Privatisation has been a costly failure in Britain • Hacker News Board

Re: Privatisation has been a costly failure in Britain

#391

Post by Yoric » Tue, Jul 11, 2023, 1:13 PM UTC

Kiro wrote: post #193

jraph wrote: post #179

Earlier quoted context omitted.

I've also seen many public places where people are efficient, and also stressed because of the amount of work to do. I feel like your experience is not very applicable to all situations. What's more, a private company which has monopoly does not really have special incentive to respect deadlines and everything: it is the only choice, so customers won't deal with any competitor and are stuck with this private company.

Absolutely. My experience is completely anecdotal, and even if it's true that you get less bang for the buck in the public sector I still think it's ideologically sound and worth it. My country has a huge public sector but I think it's good. What's normally the driving motivator in public companies to be efficient?

Professional pride?

Re: Privatisation has been a costly failure in Britain

#392

Post by hnbad » Tue, Jul 11, 2023, 1:14 PM UTC

juujian wrote: post #25

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…

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.

This is a pet peeve when market maximalists talk about how public services are "inefficient". Efficiency in economics refers to profitability. If a public service isn't profitable, that actually makes it efficient in a practical sense because a public service being profitable would mean it is overfunded (i.e. it's receiving more funding than it needs to operate).

In practice this often means politicians will squawk about how a given public service that is inherently a cost center is "inefficient" (which is true in the economic sense because it is designed to use its entire budget and thus doesn't extract a profit), impose austerity by cutting its "bloated" budget (which is justified by also cutting the workforce and other cost factors) and then repeating this process until the public service is inoperable and its failure is seen as a demonstration why it must deseperately be privatised and sold to the highest bidder (who can now get the monopoly position at a fraction of its potential value). Potential extra steps along the way involve creating a (government-owned) corporation to make it easier to complain about its bad business performance.

On a related note, there is an independent "tax payers' association" in my country that makes a big deal about "tax waste" by highlighting (usually fairly small) public works that most often have legitimate uses/explanations but may seem absurd/wasteful at first glance but largely prefers to stay silent when it comes to business subsidies and such. They have a clear ideological bias and while the media seems to be somewhat aware of this, it's always interesting to see journalist report on inadequate welfare programs in the same breath as mentioning (and using b-roll of) the public "national debt clock"[1] installed by this association.

[1] The most recent example was a segment on youth debt stemming from welfare overpayments their parents received (which under the legal system at the time was partially imposed on underage children in the same household even if they didn't have any money - the law was recently changed so they could only be held liable for the amount of money they owned at their birthday when reaching the age of maturity). Ironically this debt was the direct result of the kind of legislation to cut "tax waste" (in this case: welfare overpayments) the association generally advocates for. The hook was something like "the government can be billions in debt but for a young person a much smaller amount can be life-ruining" but the lack of reflection was astonishing.

Re: Privatisation has been a costly failure in Britain

#393

Post by UncleMeat » Tue, Jul 11, 2023, 1:15 PM UTC

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'…

Profit maximization does not inherently create efficiency for all consumers.

A profit maximizing company may reasonably say "oh this population is super expensive to serve so we will let services there stagnate or even remove services for that population because it is more efficient for us to focus elsewhere."

Or consider a subscription service that makes it considerably more difficult to unsubscribe. That increases profit while making the product actively worse.

Profit incentive leads to efficiency of profit extraction, which is only loosely correlated to efficiency of services for consumers and occasionally runs in total opposition to efficiency of services for consumers.

Re: Privatisation has been a costly failure in Britain

#394

Post by arethuza » Tue, Jul 11, 2023, 1:15 PM UTC

darkclouds wrote: post #210

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…

>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 p…

"Govt is subsidising infrastructure providers to the tune of £3000 to £4000"

I live in a rural area in Scotland, until recently we only had 20 Mbps down and 1 up. I had enquired to a specialist ISP about installing fibre and they quoted £7000 to do an estimate - which I interpreted as "please go away".

BT/Openreach came along and installed full FTTP - which I am very happy about but I did wonder how commercially sensible it was with us paying £50 a month or so...

Re: Privatisation has been a costly failure in Britain

#395

Post by LastTrain » Tue, Jul 11, 2023, 1:16 PM UTC

flanked-evergl wrote: post #249

Machado117 wrote: post #139

Earlier quoted context omitted.

Same thing happened in my country. Fortunately someone decided to create a cooperative and now I can avoid contributing to the profit margin of some private company

I once worked for a co-operative, and it was by far the most poorly run company I have ever worked for or with. The control of the company was so far removed from shareholder control that the management was basically only accountable to their creditors (i.e. banks). The company had every corporate pathology you could imagine and then some. It was orders of magnitude worse than a Fortune 500 dinosaur I also worked for…

So you shared your experience with one co-op, do you think they are inherently worse than other types of business organizations? If so, why?

Re: Privatisation has been a costly failure in Britain

#396

Post by ZeroGravitas » Tue, Jul 11, 2023, 1:17 PM UTC

gnfargbl wrote: post #117

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…

Because of the Thatcher government wanting to "open the market" to American telecoms, in the 1980s they stopped the world leading Fibre rollout that BT had already started.

Decades later the UK is still behind the countries that took all the tech and continued what we'd started.

Re: Privatisation has been a costly failure in Britain

#397

Post by BoiledCabbage » Tue, Jul 11, 2023, 1:17 PM UTC

lotsofpulp wrote: post #295

EdwardDiego wrote: post #205

Earlier quoted context omitted.

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!

That is inevitable with super low interest rates for a super long time, especially near zero. Your options are to acquire appreciating assets quicker than your competitor, or you get left behind. See people who bought homes at 5% down versus people who waited to have 20% down. The people who took on more debt were rewarded nicely with huge gains, and the people, who were prudent, now decide on paying a few hundred th…

This is a very naive reading of the situation - it almost comes across as twisting in knots to avoid placing the blame on the responsible party: the company and its owners who were responsible for this.

> Your options are to acquire appreciating assets quicker than your competitor, or you get left behind.

This is wrong twice over! First of all, they are effectively monopolies, they have no competitors in their industry. The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens). Second of all, from the article, they aren't spending the raised money on capital investments.

> For example, South East Water—thousands of whose customers were left without running water this summer—spent more on dividends and servicing its debt than on infrastructure in the two years to March 2022. Water bills for Britain as a whole have increased by around 360%, more than double the rate of inflation, since privatisation. Over that time, annual capital investment by the ten largest water and sewage companies has fallen by some 15%, according to research by the Financial Times (FT).

Privatization is an utter failure here, just as would be predicted given the situation, and it's crazy to see an attempt to rationalize it away.

Re: Privatisation has been a costly failure in Britain

#398

Post by robertlagrant » Tue, Jul 11, 2023, 1:17 PM UTC

Kiro wrote: post #193

jraph wrote: post #179

Earlier quoted context omitted.

I've also seen many public places where people are efficient, and also stressed because of the amount of work to do. I feel like your experience is not very applicable to all situations. What's more, a private company which has monopoly does not really have special incentive to respect deadlines and everything: it is the only choice, so customers won't deal with any competitor and are stuck with this private company.

Absolutely. My experience is completely anecdotal, and even if it's true that you get less bang for the buck in the public sector I still think it's ideologically sound and worth it. My country has a huge public sector but I think it's good. What's normally the driving motivator in public companies to be efficient?

My experience with the public sector is the same. People must spend all their budget or it will be cut next year, so they do. Processes calcify and no one is incentivised to improve them. It's hard to fire people or make them redundant, so people get shuffled around between departments, costing far more than they contribute. Pensions are often very expensive. Strike action is more likely, as it's a big mass of people who can shut things down.

Fundamentally, it's the principle-agent problem. The customer isn't the one paying the bills. The customer is a politician or two who can heap money on the department or not, and they get praised for heaping money rather than saving money. The people paying the bills, taxpaying individuals and businesses, must do so or they go to jail. So why be efficient when your customers cannot legally avoid buying your service?

Re: Privatisation has been a costly failure in Britain

#399

Post by bandrami » Tue, Jul 11, 2023, 1:19 PM UTC

lotsofpulp wrote: post #277

WithinReason wrote: post #217

Earlier quoted context omitted.

"borrowed £53bn in debt while distributing £72bn to shareholders" There is the difference

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).

Wow. Yes, they do. It happens most fiscal quarters.

Re: Privatisation has been a costly failure in Britain

#400

Post by bowsamic » Tue, Jul 11, 2023, 1:19 PM UTC

spiralpolitik wrote: post #13

The intention of privatization in the UK was never to improve service. It was to transfer wealth from the public to the private sector. From this perspective it's been successful. From the perspective of the British public it's been a complete disaster.

Yes, and the conservatives have been clear on this from the beginning. I remember watching Question Time a decade ago when I was turning 18 and people obviously asked about austerity and the conservatives response was not "we need to stop spending in order to help the economy which will then help poor people", it was "the goal of our government is simply to grow the private sector".

Thatcher even said that the eventual goal of the UK was for all the labour to be highly skilled. The vision is a nation of software devs, engineers, financiers, lawyers, and managers driving their car to work or paying whatever for the expensive train ticket.

We even have a pipeline that takes you directly from university graduation to these high end jobs. These jobs then re-educate you with their own bespoke courses.

Basically, the point of austerity was always to try and starve all of the public aspects of the country. It is almost all by design.