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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

#91

Post by oaw-bct-ar-bamf »

mrfumier wrote: post #62
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.

"And you don't extract profits from a rail line by offering the best service." So how do you extract profits then?

1.) Force other competitors to go belly-up or buy them to create a Monopoy or if the authorities don‘t let you do that, try to end up in a duopoly situation where you and your competitor come to some silent agreement to not overly compete.

2.) Raise the regulatory bar to prevent startups from entering your field.

Milk whatever half dead infrastructure you have and people depend on.

Oh and raise prices every odd year while still not investing in the rotten infrastructure. Somehow investors need to see growth and dividend payments.

Due to 1.) there is no competitor left that could offer a better service. People cannot simply switch.

Die to 2.) you are not in danger of ever having to face situation 1.) again.

Job of the government is to not let 1. and 2. happen.

Re: Privatisation has been a costly failure in Britain

#92

Post by veltas »

mnd999 wrote: post #82
mrfumier wrote: post #62

Earlier quoted context omitted.

"And you don't extract profits from a rail line by offering the best service." So how do you extract profits then?

Minimise investment to maximise profits, which you take, whilst running the minimum service required to avoid contract penalties or publicity so adverse you lose your contract. Then threaten to go bust and get bailed out by the government when the infrastructure starts to break a few years later. At least that’s they playbook they’re all using.

The infrastructure isn't privatised though, it's maintained by Network Rail.

Re: Privatisation has been a costly failure in Britain

#93

Post by ccppurcell »

madaxe_again wrote: post #69
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…

Regulation. Regulation regulation regulation. I too believe that free markets are the solution to a great many of the conundrums of organising a society, but I also believe that a strong and socially conscious (by which I mean its prime directive is the enhancement and improvement of living conditions for all of those under its jurisdiction) regulatory hand is necessary. The U.K. has plenty of regulations, and toothl…

Money is power. Regulation is a fig leaf. Think of taxation: the government makes all the rules on how much tax a business should pay under this or that circumstance. How much tax do the biggest companies pay? Next to nothing, pound for pound. Because they are able to use their money to exert power. Companies will always do this, so regulations will always erode over time.

Re: Privatisation has been a costly failure in Britain

#94

Post by iraqmtpizza »

tnel77 wrote: post #3

When profit becomes the main motivator, quality of services always seem to drop. I get that the government can be annoying, but I feel like there are many services that we should aim to provide as a society where profit isn’t the goal. For example, you don’t need to price gouge people for electricity, but charging enough to cover expenses and future infrastructure upgrades is fine and to be expected. No costly CEO or…

(not) sorry to say that when a company has a strong ethos of providing great service it is primarily motivated by profit. even if it is known ahead of time that the profit won't materialize for decades.

you must mean immediate profit

Re: Privatisation has been a costly failure in Britain

#95

Post by mrcartmeneses »

vidarh wrote: post #71
jack_riminton wrote: post #19

Earlier quoted context omitted.

Exactly. Fake competition in utilities and services makes no sense. The "privatisation" of the UK railways is a prime example. I use quotation marks because it's just privatising the profits and socialising the losses. "from March 2020 to February this year, the Government paid out more than £7.3 billion in operational support to private train operators" - https://bylinetimes.com/2021/05/18/7-billion-covid-bailout-f.…

The train operating companies are a particularly bad failure because like e.g. the water companies they get to channel the revenue but unlike the water companies they don't own the capital intensive bits but bid on how much they'll return during the franchise period. As a result, the capital need to start a train operating company is tiny in proportion the revenue flow, and their returns look modest related to revenu…

And one of the worst ironies is that some of our franchises are run by the state rail companies of other countries. Meaning we are subsidising rail travel in foreign countries.

Re: Privatisation has been a costly failure in Britain

#96

Post by DeathArrow »

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 market works because of competition. When you are privatizing utilities and public services, most often you are creating monopolies, which means no competition.

Re: Privatisation has been a costly failure in Britain

#97

Post by tibbydudeza »

mnd999 wrote: post #45
tibbydudeza wrote: post #21

We have state enterprises, and they are all colossal failures today because it is so easy to hide corruption when the books is not open and they don't have to answer to shareholders. State owned enterprises are fine if something needs massive capital investment to start off and nobody has the resources but there must be a plan for the state to disinvest. Then again I prefer subsidies like the US does for semiconducto…

So legislate for transparency, why shouldn’t state owned companies be subject to the same rules as public companies?

Public sector companies are audited by a state institution and the reports are tabled in Parliament where the oversight committees are majority controlled by the corrupt ruling party.

Members of said committees are usually clueless about financial affairs.

State = useless

Re: Privatisation has been a costly failure in Britain

#98

Post by avidphantasm »

fy20 wrote: post #47
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…

My country recently (2019) privatized the electricity supply. The infrastructure is owner and operated by a government entity, but the company you buy electricity from is a private entity, and you can choose which supplier you use. Generation was already privatized a long time ago. It was advertised as being able to offer lower prices to the consumer through competition, but all it has done is provided more ways for…

> but all it has done is provided more ways for private companies to extract money from the general population.

Then the system is operating as it was designed to. This is the coercive law of competition in action. And regulation won’t help in the end. Ultimately, without an overarching ideological project beyond capital accumulation, the motivation to accumulate wealth dissolves all social bonds that enforce trustworthiness, so regulation is doomed to fail due to bribery and petty corruption.

Re: Privatisation has been a costly failure in Britain

#99

Post by pydry »

markus_zhang wrote: post #83
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…

Privatization of public sector has nothing to do with free market. Free market has been dead since the 19th century.

In the 19th century the cult of the free market was used to justify exporting all of Ireland's food while the Irish starved to death. The cult has only grown in influence since then.

Re: Privatisation has been a costly failure in Britain

#100

Post by timmb »

mrfumier wrote: post #62
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.

"And you don't extract profits from a rail line by offering the best service." So how do you extract profits then?

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 with terrible interest rates.
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