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.
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.
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.
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.
So how do you extract profits then?
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.
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.
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.
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.
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.
I would call them cultists at this point.
Whatever the populus via government decides that to be.
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.
Decades later the UK is still behind the countries that took all the tech and continued what we'd started.
Airline privatisation has also been quite successful compared to the rest.
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.
I just don't see how the free market helps in the maintenance of poles and ducts. That should be owned by the state.
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".
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.
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.
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
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.
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.
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.
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).
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.
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.
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.
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.
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.
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 shareholder overhead thrown in there.
"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...
If you compare the average quality of housing in, for example, Singapore (where 90% of housing is public) and the UK it's like night and day. UK private landlords are among the laziest and most entitled in the entire world, the land use efficiency is terrible and the building quality is abysmal. Thames water wasn't the only victim of the cult of privatization.
Alas, the one UK politician that tried to fix this was treated like the a cross between the antichrist and a terrorist by the UK media oligarchs and that was enough to prevent him from fixing anything.
If anything the NHS is probably in the crosshairs of the investor cult.
Obviously there are cases where the government fails and that can't be given a free pass, but this is too often assumed to be the outcome and the only solution is privatisation.
Even in the UK where there is the feeling that government is totally incompetent the NHS keeps providing at least a baseline level of medical care expected from a western country. This is despite being sabotaged at every opportunity over the last 12 years by the Tory party.
When the government is ideologically opposed to ensuring sufficient public oversight, quality of services drops.
The problem in the UK is not merely privatisation, but privatisation in a way that privatises profits, often socialises losses, and that substitutes dealing with crises after the fact over strong oversight during, because of a string of governments that have not just been opposed to government ownership, but that has been opposed to regulation.
You could strip away the profit motive by making these all non-profit stakeholder led organisations of some sort, and you'd still have a massive problem because of the lack of proper oversight.
Fix the oversight issue and maybe some degree of privatisation would work (though I agree many of these services should still not be operated with a profit motive), but the double whammy of weak oversight and privatisation is disastrous.
Look at what is happening with South Africa's power utility (and other State Owned Enterprises like their post office and national airline) as a great example of what happens to a public enterprise with no oversight.
The other issue of course is in a public setting, there is no motive for efficiency.
In other words: You can set budgets and force your providers to do the best they can within them. No matter where you set them, people will be unhappy, but it's not like setting quality as the main motivator means you need to give the provider free reign to spend however much it wants.
PPP adjusted total UK healthcare spending is less than half of the US, despite a significant private sector acting as an outlet for a proportion of the situations when people are unhappy with the NHS. Incidentally US public money per capita going towards healthcare exceeds the per capita cost of the NHS (whether nominal or PPP adjusted). The low amounts flowing to private providers in the UK can be seen as a demonstration that most people considers the NHS service good enough - while many would not be able to afford going private, the proportion who could if it mattered is certainly far higher than the current takeup.
Theres actually a pretty huge amount of "free ride" sitting there waiting to be ridden.
Do people prefer to buy the package of ground beef that's $9/lb or the one that's $5/lb? When faced with a choice, most people want the cheaper one, disregarding the harmful externalities that make the lower price possible. Nevermind that the more expensive one is better for their bodies and the environment. Most people and corporations are married by the same motivation: to make and save as much money as possible with no regard for the harmful effects.
If profit-seeking consumers shift their motivations, profit-seeking corporations will naturally starve, and something higher than profits will prevail. But people won't change. Nobody is going to vote for the government to ban the cheaper but more harmful beef farm.
What do you think the FDA is, but people having voted for more expensive but healthier beef? Like, as bad as you think it is now, imagine how much worse it would be without food safety regulations.
Thank you to everyone who flagged me and now I can't respond or comment in this thread <3
you must mean immediate profit
I like non-profits in some cases. They're great at funneling money into specific causes that people care about. Especially small ones (a local theater group is the go to example) or politically charged ones. But "the trains running" doesn't seem like one of those. Why not have the government oversee it?
It's alarming to note the extent to which our resources have been sold off. The Conservative party, for instance, facilitated the sale of nearly 10% of Thames Water to China, and a further 10% to the Abu Dhabi Investment Authority.
Effectively, the country is being turned into a dividend machine for foreign capital, while our government debt continues to soar, now standing at over £110 billion and threatening to surpass our entire education budget [0]. This rampant exploitation of our national resources and the escalating debt crisis are alarming indicators of our economic vulnerability.
The country's economic situation is gravely concerning. Our mounting debt issues are additionally exacerbated by the looming crisis in our public services, which are showing signs of failure and are predicted to become significantly more costly. For example, we currently allocate 38p of every pound spent on public services to the NHS. However, projections show the number of Brits aged 85 and older doubling in the next 25 years [1]. Despite these alarming statistics, nobody in government or the media wants to have an honest conversation with the public about what this means.
There are also limits to how much more redistribution can be done. As per 2019/20 data, the top 1% of income taxpayers, earning above £180,000, received 13% of all income but contributed 29% of income tax receipts. The burden is even more evident when considering that the top 10% of income taxpayers were responsible for approximately 60% of all income tax receipts. In contrast, the lower half of income taxpayers, those earning less than £26,000, accounted for only 10% of income tax receipts, suggesting a significant tax skew towards higher-income earners.
It's really not looking good.
> In truth, what needs to happen is the government needs to realise that
> what limits our wealth is our resource constraints and enact policies
> on that basis, instead of fussing about artificial financial constraints.
Yet, the UK seems hesitant to utilise natural resources, develop housing/infrastructure, or encourage investment in capital or innovation.
We've been rich and industrialised for so long we have forgotten that wealth isn’t created out of nothing. Our attitude towards fossil fuels is particularly indicative of this. Coal made this country an industrial superpower. We forgot that the key to our economic power started and will always start with energy -- and that this is often dirty.
Today we a country of financial services and coffee shops, because we believe we are above the truly productive sectors of the economy.
* The volunteers being a limited group of decision makers.
If you actually let public services take their gloves off, they'd shred most tender offers on sight. With few exceptions, hiring people to do things is ALWAYS going to be cheaper if done directly, and it's stupid to pretend that Serco, G4S, etc are delivering value.
There's still room for private providers, and even room for multiple providers (some public, some private) operating in constant competition. Central government should compete on centralised services. Does every hospital in the country need patient management software? Then write some centrally! Does every council need to send out letters and notifications? Then do it centrally!
It's all so stupidly simple. It's a travesty that the people making these decisions have been profiting from doing things the wrong way.
From the perspective of the British public it's been a complete disaster.
Especially when it comes to our healthcare system.
Thatcher even said that the eventual goal of the UK was for all the labour to be highly skilled. The vision is a nation of software devs, engineers, financiers, lawyers, and managers driving their car to work or paying whatever for the expensive train ticket.
We even have a pipeline that takes you directly from university graduation to these high end jobs. These jobs then re-educate you with their own bespoke courses.
Basically, the point of austerity was always to try and starve all of the public aspects of the country. It is almost all by design.
https://en.wikipedia.org/wiki/Thatcherism
Or talk to a few older folks about Britain in the 1970's and 1980's.
And the west pushed this Privatize All The Things model into the former Soviet bloc, too, where mass brutal privatization of the huge portfolio of state assets created the kleptocrat economic they have there now.
Nobody ever denied that the free market is efficient. The question is: efficient at what?
Moving control of capital to capitalists. That's what it does. That's all it does. That's all it's ever been capable of doing.
In hindsight, much stricter regulation regarding reinvestment of profits would have been a good idea.
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 England) has duly gone up a lot since privatization and has been comparable or higher to other nations since.
From this point of view, it's less about choice and markets as a way to structure the regulation and ownership so that capital investment actually happens.
It is no longer possible for Canadian provinces or cities to make any effective use of infrastructure that we had built and maintained for over 100 years. My city had developed a plan for light rail, but required some access to CN tracking, and CN refused to even review a proposal. They also launched a major lawsuit against the city/town to try to get out of their commitment to maintain some safety infrastructure around their property. Their attitude seemed to be "we have deeper pockets than you".
In my own neighbourhood, there is a track that runs through a railway cut. A group came together and had built a beautiful multi use trail. They asked for an easement on a part of the CN right of way/property that was nowhere near the trackage and had been used as a path since time immemorial. What did CN do? Within weeks they erected a 6 foot fence around the entire property. They never even responded to the letters.
They freight business absolutely did benefit from private ownership. The workings of the capital markets have created an efficient machine.
The trackage they run on should never have been privatized. In return Canada will never have any decent passenger rail and no city pairing in Canada will ever be able to build a reliable or reasonably fast rail network.
Failure of privatization is in a lot of ways a failure of aptitude, or an exercise in grift. I'm not sure which exactly. It was either not well thought out, or very well thought out... depending on which side of the table you might have been sitting at.
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.
In many cases it can't even be described as "privatisation" because the resulting industries have been bought by other people's governments. It is literally the worst of all worlds.
They changed tack on climate change and ecosystems disasters about a decade ago. After that it was pretty obvious the current trend on full economy scale climate action (starting from Wall Street using ESG in major fashion as a criterion) was coming.
https://www.economist.com/by-invitation/2023/07/06/thames-wa...
Although they went quite far to be clear it wasn't written by them.
That said I've not found the economist to be dogmatic when it comes to privatisation. They typically come across as quite practical to me.
It's a post-ideological era that we live in. Nobody cares about taxes, incomes and the like any more.[2] The conflict is now red vs blue.
[1]https://www.theguardian.com/commentisfree/2021/may/20/great-...
[2] Apart from the occasional oligarch who buys a newspaper because he really cares about his own taxes.
The Economist is a bit like RT - denying that everything is going wrong in Kharkiv to a point but beyond a certain threshold they eventually stopped and admitted reality.
I'd be curious to see what their views were about Thames Water privatization were in the past before all this stuff came out. That'll give a clearer picture of their true views.
The generational wealth the UK had in the form of North Sea oil passed off to private interests for their own profit rather than used for the creation of a sovereign wealth fund like the ones Norway has is a perfect example of the sort of backwards situation you end up in. That oil could have been used for the benefit by every member of the UK public and instead is used only for the benefit of the few while the public suffers under outrageous energy and cost of living increases.
edit: added missing word, "has" after Norway
Truly astonishing that nothing like the Norway model was done. Those oil reserves could’ve transformed the country, surely?
My basic woke laymen POV is that the in last 150+/- years, we figured out 100% of how to sustain humanity at scale and even offer some perks like efficiently traveling huge distances. Greed/nationalism/willpower get in the way from time to time, mucking up the works, but creating opportunity for well-timed industrialists on borrowed wealth to come in and provide "solutions."
This is all viewed through glorious, rose-tinted hindsight, but what even are we doing here?
I've spent my entire life watching private shareholders rape companies sold off by successive Conservative governments.
I've grown up hearing of workers buying homes on minimum wage and that the majority of families could support themselves on a single income. Yet despite huge advancements in automation, computing, and productivity I do not live in such a world.
I've seen the ways in which private business treats people who have no other choice: with no regard for their wellbeing, their humanity, or the law.
Private business serves as a useful means of parallelising and (somewhat) decentralising decision making, but unless brutally controlled it ravages society.
This is one of the big failures of the last 30 years and can't wait to see it rolled back.
Should the government run coal mines at a loss which have no strategic value just to keep jobs? No.
Should the government run natural monopolies in strategic or socially important areas (like railways, water utilities, etc)? Yes.
But instead what started at privatising the former turned into an ideological push to privatise the later.
There is also the question of HOW these services should be run...
Even then it can be a challenge to structure this correctly, but if a government and populace are willing to tolerate an iterative approach an optimal solution can be reached. I'm not entirely convinced it's better than the public alternative, especially since most of the public failures were prior to the internet and the increasing popularity of freedom of information acts, which have allowed the public to gain knowledge and influence the operations of public agencies in a way they, for better or worse, couldn't before. But at the very least such a solution could come functionally close enough to operating optimally.
But none of this is true in the way the UK privatized its water networks. The water privatization is an embarrassment of how to do privatization as wrong as possible. Alternatively, considering a primary goal of the Thatcher govt was to transfer public wealth to private purses, one could argue this privatization was done as efficiently to achieve that goal as possible.
Privatization can, and has, worked well in several monopoly utilities, where the privatization is structured appropriately. Forced percentages to be set out for infrastructure improvements, profits capped by regulation, debt cannot be piled on willy nilly but has to be approved by a regulatory body, and finally common access allowing for competition.
Power, Water, Road, Rail, and Healthcare should remain and have remained under public ownership - those are a public service and should not be run for profit. Telecoms is about the only one to have worked - ish, but it took decades and a lot of lobbying and regulation to make it happen.
More broadly and less strongly, the same is true of globalization. The fact that these haven't lived up to promise means we are frakked. The witch was right, there is no alternative.
It's better to keep water, streets and telecommunications public. Privatizing them is a waste of resources.
Unfortunately, this will take a lot of political capital to change. I can see there being a lot of debate about how the UK compensates private owners for nationalising the infrastructure again (likely at an inflated price). It will likely be another situation where the average person loses out, in favour of private owners, and will be made to pay the price by inflated water prices to offset the lack of maintenance and expansion that should have taken place, instead of extracting maximum funds to shareholders.
I wonder also how this will be spun - as a one off 'market failure' or as a systemic problem with extracting maximum profits at the expense of the users (i.e. enshittification).
I wonder why this isn’t a more common model. If a utility is effectively a regional monopoly, having said region’s governments be majority shareholders aligns pretty much all the incentives, no? And still helps keep stereotypical “civil servant” working culture out the door
When I moved in to where I am now in London (early 2020, whew), TW were already digging the road up literally every 2-6 weeks, as they'd fix a water leak, then a new leak would spring up down the road (because the newly repaired point was strong enough that other weaker points became exposed) and so on and so forth when what they really need to do is RIP ALL THE OLD PIPES OUT AND PUT NEW ONES IN.
The way that road repair seems to be done in the UK is that potholes are ignored until the road is full of them, then the entire road gets resurfaced. My road was resurfaced during this time, it was beautifully flat and new...and then FUCKING THAMES WATER CAME AND DUG IT UP TO FIX THEIR LEAKS. Newly surfaced road, now scarred with dozens and dozens of ugly patches where TW has not done their fucking job.
And now, apparently all of this obvious shit is coming to light and people are increasingly aware that water rates are bound to go up as TW finds a way to pay for all the pipes that are completely fucked because they haven't been doing their job this whole time.
What an absolute disgrace. As a Kiwi who's living here, the worst part of the UK is both sides of the useless government and the apathetic population here who doesn't outright demand more from it; I wish they were more like the French.
One thing I don't understand here is: who's on point for that debt? Who's willing to lend that money, and why - are they just betting that there will be a bailout at some point?
Privatization for key services (eg public transit, health care, power generation, housing) has been an unmitigated disaster, almost without exception. It's mystifying why anyone still supports it for any reason other than self-interest.
The main infrastructure company that operates country wide (OpenReach) are heavily regulated by how much they can charge for last mile termination. So that means there's a floor to how cheap services can be, but gives wiggle room for charging more in return for better customer service (e.g. Zen, AAISP). I pay £53 a month, with no yearly price increases, for 900/100 FTTP - which is still pretty pricey compared to other places in Europe, but from what I've seen of the likes of Comcast in the US, is pretty decent. No data caps either.
It's an incredible feat of psychological engineering spanning over a century, and now people love to believe in the absolute fairy tales of rags to riches, ideologically instead of realpolitically or resource driven geopolitics and meritocracy instead of the realities of an ever increasing gini coefficient.
The current market cap of the company is around a 1/3rd of the value of its pension scheme. Any takeover would be under intense scrutiny from the regulator.
Thankfully when it comes to water, in Scotland we did not privatise, nor is our water metered. We also continued to build onshore wind farms, unlike in England where it was effectively banned.
I know it seems simplistic, but generally the private market is full of corruption the poor can't really avoid. So they just end up victims to it.
The FDA and USDA are captured by Monsanto et. al. The FDA is captured by pharmaceutical companies. The FCC is run by telecom companies. The FTC is a toothless shell of itself which cannot stop any but the most blatant of anticompetitive measures (and often not even those).
What is the public to do? They can exercise choice in the market, but not when an oligopoly exists, which often only offers the illusion of choice under different brand names. The regulatory bodies have no elected positions and thus no accountability to the public. The public can elect new officials who hopefully appoint new officials to the regulatory entities, but the politicians put forth are only two flavors of the same pro-corporate regime. The media, which is deeply entangled with politicians and their will, degrades every third-party or outsider candidate at every chance they get to ensure the public never sees anything else. So even if the party at the top changes, it is still the party setting the tone, mostly, and they are funded to huge extents by all the largest corporations; and thus we have the inmates running the regulatory asylum.
Direct election of heads of regulatory bodies seems like a decent solution, but it could fall victim to the same issues as the major political parties. We could fight to get money out of politics, but with both sides benefiting from the current state of affairs, it seems impossible.
As far as I can tell, our hands are tied. I’d love for someone to tell me I’m wrong, and that it isn’t the world of multinational companies, which we just happen to live in.
It would make sense that policy has to constantly be evolving in a free market.
someone who is good at the economy please help me budget this. my family is dying
Infamous example are leveraged buyouts, i.e. finance the takeover of a company by putting the company in debt. I think Twitter was an LBO.
Scenario 2 - Decisions are made by people shouting at each other.
Scenario 3 - Decisions involve a big review of some successful energy grids in other countries and starting with one that works really well as a baseline.
A big shouting match to decide what a successful energy grid looks like is a good idea. But fixed infrastructure is long-lasting and hard to replace - it would make sense to make the decision rationally rather than making political guesses at what might or might not work.
A good example is when people say "look how bad private healthcare is in the US!". Yeah, it's horrible because of the framework the government put around it. If you look at things like vision correction or plastic surgery, you have none of the problem you have in typical private health coverage - surprise billing, inflated costs, etc, etc.
But my favourite example of trains done right is Japan, and to my surprise, their expansive rail network is dozens of private companies. It turned a lot of my assumptions upside down.
I still don't think we should privatise core rail infra, but obviously it can be done right. So we can at least try to do that.
My impression is that in Japan, there are social repercussions for people who work for a company that acts against society. Which is why we see public apologies from executives when things go wrong.
On the other hand, your ability to fuck over wider society seems to be a point of pride in many western countries. See the various scandals in the UK over COVID contracts, or PPP fraud in the US.
I'd like to see proper consequences for those people, of the kind that gave us the term Boycott at the very least.
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 semiconductor plants.
I'm not in the UK, but searching for what those is Britain and Scotland pay for combined water and sewage annually I found claims of an average of around £410 and £320, respectively.
If you look around at the British state it's very clear to see, the issue isn't whether X Y Z is private, the issue is the state spent 2010-2020 systematically ensuring the state was incapable of acheiving anything. And then decided in 2016 that they were going to repatriate a tonne of regulatory power from the EU. The result is a state that's got a lot to do, and no way of actually doing any of it.
Also, according to Wikipedia, the largest shareholder for Thames Water is a Canadian public pension fund, so it is at least partially public, just owned by another country.
One of the things it made sense to privatise was transportation. If you have some sort of disability you can apply for public help for various things. This can be the elderly going to play bingo, it can be parents of a disabled child getting a taxi service to and from school, and a range of other things. The financial “issue” is that it’s rather expensive to have a car park and drivers on staff, and it’s an area where some years you’ll need a lot of drivers and cars and other years you’ll need almost none. There is also a “scheduling” thing where you’re most likely going to need a lot of drivers/cars in “rush hours” and then none the rest of the time. For a range of reasons, the public needs mix very well with the private needs for taxi services. You and I will need a taxi on weekend evenings and the city will need a taxi when you and I are at work. On paper this is a very nice match. Especially in the rural cities where you can also help subsidise the taxi companies.
Here is where it gets expensive. Because taxi companies come and go. It’s hard to make money in that business, and it’s also sort of “easy” to get into it because at its most basic all you need is 1 car and 1 driver. Yes, it’s much more complicated with the various licensing and so on, but you get the point. What the city would do is to buy yearly contracts from companies. Sometimes many different companies, which would add a little to the bureaucratic “burden” but not much, and if things ran smoothly then it would be a massive win for everyone. But things don’t run smoothly. Sometimes a taxi company is going to bankrupt, and sometimes this can happen with very little warning. But you still have to get your citizens to where they need to go. In the perfect world, you would call a different taxi company and have them take over. But in the real world, there isn’t a different taxi company with available rides, because why would there be? In our bigger cities, sure, you can do this, but in around 90 of our 98 municipalities you can’t. So now you’re looking to have a 100 citizens driven around to things they can’t miss. Some things like the weekly bingo can be cancelled, but doctors appointments can’t. And the only option you’re left with is often going to be to reach out to one of the larger taxi companies in one of those 8 municipalities that don’t have your issues. Which is expensive. Sometimes it’s so expensive that a whole decades worth of savings and local investments go up in smoke compared to having just run a public car fleet.
Like I said in the beginning, it’s a hard nut to crack. Because politics aren’t going to operate on a modus where it expects things that look good to fail. Maybe someone can argue that it should, but it won’t. Because we don’t. You and I are going to look at the business case and want our cities to work with the taxi companies. Not only to be able to use public funding smarter but also because we will want to have a taxi service. We may even know a person who runs or works in the local taxi service and will want to support them. So the fix isn’t going to be to stop privatisation. At least not in all cases. I’m personally still not sold on why our waterworks should ever be privatised. But for some things, it’s just always going to make sense. So what can we do? You can’t buy insurance, and unless the companies in your area happen to be well managed and capable of producing stable profits, then you’re likely always going to sit with a situation where the best intentions turned out to be part of the road to hell?
The bondholders/lenders lose 100% and shareholders lose 100% of equity, but have likely received huge dividends already.
Entity goes back to being public.
Lesson learned.
They have allowed the balance sheets to become untenable, now they lose their capital. PE has sold to the next fool - but more fool them.
The debt holders are going to have to take a haircut as well, again this is a hard but fair lesson from the pages of capitalism.
Privatisation means, "you that don't give a fc... take care of that problem for me"
Though I don't know if that was because there was a huge boom of Internet access around that time, and telephony prices would have dropped anyway, or if that was one of the examples where it did work, inherently.
Railways were privatised because government couldn't afford the investment required. But because of rail unions I'm currently subsidising rail travel I don't use.
Energy market competition has been destroyed by price controls (thanks Mrs May).
I can't read all the article because of the paywall. Nothing on archive.org yet. Maybe these points have already been addressed.