So how do you extract profits then?
My experience in the UK and Germany is show up, pay, go, and it being cheaper.
This is arguably illegal and only exists because the govt refuses to enforce the obvious interpretation of the agreement.
Meanwhile, the US DOT has historically always taken the approach of "the solution is more highways. What's the problem?", losing far more than $1B/year.
If you find their service to be good and cheap, I can only assume you've never ridden a train in Europe.
Especially when the service is a necessity for many (Train to work, water to drink, electricity to keep warm and cook, etc).
At least that’s they playbook they’re all using.
https://www.channel4.com/programmes/ben-elton-the-great-rail...
When we sell our public investments for a quick buck we complain when the real cost of the service gets priced in. The trouble is, we pay the same taxes still, they just no longer go to the service we privatised, so we feel it in the pocketbook individually.
Presumably those taxes are going elsewhere now, but I was very happy with them going to core public services.
https://www.barrons.com/articles/usps-louis-dejoy-post-offic...
I, for one, think it's a good thing that people are entitled to their mail regardless of the profitability of their mail route. That's the point of a public service.
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.
That said, the service provided by the USPS nowadays is primarily delivery of paper waste into a receptacle I am obligated to empty because very occasionally they also use the same box for packages.
USPS is not a business, and it’s a fundamental mistake to pretend it is, solely for the sake of slandering it.
Amtrak gets surprisingly small amount of money.
However that doesn't change what I said so I'm not sure why you are bringing it up. Amtrak most likely wouldn't be profitable if they had priority.
Each big city we came to we had to stop and wait without having any idea how long it would take for “freight traffic to clear”.
I love train travel, and I’m not price sensitive at all, but the delays were completely absurd.
USPS delivers to remote addresses no one else’s will on route that will never make money.
https://en.wikipedia.org/wiki/Railtrack
https://en.wikipedia.org/wiki/Network_Rail
https://en.wikipedia.org/wiki/Southall_rail_crash
https://en.wikipedia.org/wiki/Ladbroke_Grove_rail_crash
Edit: To be 100% clear the badly maintained infrastructure was the responsibility of a for profit private company at the point where people died.
> The passenger train operating company had failed to inform Railtrack and the signaller that the automatic warning system (AWS), which warns drivers of adverse signals, had been turned off in the cab of the HST.
But Ladbroke Grove was Railtrack's fault entirely (within the first few years of its creation). Meanwhile it's been 20 years since National Rail was created, when do we get to blame current governments and National Rail for bad infrastructure?
Railtrack made a lot of money by selling off land, and other assets, under invested and generally underperformed
> Railtrack made a lot of money
"Made" implies creation, growth, increase.
This is the opposite of what happened.
The money wasn't made. It was /extracted/. They /extracted/ a lot of money.
Railtrack doesn't have that money. Their succeeding entity doesn't have that money. The government doesn't have that money. The taxpayer doesn't have that money. None of that money was invested such that any of these entities might benefit from it in any way. It was removed from the system into private wallets.
The private owners plundered and fled, and the remaining skeleton was socialised again so it might regrow a bit of flesh from public taxes for the next extraction cycle.
I expect the maximum profit sweet spot actually includes a small amount of penalties. If you don't get any penalties at all, you are probably leaving money on the table re service cuts.
I am new to this. Doesn't a dividend come from profits? What profits are there if you need debt? And who will loan to you if your business plan is to exit scam?
A dividend can be paid with money from any source, it's all money.
> And who will loan to you if your business plan is to exit scam?
Ambitious junior bankers. Or you get the government to guarantee your debt.
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?
It's a sham market.
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
People: "ugh, I will use the app"
Company: "Look, nobody uses the front line staff"
30 years ago Terry Wogan was using his radio 2 breakfast show telling the 40-60 demographic how to send emails and watch his webcam. That demographic are now 70-90. I do sympathise for independent 95 year olds who can't use a ticket machine. I'd rather we spent the money in a far better way -- increasing services for example.
Nothing to do with accessible stations, where they simply look up entries in a database and will have very little personal knowledge.
Additionally, often the ticket office gives better rates -
https://twitter.com/CraigJordanBak1/status/16786743395735101...
The fact that you dont know this, betrays the fact that you havw no idea how the UK ticket prices are actually set
Most important is that the target service coverage, quality, etc should be decided by government (who should be seeking to please voters), not corporations who are seeking to please shareholders.
I mean, do you really not understand how earnings are calculated, or are you trolling?
It is a free market, you are free to open your own water company and build your own water pipes or deliver water in bottles. No one is stopping you
In Britain, British Telecom spent around 20 years making it impossible for other players to supply an internet service to consumers. They used various anti-competitive practices and had very good capture of the largely toothless regulator OfCom. This is all documented.
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.
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.
You might as well say that the US military makes a $1 trillion loss per year. No, they supply something which is required by the govt and which has a cost.
There was an excellent book on the subject published this year called Our Lives in their Portfolios[^1].
[^1]: https://www.ft.com/content/7da72f9c-978b-41e7-8e4b-478818f74...
So the example of rail doesn’t really apply to this branch of the discussion.
However, once you’ve bought a house, it is very difficult to to but in new pipes from a different water works.
Here is how that works in American railways: https://m.youtube.com/watch?v=jNkYNjADoZg
And why they are on a road in implosion.
I was just at EWR last night waiting for an arrival and there was an old man looking for water. He asks an employee where to find some and she looks at him like he has two heads.
“You have to buy some. Or you can drink out of the faucet in the restroom”
Can you imagine that? Telling an old man at 1am he has to drink out of a bathroom fixture to quench his thirst.
In my mind, I was hoping he was flying to a more civilized country. Because that’s the system we’ve built for ourselves. In a better present, the man would have access to a drink for free. But because a profit needs to be made, the entire airport is organized around little nickel and dime scams.
This is a nonsense delineation in systems thinking. That railroad shareholders are also the public doesn't justify ripping them off.
Unions are beholden to the same impulses towards monopoly and rent-seeking as corporations. Swap members (i.e. sellers of labour) for shareholders (i.e. sellers of capital) and employers (i.e. buyers of labour) for customers (i.e. buyers of goods and services) and union management starts looking remarkably like its corporate analog, churning undifferentiated workers into a differentiated and thus premium block of labour as truly as a mill grinds forests into houses.
They are the public, just not the UK public!
Lets see the shareholders:
* French government
* Chinese government
* Australian banks
Labor and capital aren't the same concept no matter how much you scramble them. One is powerful enough that the entire system is named after it.
Have you seen the dividends and bonuses at Thames Water, or read the article posted here?
Paying more won't net you a better one.
Yes they do, from rival businesses, superior and new technology, just look at Chat-GPT potentially putting programmers out of work, or telegrams being made redundant by pagers, and text messages and email.
@arethuza
>CEOs of corporations of the same size quite often have to find and retain customers in competitive markets - which is hardly the case with Thames Water?
Water companies are delivering a minimum standard of water, call it the least toxic form of water considering the energy constraints and logistics of delivering water en-masse compared to other methods of obtaining water.
Mains water from a very young age always made me sick, so where possible I use bottled spring water in the kettle, but am currently considering a reverse osmosis water filter, to deionise the water in the house as much as possible.
Deionised water is the best tasting, sweetest tasting water I've ever experienced, and if I listened to the medical experts I should be dead on numerous counts of their assertations. So two fingers up to them as well! LOL
https://www.scottishwater.co.uk/About-Us/News-and-Views/2022...
Carefully chosen words, someone has done their research!
Thats what happens when new standards come into force and improve upon the old standards.
https://environment.data.gov.uk/portalstg/home/item.html?id=...
"The purpose of this dataset is to present a summary of bathing water compliance in England between 1988 and 2014 against the old bathing water directive (76/160/EEC), which was repealed on the 31/12/2014"
However I'm not against better standards, but I am against some of the "engineered" methods used to gain those standards....
https://www.ciwem.org/the-environment/how-should-water-and-e....
As I was saying, some things are engineered....
There's so many factors potentially at play here and some of it we wont get to ever know about, but life has taught me there is manipulation in many guises.
What changed?
An upgrade to Eli Parsier's original filter bubble warning, one might say. https://www.ted.com/talks/eli_pariser_beware_online_filter_b...
In the examples here, no, CEOs don’t face real competition. Water companies are sold off public utilities. They way they make profit is to degrade service and raise prices. No one is going to install a competing water system. No AI is going to do that anytime soon.
The Economist has a political bent, but they are clear on how privatisation has gone: ‘Dogmatic adherence to privatisation in the face of its sustained failure suggests ideology, not pragmatism, was the motivation.’
> Water companies are delivering a minimum standard of water
No they aren’t. That’s a key point in the article.
So that other technologies, like rainfall capture systems and water filtration systems can be become financially viable through economies of scale. If you have a roof you can top up water tanks, water filtration systems clean the water and can recycle the water. Reverse Osmosis filtration which deionises the water is about as pure as you can get, so pure nothing can grow in it, which is why colony forming units (CFU's) aka TVC's are so low, lower than spring water.
https://www.gov.uk/guidance/spring-water-rules-for-local-aut...
This article explains why Thames Water is in the news. https://www.theguardian.com/environment/shortcuts/poll/2013/... "after 2025, Thames Water believes more drastic measures will be needed"
Not long to go.... standby for some more "engineered" news.
>The Economist has a political bent,
Whilst its easy to say, privatise problems, Thames water has its own unique problems, but when looking at something like the coal miners, what did it do? It shifted people away from using coal to other less large airborne particulate laden forms of fossil fuel, the latest being air source heat pumps 1w in 4watts out at best, solar power 15-22% efficiency, and nuclear with the debate over the use of different nuclear fuels, like plutonium and thorium. Sort by Specific Energy (MJ/Kg) at this link https://en.wikipedia.org/wiki/Energy_density#In_nuclear_reac...
Anyway some things are engineered including things in the news like Thames Water.... Someone's getting a shake down!
I meant while applying to their own position. Not between corps. The CEO market is artificially small.
If the RMT had that amount of money I’ve no doubt Mick Lynch would be using it to buy the railways
Is that the combined salaries of all union members?
That’s a pretty amazing figure, how was that calculated?
Are you seriously arguing that that the Thames Water CEO was underpaid? They have been mismanaged extraordinarily. Their debts, losses, costs, service and environment records are so poor that nationalisation is being discussed. They have been paying dividends and bonuses throughout.
https://www.theguardian.com/business/2023/jul/10/thames-wate...
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't really matter what you produced. Not hitting deadlines was no big deal.
Compared to my normal jobs where there is a constant stress from management to be lean, efficient and hit goals. I hate it but the team spirit is much higher and I probably produce 10x in comparison.
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.
What's normally the driving motivator in public companies to be efficient?
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?
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.
When something is of public importance, like a utility, it really seems that running it as a public service instead of a private company seems like the right call
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 better service is more efficient at making money - the free market hypothesis. When there is a captive audience, as in the case of public utilities, there is no incentive to provide a better service, but the company goal is the same - make the most money - and they are freed up to do it in the easiest way possible, usually by cutting costs across the board and paring down the services to a bare minimum. This is still efficient in the sense that they maximise income for minimum outlay, but it's not in any way desirable for the customers who are forced to use the now crappy service.
They don't make any money unless they give the customers what they want, that's the whole point. It's so basic even animals have an instinct for it. That's why government and private business shouldn't be mixed.
I nominate his doorstep, since who is he to tell us where to poop?
That's because it's a more general category, not because it's a better category. Going the other way: privatisation can for example invest money up front to make operations cheaper.
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 discovered that you could axe entire departments, lay off thousands of workers, and pay that money to shareholders while your company crashes and burns.
Why invest in making better products than “the commies” if you can make cheap products on par with imports and fire factory workers/QA/research? They learned that if the consumer doesn’t have a competitive choice for a product that will break in 1 year vs one that will last decades, then why not sell 10s of the cheap one over and over?
"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 Soyuz rockets, or people flock to countries run by "the commies" vs, say, the US, due to the better products and wages in said "commie" countries, then we might just have a fundamental disagreement on the state of reality. But my understanding is the opposite is true.
> why not sell 10s of the cheap one over and over?
Companies can do that, but in a decent economic environment a competitor or twelve can spring up and offer products at different prices and levels of quality. E.g. not every restaurant is McDonald's. Why is that?
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.
/extracting/. Efficient at /extracting/ money. This is the metric that is being rewarded, and therefore this is what gets optimised. You also see this pattern when an asset stripping firm buys an ordinary competitive free market company and runs it into the ground. To align this with /making/ money, just having a free market isn't enough - the controlling entity has to be in it for the long term, and has to bear responsibility for the downside of any decisions it makes. Otherwise it's just plunder and flee, just as with the usual kind of private equity firm corporate raid.
That is often at odds with “making profit” either from over hiring so there’s always fallback people on call to overbuilding so in 50 years your still under capacity.
The goals are entirely different and so should the incentives
This doesn't happen.
When the government is the customer, and the private company is maximizing profit, the company's effort goes towards figuring out how to 'raise' rates.
This might sound like free market, I'm just trying to increase prices while reducing my overhead (efficiency). But in practice you end up paying a lot for a little. So instead of government workers slacking off, you have even less well payed people slacking off, with managers making a lot of money.
If you ever had to go to a 'privatized' DMV you can see it. Just awful everything, because of cutting corners. Yet the company gets paid a lot. The money goes to the company leadership, it doesn't 'trickle' down to operations to do a better job.
You never invest in infrastructure - in 30 years since privatisation, water companies in Britain haven’t built a single reservoir, lose 30% of water to leaks and dump raw sewage on the beach where children swim
Sure, there's lots of pressure, but, at least for someone with my profile, it's limited by the fact that it's easier to walk away.
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.
Yes but one way that happens is by ignoring unprofitable customers. That's great if you are a car dealership and sell higher end cars to wealthier people or run a botique grocery store with fancy all-organic produce, but terrible if you are (for example) trying to provide healthcare or education and decide that the profit margins aren't high enough for you to serve various segments of the population.
Cuz that never happens in the private sector, lol. Guess where I'm at now...
There was a week while consulting pre-COVID I tried to see how many hours of Skyrim I could play on Switch, both in the office and remotely. I got to about 11.
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 shareholders", which of course is what the issue is now interest rates have risen significantly. The article describes this as "the tension between generating strong returns for investors in uncompetitive monopoly conditions and providing high-quality, affordable infrastructure to the public". The end result is still the same though - transfer of wealth in a socially destructive direction.
There is the difference
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).
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”.
It's just fancy accounting talk for theft. A shell game. Like u/Spooky23 states upthread.
It's wrong. It doesn't make any sense. And yet here we are.
Water company does a debt bond issue, parent owning fund takes a % of the issue (enough so that the bond issue is a success at a good price), parent fund extracts all the funds raised as a dividend, and sells the % of the issue it own too
All while extracting management fees etc too
Without getting into the weeds, my point was that in order for owners to end up with cash in their pocket, the business has to earn a profit, at some point. And that profit must come from revenue (higher prices for customers) minus expenses (lower quantity/quality for customers).
You can insert a lender in there to shift when those cash flow changes happen, but the money must come from customers, eventually.
Barring any research and development that results in technology that will allow for lower expenses and/or increased production, but I do not think that is the case here.
Of course what happens is many business geared this was don’t make a profit, fail their banking covenants, interest on the bond rises and eventually they go bust leaving lenders out of pocket
It’s happened to many PE owned businesses
Of course they will! There's an entire industry (leveraged buy outs) built around it. And more generally, lenders will let you do dumb things with the money they lend you. As long as they expect to get paid back.
So, could a small business borrow money to pay it's owners? Probably not, it's not likely to get paid back. Could a multinational corporation borrow money to pay dividends? Yes, it's happened.
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.
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.
Or run a nationally important service into the ground and then need emergency government money to keep providing it.
When does profits don't materialize, the company goes bankrupt, the government rescues it (can't just cutoff power and water!) and everyone is happy! Well everyone but the majority of taxpayers who aren't also shareholders of the utilities...
- 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.
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.
What about using revenue to buy it? You don't have to use (or have) debt to buy something with revenue.
So you could still be giving away money to cash out that is owed to someone else? If your revenue is based upon fictional income then these privatised public services will become tax payer problems because they can't be shut down.
> buybacks in any other fashion only increase debt.
There's this thing called a "leveraged buyback" where a company borrows money from lenders and uses that money to buy back shares.
When the board is more like a group of Huns than a Shepard, you find that after you pay out the shareholders, the enterprise is toast. In some cases, like most recently in big box retail, the private equity investors are running an obvious and odious, but legal, fraud.
With utilities, the business is all about capitalization and cash flow. They should be stable and boring businesses. When they are exciting, the management is burning the candle at both ends.
if it's on the balance sheet and you sell it for more than it cost you, then you have to book it as non-operating income, i.e. capital gains, i.e. profit.
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 thousand more, if they were even able to keep up with saving a larger down payment.
> 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.
>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.
The owners of the company are competing with others in society to buy land/houses/cars/services/etc.
Except, not every investor wants every investment to be highly leveraged in this way. The entire point of utilities in most peoples portfolios is as very stable dividend stocks. It’s the people running the company who have incentives to do these kinds of transactions.
Competitors who take large loans and fail to deliver are out competed by alternatives who went a more efficient route.
The profit margins are fixed, but everything is still competitive.
I think that's what the poster above was trying to say - they're not competing for customers, they're competing for investors. Effectively their only products are ROI and share value.
And when I say it out loud, I get a little shock, as I realize how much all industries are trending that way. No matter how consumer-facing your business is, the real competition is for capital investment. Consumers had better hope that capital investment depends on their happiness, because if it doesn't, their happiness is going to slide far down the priority ladder.
The irony is we might all be complicit in supporting this dynamic by choosing to invest in whichever 401k/pension fund option offers the highest returns and lowest expense ratios.
That The Economist, the City of London's answer to Pravda, published this article at all is telling.
Do you mean it's extremely left wing? Or pro-authoritarian capitalist? Or the most left-wing publication you can find in an otherwise capitalist group?
But I do think it's a bit of hyperbole in a way, although I'm only tangentially familiar with the publication.
Pravda is both the Russian word for ‘truth’ (правда) and was/is a publication advancing the interests of the USSR/Russian state establishment.
The ‘economist’ implies a similar ‘truthfulness’ (it must be right about the economy if it’s an economist!) and advances the interests of the London financial establishment.
Specifically table 1 on page 2, "The ten industries with the highest profit margin", has the spots 1 (elec: 42.5% profit), 2 (gas: 40.5%) and 8 (water: 32.1%) being utilities.
A water company caring about some international investors more than the people they serve, and siphoning money out to those foreign interests, borders on treason.
Your comment on the incentives of private companies missed his point about the competition aspect.
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.
Ehhhh... nah. There is still a cost vs. return.
Postal Services, for example. $10 ships 1.1 packages on average, or they get efficient and $10 ships 1.9 packages, etc.
You absolutely see this in things like Medicare where $100 worth of spending doesn't get you 90-100 generic aspirin, but more like 20 pills, and the rest of it goes to pay middle men.
The problem with Medicare in the US isn't that Medicare is inefficient. The problem with Medicare in the US is that the US has a private healthcare system and Medicare exists on top of it. A universal public healthcare system wouldn't perform the same way in terms of bang for the buck because the dynamics would be very different.
The UK structures water provision as regional monopolies. This should be a hilarious joke but it's the reality. You can't change water company without living in a different region. There is no effective market competition for water provision in the UK. We already rely on price caps to keep this state of affairs in check.
Pretty much the only argument that almost stands up for them is that they're quite good at contributing to private pensions as a byproduct of being good stocks because people need water to not die. We gloss over where the rest of the money goes, possibly into PR management around frequent sewage dumping.
This is how utilities/water work in the vast majority of the US. I’m unclear why you think this is strange? At the very least, it doesn’t explain the UK’s problems.
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 private companies to extract money from the general population.
Previously electricity prices were overseen by the government, and I don't really understand how a private company could do that any cheaper. There was already a market for the spot price that electricity was sold at by producers, so all the entity you bought it from had to do was balance the books. Any excess would have been put towards the balance for the next period, but now it goes to the owners of the company.
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.
We don't make murder legal because it still happens, and the existence of corruption doesn't make regulation a bad idea - it means we need to clamp down on corruption.
White collar crime has good PR representation, and that needs to stop.
The cooperative was performing poor profit-wise while middle management lined their pockets. If it was not a cooperative, their share price would have been in the gutter, and someone would have bought up enough shares for cheap to fire the leadership and replace it with people who are competent, and then benefited from the increasing share price of having the company ran competently.
If you are a member of the co-op, sure. Not everyone who trades with a co-op is a member. If you are a shareholder, in a company, most likely you have votes, as I think less than 10% of companies have different share classes with unequal voting rights, and of those most still have some voting rights. So in both cases (with limited exception), shareholders have voting rights. So there is no difference here, in fact all of the things you listed is valid for more traditional businesses.
The main difference, at least for the cooperative I worked for, was that no individual can have more than 1 share, where as in other incorporation models individuals can have more than 1 share. This is advantageous as one individual can expend resources to buy shares, then use the control granted by those shares to improve efficiency and the value of the shares they acquired, and everyone who is a shareholder benefits from this. No similar mechanism exists in a co-operative.
Maybe, with a cooperative, on a small scale, you can lobby enough people to effect change, but it takes a lot of time, and usually the people with time to fiddle with the politics of a co-operative probably should have as little as possible say in how it is run as they likely have nothing more productive to do.
I do vote in some co-operatives, I even vote in the co-operative I worked for, I look at the candidates, and I can clearly tell that there is no way they will change anything, never mind do something as drastic as replace the inept leadership. I could of course expend lots of time to try and convince them, but this is a massive gamble.
If I see a company is ran poorly, and I have money to buy enough shares to change it, the gamble is a lot smaller. I know it takes X resources to aquire Y% of control.
When wholesale energy prices spiked last year, followed by a cap being applied to the prices that they could charge, they weren't hedged and several ended up going bankrupt.
The overall effect of this game was that more astute consumers, who tended to switch to the lower-cost providers, were ultimately subsidised by the less-astute consumers who stuck with the traditional players. Or to put it another way, the rich were subsidised by the poor.
I agree with most of what you've said but I don't agree that this conclusion follows. If anything when I was less well off I was far more inclined to put up with the hassle of changing providers every few months to minimise the costs than I am now.
I do think there were some efficiencies generated, it's just hard to figure out if a nationalised entity would have gotten there eventually. The online only account management for example probably saves a bunch over call centre staff and sending people around to read the meter.
But those more efficiently discovered "natural" prices may be higher or lower than the prices previously chosen by the public committee. It's possible that the committee was setting artificially low prices subsidized by the public purse, and it's possible they were setting them higher than necessary. Either way, it could just be an accident - that they tried as hard and in as good faith as possible to pick the right prices, but just didn't have all the information or didn't model it exactly right - or it could be that they were responding to political pressure, choosing low subsidized prices because it's popular with voters, or choosing high prices because it's popular with lobbyists from utilities.
Markets certainly come with their own trade offs, and they certainly don't do price discovery perfectly either, but where they do have the advantage (in my view) is in spreading out the information-gathering, modeling, and incentive-following responsibilities across all the market participants, rather than concentrating them in a public committee that is inevitably a small group.
But this is really just the generic age-old argument between central planning and market structures. I tend to find market structures more appealing because I can contribute my ideas and my work into them as an employee or entrepreneur, whereas I'll almost certainly never be a central planner. But it's not a panacea by any means. There is a good reason we keep penduluming between more centrally planned solutions and more market based solutions in different areas; there are real trade offs between them and it's never obvious what the right balance is.
In general public services exist as public entities because they would otherwise necessarily be monopolies, and the only lever the public can therefore have is some kind of democratic process.
In the case of UK privatisation it’s clear that the policy was merely a wealth-pump designed to extract value from a captive set of consumers.
I’m sorry but it is a fiction that capitalist seizure of public goods are primarily intended to add value to “consumers”. If this does happen, it is an side effect, and I would argue a temporary one experienced while the system is coasting from the inertia of past public investments. You see the same thing with the victims of leveraged buyouts by private equity.
In the end without an ideological project that transcends personal or familial accumulation of capital, all collective enterprises are doomed to failure. This is because people alienated from the motive forces of the collective endeavor at some point stop caring about the forward motion of a system that at best only marginally and diminishingly benefits them.
The public sector is unfortunately a terrible place to pursue ideological projects. Especially in a democracy where the ministers with leadership authority of a department change every 2-3 years and very wide groups of stakeholders need to endorse any substantial change.
I would call them cultists at this point.
Whatever the populus via government decides that to be.
Personally I agree with you, I think privatizing any of those things would be madness, because the real world never ends up working like the ideological fantasy, but it's hard to get everyone to agree on what's an objective economic truth.
That's just silly, we've had the anarcho-capitalists perspective in the past, that's how the modern firefighting services were started.
Do you know how they'd work?
Firefighters would come up to your house and ask for half of what was inside in order to extinguish the fire, because there's no free market for desperate people.
Ooooor... they'd do the same to your neighbors, because if they wouldn't extinguish your fire, their house could burn down, too.
Ooooor... they'd set stuff on fire so that they'd have who to blackmail.
Ooooor... you could pay them a constant insurance/protection fee so that they'd actually help. And that insurance/protection fee would become widespread, because who wants their house to burn down?
At which point, why not just distribute the cost to everyone since 99.999% of buildings can burn down, and make it a public service?
Which is where we are now.
Anarcho-capitalists and libertarians are basically people who don't know history and would want to speedrun it with great pain and suffering for everyone, along the way.
It's important to be realistic here and not fall back to technical truths. Yes, you could technically buy a house with physical cash. In practice, you need a bank account and to deal with the private banking system.
Another important factor for me is whether choice reasonably exists in the market. One of the great things about having a private sector is I can choose where to allocate my funds. I'm quite into music so naturally I have more instruments and sound equipment than most. But to afford this I must sacrifice other areas, like fishing. I don't own any fishing equipment because I'm not into fishing. This is great because it allows for a rich and diverse society.
But when the doctor says you need a £3000 procedure or else you will die, nobody chooses instead to allocate the funds elsewhere. There is no reasonable choice when it comes to healthcare. So it's wrong to treat it just like fishing.
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 to offer somewhat equitable access to their competitors, e.g. by sharing masts, poles and underground ducts. That, plus the relatively low cost to entry of setting up as a new player, seems to be enough to keep prices down and service levels up.
This wouldn't work for transport of or on rail, road, water or gas, because there's no realistic way to force different entities to share the same infrastructure; you can't reasonably set up two parallel gas networks, or run two independent sets of rails. In those cases I agree that we have experimentally proven that socialising the infrastructure was/is the most efficient option. Now we need a government with the political chutzpah to accept that.
I just don't see how the free market helps in the maintenance of poles and ducts. That should be owned by the state.
The issue of privatised companies taking on debt whilst paying dividends is a pure failure of government regulation.
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 property (FTTP).
So a company like this one https://countybroadband.co.uk/ needs to get about 30 households signed up, they have 1 year to get the cables laid to their greenbox street furniture, and then then run fibre from village to village until it ends up back in London, probably telehouse.
So its costing about £90k per greenbox, and depending on where on the run you are, you might see a bit of a lag if you are at the end of the run in places like north norfolk, but if you live in a village somewhere in essex, ie closer to the main routing points in the UK, then the lags will be less noticeable. This also ignores cloudfare type data centres which cache the most popular content and locate it close to your door.
But there's a govt subsidy here going to businesses, in this case infrastructure providers for home users.
Now if you take this place https://en.wikipedia.org/wiki/Cwm_Dyli its got fibre which it had to pay for and cost £200,000 a few years ago when it was strung up the poles. But its also benefited everyone in the area who didnt have to put their hand in their pocket, but the fibre is somewhat exposed on the telegraph poles imo.
There is actually alot of fibre already in use in the UK, because fibre doesnt really change, so the improvements in fibre come from lower costs and improved compression ratios by detecting the traffic type and then compressing it, which requires a level of oversight on everyone's internet traffic going in and out of the country. Goonhilly has been doing some of this sort of algo compression/traffic detection testing in the past. https://thefalmouthconvention.com/record-2/field-trip-report...
Rail companies push up the costs, much of it through clever accounting, setting up leasing companies for rolling stock, separate companies for man power etc etc. You'll be surprised how many foreign companies have a slice of the british railways. If you are fed up with the state of the rail services, beat up on the foreign countries and companies that have a slice of the pie.
Roads, builders all submit tenders, the unwritten rule (for all types of building work including schools, hospitals in the UK) is if you dont want the work, submit a super expensive tender, those that want the work price competitively.
The main advantage of privatisation, is you get new ideas being tried out more quickly than with socially owned or governmentally owned entities. In other words it brings diversity to the table, instead of conformity.
Legislation already brings conformity in many ways, but this is still after people but typically businesses have been consulted on for a govt white paper.
It also gives govt the ability to say its not my fault when something messes up, so if you really want to beat up on the govt, get everything taken back into state control, then beat up on the govt. If the govt is smart, it will push responsibility's onto other people who feel they have the chutzpah to run a multi million/billion utility company, in the words of L'Oréal "because they are worth it".
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...
Airline privatisation has also been quite successful compared to the rest.
Decades later the UK is still behind the countries that took all the tech and continued what we'd started.
This suggests that you could privatise both the electric grid and the electric supply, but only if you enforce strict separation of the entities owning the one and the other. I'm saying this just as a thought experiment, there seems to be zero benefit to privatising the electrical network. The main problems with a government run service boil down to possible inefficiencies raising the price above what a hypothetical lean business would do; the fact that changes at the government level happen slowly; and lack of consequence for doing the job poorly. For an old, established technology like electrical wiring, these are mostly theoretical criticisms - it is extremely unlikely for a revolutionary change in electricity delivery to happen any time soon.
However, I would like to keep my water supply so somebody has to sort this situation out quickly.
Can't get more inefficient than that. What's next? Privatization of trash?
I have actually seen this with recyclable trash, several companies with different colored trash bags that pick up on different days littering the street. I'm glad some towns have already banned this. Worst part is that they let people mix all recyclables in one bag and then sort at the facilities adding another huge inifficiency. This is a huge eyesore in Switzerland where people will give you the "stare" if you through shit in the wrong bin.
Turned out the winner was massively cheaper because they had massively underestimated the work required. Trash piled up for weeks while the new trash collectors worked illegal amounts of overtime trying to get rid of it.
Now, this switch had happened just before local elections, which the right-winged parties who'd been in control soundly lost.
The new left-winged leadership ended up canceling the contract and bringing the service back in public hands.
It's such a waste of money which the right should be the ones complaining about.
Unregulated privatization does not work because privatization means optimize to the max which includes cutting corners in labor laws to the health the citizens.
Do more direct democracies have this problem?
There are several things in the UK that have been clear attacks on our democracy that it feels could have been avoided if it were possible to force a national vote on them. Proroging parliament. Neutering parliamentary standards. Tory party members solely being allowed to choose succession for multiple PMs. And so on ...
Allowing water companies to pay bonuses and dividends whilst putting up rates and pumping effluent into our rivers at massively increased rates ... a national vote would allow an opposition party to put a solution to stop that to the populous and it could be fixed, somewhat.
Although, with the levels of deceit and manipulation, just flat out immorality, the Tories have practiced in recent years maybe they could get the public to vote for more profits for shareholders and more shit pumped into the rivers. I despair.
We tried this with the railways in the UK. In the mid 90s the tracks and signalling and most of the stations were transferred to a publicly owned and regulated company (Railtrack), while private businesses competed for franchises to offer train services. But within a few years the government was unable to resist the temptation to privatise Railtrack too. After that we had the inevitable phase of regulatory capture, followed by financialisation of the train operators, leading to position we had at the start of the pandemic where the operators were basically competing to offer minimal services for maximal revenue by subsidy farming.
In the absence of regulatory institutions that are able to withstand commercial pressures^W greed, then this approach will always fail.
In the UK, regulation of privately-delivered public services has failed due to decades of government by parties that view regulation (and public ownership) as simply undesirable.
Because companies bullshit their "missions" and "goals" everywhere and repeat after me, PROPAGANDA WORKS. Even if you think it doesn't, it plants a seed somewhere in the back of your head that's very hard to dislodge and clouds your "fully rational decisions".
After hearing from a myriad channels that companies want what's best for the customer, from a myriad authority or friendly famous figures, the average person is convinced they must be right. If you ask them directly they'll agree with you, and then their actions will show the exact opposite.
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.
Exactly, in many of these markets a small team of public ally employed engineers could design a reasonable strategy in a week. Now you need a massive team of lawyers just to draft a contract with a private company that isn’t full of loopholes they are gonna abuse. Managing them is more work than doing the job directly. And government can always access cheaper loans
I'm assuming the main issue with government is that people keep electing politicians uninterested in statesmanship or running an administration, and with personal incentives to privatize.
I still don't understand how voters can choose to entrust public service to people that claim public service is inefficient: they can run it in the ground and claim "see, I told you!"...
Natural monopoly? The market is inefficient.
Inelastic demand? The market is inefficient.
Negative externalities? The market is inefficient.
Markets are just a means, not an end. We should apply them judiciously, not religiously.
That's absurdly generous.
Even some of the supposed privatization successes really werent (e.g. British Steel, British Telecom). Even in markets where competition is possible, if the product or service is basic enough, keeping a state run competitor helps inflict market discipline on private actors who need to be kept in check. The UK property is a clear example of where this is direly needed but the cult both prohibits it and has its greedy eyes on the NHS.
The free market cultists pretending that these two things that are very different are equivalent is half of how we got into this mess, in fact.
Whilst participants in the utilites market will often complain that it's "not fair" that they have to compete with a state actor, they're often the best way of exerting market discipline on them.
This is particularly true in utilities space where private actors unhindered by state competition try to bamboozle their customers into giving them fat profit margins with stupidly complex bills. State run companies that provide a bare bones low profit service that matches what most people actually want inhibit this kind of market abuse.
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 toothless enforcement of practically all of them, to the extent where ignoring them and the ensuing fines are just a cost of doing business.
With firm regulation, a free market could operate both profitably and fairly to run public services.
As long as there’s a commingling of commercial and political interests, however, this is an improbable reality. The changes would have to start in the culture of government.
I have numerous thoughts on what would be better, such as sortition, or devolution and administrative federalisation, but as long as we have party politics and elections on mass scales, we will have corruption baked into the system. What we have worked reasonably well before mass communication, but with each step of communications technology, one of the core principles of representative democracy - representation - erodes, as the battles become tribal and personality driven on vast scales, and defy ration and reason.
There are more people proffesing their beliefs in this thread, than in most discussions about the Catholic church.
In this entire thread noone considered - "let us have a look, which country has best railways" and maybe learn from Spain and China.
In public discourse, ecomomy is treated like a religion.
I'm not saying it's always the best solution and free markets going unchecked can for sure cause more harm than good, but I think you're making it out much simpler than it really is.
We can debate metrics, but Britains aging and expensive diesel trains sont loom good in any of them.
Even then it doesn't always work out - UK rail services have that system - the infrastructure is maintained by a public body [1], but the operators are private. UK rail is quite expensive, and mediocre in quality compared to our EU counterparts.
One of the issues is that it's basically impossible to have competition on a single rail journey joining two large cities - there's aren't enough tracks to support it without making it unprofitable for operators. So rail networks bid every few years on sections of the rail network, and then have no competition for their term. Again the incentives that make the free market efficient are just not there. A nice video that summarises this mess here: [2]
Evidence from the new post-fourth rail package landscape seems to contradict this. Multiple places in Spain, Italy, France are connected with at least two competing high speed rail operators, to massive success (Paris-Lyon SNCF and Trenitalia, Madrid-Barcelona and Madrid-Seville by Ouigo, AVE, AVLO, Iryo; many routes in Italy by Italo and Trenitalia).
Competition also doesn't really work as soon as your journey isn't large metropolis to large metropolis and involves connecting trains, because a) if a connecting train only runs hourly (or at best half-hourly), it's impossible to have attractive connections from that one train to a multitude of competing operators and b) there are usually ticketing problems which start to matter as soon as one of the trains is delayed and you miss a connection.
Spain has, considering its size, economy and population a relatively generous high speed network (to a large extent financed by EU grants) that by necessity (broad gauage vs. standard gauge) is also completely separate from the legacy network and consequently isn't utilised super-heavily. Plus RENFE already sees its AVEs as a sort of plane on wheels and traditionally has a minimum connection time between trains of 60 mins (!) with only some exceptions, so there is still room for running additional trains and things can't get much worse even with competition and incompatible ticketing between operators on top.
France's and Italy's high speed lines are somewhat more heavily utilised, but you can still get comparatively far by staying exclusively on the high speed network. Plus in France the geography favours the simple Paris-to-province model with no complicated connecting services necessary, whereas Italy is favourable to a linear arrangement (Turin - Milan - Bologna - Florence - Rome - Naples are all along the same line).
In Germany on the other hand population centers are somewhat more distributed across the country, the high speed lines are of a more fragmentary nature and you have much more running on mixed traffic lines, plus a lot of network sections are effectively at capacity.
The result is that in Germany competition mostly isn't solely directly about passengers, but often rather about train paths, and almost any new non-DB long distance service that has been introduced in recent years (thankfully there weren't that many) caused varying amounts of havoc among local services running along the same sections of line, or in some cases even with DB's existing long distance trains.
Plus it means that e.g. RENFE and SNCF now see each other as enemies, so good luck booking a journey between Spain and France that involves a change of trains in one country or the other (or even worse, both of them).
Exactly, we just end up with a large number of micro-monopolies.
Not even the free market diehards can point out the competition in rail travel.
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?
It makes sense that energy production should be competitive. But for energy supply I can choose from dozens of companies that all supply the same gas/electricty, using the same pipes. These energy supply companies are really just billing operations. The actual supply of electricity is done by National Grid, another private company, but with no competition. Same for gas, and Centrica.
I can't even discriminate between them based on whether they're likely to go bust; when an energy supplier goes bust, some other supplier is forced to take on all their customers. That is an incentive to not run the company finances responsibly (whther you're the one that goes bust, or the one that is forced to take over).
Regulators are consistently hopeless. Regulatory capture is part of it - half the executives in these companies used to work for the regulator. But part of it is that you simply can't make a competitive market just by having a regulator tell you how much profit you're allowed to make.
"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.
What I see everywhere, not just in Britain, is the same old story over and over again: privatizing the profits, nationalizing the losses.
We want the "fight" to occur. Economies are complex systems and humans have extensively proven that they're not good at running those. Free markets are the most effective way to facilitate technological progress and economic growth which indeed benefits everyone - although not in equal amounts.
However, we have to be mindful that free markets contain the seed to their own destruction. On the upper end, there's monopolies, price fixing and other anti-competitive behavior that disables the price finding mechanism. On the lower end, there is poverty which prevents people from participating and discourages entrepreneurship.
Good regulation does just enough to keep the fighters in the arena.
When employed in the right place. It's very much not clear that train networks are that place, in fact I'd say it's quite clear in the UK that train networks are not that place.
Unregulated markets move away from market competition. They move towards monopolies, exclusivity contracts and similar items. Enforcing competition is the only effective method of benefiting society.
But hey, they are very efficient at doing that.
Absolutely, privatise and then increase taxation if needed to provide the service. But why do you need to, just give a water allowance per person and then adjust prices above the allowance to cover the cost of the service?
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.
I agree that it’s in the people’s interest to own the infrastructure. But the management of the service on that infrastructure should be auctioned into the private sector with oversight from the government.
I suspect though that when clean water was a new thing it probably cost a much bigger amount of people's income than it does now.
People that need insulin need it regardless of price, so a 'free' market has the property that the price increases until the 'customer' is broke and then dead. It creates corporate structures that are based more around a 'leech' model. There is no incentive to create better or more efficient products.
This goes for basic food, housing, healthcare, transportation, education and so on and so forth.
So much life hardships would disappear if this was our reality and all it needs is political will.
I believe it's not done like that, because there is little opportunity to make huge profit on such privatisation. Would you rather own the entire rail network, or buy some trains and have to pay rent for rail access? No one will invest in the latter without financial history of operations in such environment.
To do privatisation properly the state should breaker up the infrastructure from the services. Split the services into separate companies (then do we want them to compete or each will have it's niche? Usually it's the latter). Restructure and run those service companies until they're profitable. Finally sell them, or better yet over the span of the years get the employees to get a sizable ownership share, give local go another sizable share, sell the rest on the stock market.
That IMO is roughly a good way privatisation could work, but it takes more than one electoral cycle to do it right, and which government wants to create gifts for their opponents? So we usually don't see anything like it.
What benefit is there to the public/state of selling off a company that they wholly own and is subsidising their transport through it's profitability?
The only possible outcome is that the service declines and/or prices rise as money that once went to the benefit of customers is now extracted via dividends and share buybacks.
"Distributing goods and services" also sounds as if these were inherently available in infinite quantities.
Problem is, they use finite resources. Such as oil, gas, soil, people.
So you are probably right and your belief is not a belief but a fact, but I strongly disagree with the implicit statement that this would maximize human wellbeing, present and future.
What is the empirical evidence for the efficiency of "free" markets (free from "externalities" too?), and what do they minimize, what do they maximize?
For distribution of finite resources, I think free markets (without the scare quotes) are efficient.
But for something like public welfare, I don't think so, and I dislike that much is being swept under the rug regarding were the "value creation" takes place. I agree with GPs closing thoughts.
This sounds sensible the first time you hear about it. The reality is pretty awful.
This happened to the national railway company in Norway (NSB). The result was lack of investment, poor service, and a bureaucracy where nobody seems to be responsible for anything. Which means that rather than concerns being addressed, they get ignored. Because when, for most things, you can blame someone else, nothing gets fixed because nobody is really in charge anymore. As a consumer you do not really deal with one company anymore - you have to deal perhaps half a dozen companies that do not work well together.
NSB went from a somewhat poorly run public sector organization to an entirely dysfunctional failed NPM experiment. The reasoning behind this was about as sane as suggesting we terraform Mars rather than try to not screw up the Earth.
I have seen this in the private sector as well. I worked for a telco for a decade, and they are very similar to how New Public Management works in the public sector. (Which isn't too odd since a lot of them are former state monopolies, so they will be prone to the same sort of defective reasoning you see when NPM is applied in the public sector).
You fragment, outsource and then pulverize accountability. Telcos are usually fragmented from the outset. The restrictions on ownership models, a large telco will typically have separate companies with entirely separate cultures, technology stacks and business processes for every country they operate in. Yet within those countries they will fragment further - ensuring that you have siloed organizations working at cross purposes. Usually due to very localized prioritization to achieve goals that affect bonuses, ignoring the large picture.
One thing that is very striking in telcos is that it is really, really hard to find people who actually understand telecoms technology within them. And they rarely have much control over the technology. Which most of the time has exorbitant operating costs and extremely slow evolution when compared to large internet companies.
In the telco sector it tends to lead to an inability to make sensible use of capital to act on opportunities and evolve the business. You have companies that make a lot of money, but because of how leaders are incentivized and promoted, nobody wants to take risks and evolve new business areas because that might affect short term profitability or personal compensation for leaders. And even if you have leaders who want to, they will typically have very little manouvering space and anything that doesn't have a quick payoff will typically be sabotaged and then axed.
The way you "solve" problems in the telco sector is typically through mergers and acquisitions. The latter often having a very low chance of realizing much value. I've also seen a lot of examples of companies just selling their operations when, due to failure to respond to how markets develop, just have to give up and find new markets where their outdated strategy still works. (One way to look at this is to see what happens when a market reaches various saturation milestones).
The “free market” healthcare in the US isn’t free at all, there are a ton of regulations many of which make it worse, not better.
They frequently can't for their health decisions.
Again, it's 'market competition' amidst healthy consumer choice, not 'free markets' that are beneficial for society.
People already shop around for things like joint replacement.
Under capitalism, private capital predominates; it decides the laws and the commons. If you think you've found a way around this, it's only a matter of time. We call it capitalism for a reason.
Edit: I suppose it's not as obvious if you only have an American education.
The problem is that the government let companies like Virgin off when they broke their contract, allowing them to bid high, take the profits, then walk away rather than fulfilling their contracted duties. Privatise the profits, socialise the losses.
Nethertheless there is tons of competition on transport in the UK
1) To get from Birmingham to London you can choose 3 different rail providers giving 3 different cost/value returns. Faster more frequent ones cost more.
2) On top of that you can also take a coach, hire a car, drive your own car, or of course not travel at all
3) Manchester to London you can fly, take the coach, drive (car hire or your own car), take three different trains ranging from £50 return and 3 hours to £180 return and 2 hours.
"Railway tracks" isn't where the competition is, transport is, and there's tons of competition. I remember I used to commute from a commuter town into Manchester. I could take the train during the peak, or I could take it off peak, or I could take the slower train from a different company, or I could drive, or I could take a commuter bus.
When it comes to the last mile of say BT, you used to have a monopoly, it would take months to get a replacement handset connected. Today though "a phone line" isn't what you want, internet is, and there are options
1) BT/Opeanreach connection (fibre or copper)
2) Non-BT fibre (in many cities)
3) Wireless ISPs
4) Satelite ISPs (Starlink/Oneweb or Geostationary)
Each has benefits and drawbacks
I would agree that the last mile of water and possibly electric provision shouldn't have been privitised. Treatment works though -- why not? There's no real limit on the number you can have.
When it comes to long distance electric again why not. There is a lot of money to be made transporting Electricity in Scotland and selling it to the south east. Let multiple companies do that.
The problem is planning permission and nimbyism means it's impossible to actually build new lines.
Also comparing trains to cars and busses as a positive competition is missing the point that our roads are over capacity. Moving more people off of the roads onto the train networks should be a priority.
Which station? Or which TOC?
> Also comparing trains to cars and busses as a positive competition is missing the point that our roads are over capacity
Which roads? I had no problems driving the kids to school this morning, never are. Well that time fro about 2 weeks a year that the cows cross the road at that time of day after milking which adds a few minutes onto the trip.
If you doubled the passenger mileage on rail, you would reduce passengers on the roads about 10%. Rail isn't going to be a fix for general capacity problems.
And also, your commute may be fine, but believe me, many cities in the UK are not... Edinburgh’s 41 per cent congestion level means a 30-minute journey will take 41 per cent longer than usual and I can tell you from personal experience that a lot of cities in the west-country are over capacity.
Having rail be so expensive or badly run that people decide to use roads instead doesn't seem like a win for privatisation.
Encouraging people onto roads or even flying is also a disaster for tackling climate change.
Road increased from 666 to 741 bkm, increasing 11%.
In theory this extra cash and economies of scale should have been an ideal situation whereby rail transport could be significantly improved. In practice we've seen above-inflation fare rises and (in my experience) dreadful services.