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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

#521

Post by danparsonson »

makomk wrote: post #431
danparsonson wrote: post #242

Earlier quoted context omitted.

> Isn't that the whole point of privatisation? By introducing a profit maximisation goal you (supposedly) create a more efficient operation. Right, but efficient at what? The answer is almost invariably 'efficient at making money' - that's the whole point; competition normally forces alignment of incentives, wherein 'better' service (for some value of 'better') results in higher income. Thus a business that provides…

Quite a lot of the nationalised water and sewage systems elsewhere in Europe don't even seem to be managing the bare minimum though, it's just that without the privatisation angle the media doesn't care so they appear better. For example, Ireland tried to privatise their water industry a good while back in order to fund necessary investments and gave up due to protests - this was widely seen as a success that protect…

That being the case then, I wonder what's different about countries that get it right? Better public sector management? Privatisation with stronger regulation?

Re: Privatisation has been a costly failure in Britain

#522

Post by twobitshifter »

jmacd wrote: post #434

Canada privatized our railways in the 1990s. While it created a hugely profitable company for shareholders, it has been a pestilence on Canadian society since. Canadians do benefit from a somewhat more efficient freight network, but overall we've seen an unsafe, poorly maintained, but highly efficiently run rail network. It is no longer possible for Canadian provinces or cities to make any effective use of infrastruc…

At the same time, private carriers are losing out to trucking because trucking doesn’t pay a fair cost for the use of roads and RRs have to pay to upkeep their tracks. In the end, it may have been better for them to be able to offload the infra costs.

Due to this, they followed the model of minimizing infrastructure, equipment, and crew expenses which left them with slow service only good for a sliver of shipping. The freight RRs are efficient from a monetary cost standpoint but people are willing to pay more to get something quickly and they can’t compete on speed.

If someone else owned the tracks, and leased capacity, the track owner would try to maximize the use of tracks and clear trains quicker and provide new services. We’d see the complete opposite effect, the return of passenger trains, improved signaling, and maybe even electrification.

Re: Privatisation has been a costly failure in Britain

#523

Post by robertlagrant »

happymellon wrote: post #481
robertlagrant wrote: post #386

Earlier quoted context omitted.

Why would that be a good idea?

Because buybacks in any other fashion only increase debt. It's the shareholders cashing out, so rather than a failed business with shares of $0 value, they have money and the loans are someone else's problem.

> Because buybacks in any other fashion only increase debt.

What about using revenue to buy it? You don't have to use (or have) debt to buy something with revenue.

Re: Privatisation has been a costly failure in Britain

#524

Post by scott_w »

toyg wrote: post #452
scott_w wrote: post #270

Earlier quoted context omitted.

> What profits are there if you need debt? And who will loan to you if your business plan is to exit scam? If you’re a water company, after government bailed out the banks, chances were good you’re not going bust. What are they going to do? Let the entire population of London die of dehydration?

And since a lot of investors in large utility companies are international, should the government somehow not make them whole (or worse, just expropriate), there would typically be repercussions - with international arbitration courts adjudicating reparation with processes that are typically stacked in favour of businesses. It's a sham market.

I just explained the thought process, I never said it was guaranteed to hold true.

Re: Privatisation has been a costly failure in Britain

#525

Post by robertlagrant »

yread wrote: post #461
robertlagrant wrote: post #386

Earlier quoted context omitted.

Why would that be a good idea?

Lots of corporate tax code is about taxing the money flows from the company to the physical persons. Somehow buybacks weren't taxed until recently.

I think this is wrong, twice:

- buybacks are taxed when a person gets money for their shares, as capital gains tax

- lots of corporate tax is about exactly the opposite of what you say; i.e. reaching inside a company's bank account and taxing its profits directly, rather than waiting for the money to flow out and taxing it as VAT/income tax/cap gains. A huge amount of money and effort is spent on balancing this correctly, with R&D credits, structuring profits to appear in the correct year, etc etc.

Re: Privatisation has been a costly failure in Britain

#526

Post by phatskat »

robertlagrant wrote: post #514
phatskat wrote: post #486

Earlier quoted context omitted.

> That example does result in "better at making money" but that money can then be used to lower prices / increase quality / pay shareholders dividends / pay employees higher wages. Out of these, we often just see > can then be used to…pay shareholders dividends During the welfare capitalism of the early 20th century, we did see lower prices, higher quality products, and higher wages. Then Jack Welch and his ilk disco…

> Out of these, we often just see "Often" seems like weasel words? Look at e.g. tech worker salaries rocketing up. Or the year on year improvements in key items such as cars and phones. What you're saying doesn't jibe with my understanding of the 20th and 21st centuries' explosion of innovation and quality of life improvements. If you think Fords and VWs are no better than Ladas, or SpaceX rockets aren't better than…

I guess I should have qualified that it’s not always the case, but we have also seen a lot of factory and middle class jobs gutted by corporations who favor profits over people. Jobs in manufacturing that paid well and offer good benefits don’t seem to be as common as they once were. The fact that a single income can’t support a family for a lot of Americans is a sharp contrast to previous generations.

That’s not to say that good jobs and food companies don’t exist, as you pointed out we have tech jobs that lay well and other sectors. The divide between what’s achievable for the middle and lower class now vs the upper is staggering though. Having to worry about affording a mortgage, health care, food, etc is a reality for many Americans while a handful simply have to say what they want and they have it without batting an eye or considering the cost.

We can both pick and choose which sectors to look at to support either the idea that jobs are great or that wages are bad, my point is that there has been a very tangible shift for a decent number of companies to move away from good wages and benefits to giving C-levels and shareholders more money than they know what to do with.

Re: Privatisation has been a costly failure in Britain

#527

Post by ccorcos »

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…

How about public utility districts?

In my town, most of our utilities are public utility districts that are a private company with a publicly elected board of directors.

Our electric company, SMUD, is fantastic with excellent customer service and much cheaper rates than PG&E.

I called SMUD about a tree that was leaning towards a power pole during a storm and they cut it down within 4 hours!

I’ve been to some board meetings to complain about some shenanigans with our water district, and it’s pretty cool to see public oversight in action.

Re: Privatisation has been a costly failure in Britain

#528

Post by iso1631 »

Cymrukicks wrote: post #262
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

What happens if you're blind or disabled?

Same as happens at the majority of stations now. If you need assistance you book it.

Re: Privatisation has been a costly failure in Britain

#529

Post by willyt »

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…

From the article linked below comparing the 1960s nationalised rail service to todays privatised service:

"When Dr Beeching wrote his 1963 report, half the UK rail network carried only 4% of the passenger traffic, a third of the passenger fleet was used less than 20 times a year, and the railway employed 475,000 staff. British Railways annual deficit was then £87 million, or £2.3 billion in today’s money.

Today’s rail network is more intensively utilised and employs about a quarter the number of people. Yet in 2018/19, operational funding (i.e., less HS2 and enhancements) cost the taxpayer £4.7 billion or twice that of Beeching’s highly inefficient railway"

https://www.railengineer.co.uk/is-rail-affordable/

Also on the busiest West Coast mainline route London-Glasgow most trains still take around 5 hours the same as in the 1970s but with less legroom, more uncomfortable seats and highly extortionate ticket prices.

Re: Privatisation has been a costly failure in Britain

#530

Post by swores »

lucraft wrote: post #187
pharmakom wrote: post #17

Choice is a necessary condition for free markets. There is little to no choice in water, roads, phone lines, rail transport, etc. I still don't understand why the UK went down this path.

One reason was to increase investment. In water's case the infrastructure had been under-invested in under public ownership for decades, due to it always being a low priority from a political point of view. The regulatory structure of the privatized industry says the water companies can only make profits if they make capital investments, and so the amount invested in water infrastructure in the UK (particularly Engla…

> One reason was to increase investment.

That's such a ridiculous argument though.

Privatisation increasing investment means one of two things, either the investors are getting ripped off or they're going to get a profitable return on their investment. Assuming no government would admit to the first and no investor would intentionally invest in the first, let's assume the second is the plan. In which case, if the investment will yield profits, there's no reason the government shouldn't make the investment themselves so that the public get the profits (as well as the benefits from increased investment at the start).

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