted context omitted.

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. https://www.barrons.com/articles/usps-louis-dejoy-post-offic...

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?

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?"

Re: Privatisation has been a costly failure in Britain

#285

Post by lotsofpulp »

WithinReason wrote: post #280
lotsofpulp wrote: post #277

Earlier quoted context omitted.

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).

Didn't InstantPot just go bust for the same reason? Somebody decided to lend them too.

I do not know what “same reason” means here.

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”.

Re: Privatisation has been a costly failure in Britain

#286

Post by cartoonworld »

dffdsa432 wrote: post #265
cycomanic wrote: post #240

Earlier quoted context omitted.

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. https://www.barrons.com/articles/usps-louis-dejoy-post-offic...

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?

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.

Amazon wont even take MY package one town over.

Re: Privatisation has been a costly failure in Britain

#287

Post by Puts »

Gareth321 wrote: post #86

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.

Re: Privatisation has been a costly failure in Britain

#288

Post by yread »

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?

You can for example buy back shares

Re: Privatisation has been a costly failure in Britain

#289

Post by lotsofpulp »

HWR_14 wrote: post #259
lotsofpulp wrote: post #202

Earlier quoted context omitted.

How are shareholder returns and profit different?

Profit is extracting money from customers. 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.

Re: Privatisation has been a costly failure in Britain

#290

Post by smcl »

maxboone wrote: post #20
smcl wrote: post #4

> Since then the sector has accumulated £53bn in debt while distributing £72bn to shareholders, the majority of whom are international investors someone who is good at the economy please help me budget this. my family is dying

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.

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