12 ms·
Privatisation has been a costly failure in Britain
- juanani 3y ago[dead]
- pharmakom 3y agoChoice is a necessary condition for free markets. There is little to no choice in water, roads, phone lines, rail transport, etc. I still don't understand why the UK went down this path.
- cmrdporcupine 3y agoAlmost the entire western world did, starting in the early 90s, and those of us who tried to stop it at the time were derided as clueless naive economic illiterates (and still are.) 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?
- emptyfile 3y agoNo, the west didn't "push" eastern European kleptocrats into stealing everything in the privatisation drives, they didn't need any outside encouraging. Its really disconcerning how many people simply assume that small nations have no agency whatsoever. It's this kind of thinking that births ideas about Russian/American zones of influence around Europe and similar very dangerous antiquated nonsense. It need to die.
- mantas 3y agoOh, we did get (and still do get) lots of „consultants“ from West advising us to privatise all the things. Some paid by West governments, some paid by private funds (= big businesses). As for zones of influence... It is very real. That's why we jumped into NATO at first opportunity. A lot of companies were privatised looking for capital from, e.g., specifically USA, to make sure they have more interest in our survival. And any Russian investment is seen as a possible risk.
- krapp 3y ago>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.
- bell-cot 3y ago> I still don't understand... https://en.wikipedia.org/wiki/Thatcherism https://en.wikipedia.org/wiki/Thatcherism Or talk to a few older folks about Britain in the 1970's and 1980's.
- refurb 3y agoThe UK was going into the dumps before Thatcher even came along. That's why she was elected. I couldn't imagine how bad it would be if Labour hadn't been kicked out and the far-left economic approach hadn't been abandoned.
- bell-cot 3y agoTrue-ish. But "2 + 2 = 3 is false" is not an argument for "2 + 2 = 5 is true". (FWIW - I've seen arguments, in a broad range of periodicals, to the effect that the current generation of British politicians - if not the entire British ruling class - are dysfunctional sh*t, and the UK's future looks pretty bleak.)
- gadders 3y agoI think people don't remember what services were like in those days - the weeks you'd wait for a phone installation etc.
- odiroot 3y agoTrue for the railways, not sure about the rest.
- jablala 3y agoGood ol', "Know the cost of everything, but the value of nothing".
- dazc 3y agoPublic utility companies were operating very inefficiently at the time, the motives behind privation obviously had a political element but there was some good intention behind it. In hindsight, much stricter regulation regarding reinvestment of profits would have been a good idea.
- xmcqdpt2 3y agoThe thing is, by the time you have made the regulation strict enough to avoid any and all tricks Goldman-Sachs and friends can come up with, you've basically nationalized the companies.
- lucraft 3y agoOne reason was to increase investment. In water's case the infrastructure had been under-invested in under public ownership for decades, due to it always being a low priority from a political point of view. The regulatory structure of the privatized industry says the water companies can only make profits if they make capital investments, and so the amount invested in water infrastructure in the UK (particularly 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.
- swores 3y ago> One reason was to increase investment. That's such a ridiculous argument though. Privatisation increasing investment means one of two things, either the investors are getting ripped off or they're going to get a profitable return on their investment. Assuming no government would admit to the first and no investor would intentionally invest in the first, let's assume the second is the plan. In which case, if the investment will yield profits, there's no reason the government shouldn't make the investment themselves so that the public get the profits (as well as the benefits from increased investment at the start).
- Vinnl 3y ago> The practice of loading a company with debt to distribute cash to shareholders and managers 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?
- WentFullRetard 3y ago[dead]
- Claude_Shannon 3y agoArticle like this seems weird from Economist. Isn't it the free market magazine?
- narven 3y agoThere's been only a couple of "privatisations" in entire world, that actually resulted in some benefits. Privatisation means, "you that don't give a fc... take care of that problem for me"
- perlgeek 3y agoFrom my user's perspective, it seems that privatization of Germany's phone and Internet market has worked pretty well, and lowered prices all around. 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.
- rini17 3y agoBecause your telecom regulator has teeth and there's competition? When German T-Com bought Slovak Telecom monopoly they continued just like that. Forced old ISDN tech on everyone for high prices (probably to clear out stockpiles) and suppressed DSL for a few years, till some last mile access for competition was required by law. BTW was in Germany myself many times and it's surprising how bad coverage there's outside city centers.
- itsthejb 3y agoFunnily enough, in my experience Germany has the same (actually seemingly worse) issue as the UK; many people have poor home internet speeds due to the fact that the local (copper?) legacy infrastructure is privately owned by DT/BT, and there is little to no incentive to have that upgraded
- calessian 3y agoLTE/5G data is extremely expensive in Germany compared to essentially everywhere else in the EU. Here’sa comparison what 30 EUR per month for you in terms of LTE data volume in 2016, and I don’t think there’s any real contracts with unlimited volume available for 30 EUR still: https://imgur.com/NXu0ZoP https://imgur.com/NXu0ZoP Getting a contract for unlimited data with the German Telekom costs 85 EUR/mo currently, while it would cost 35 EUR on t-mobile.nl
- chaosite 3y agohttps://archive.is/mnZlZ https://archive.is/mnZlZ
- kykeonaut 3y agoThank you :)
- smcl 3y ago> Since then the sector has accumulated £53bn in debt while distributing £72bn to shareholders, the majority of whom are international investors someone who is good at the economy please help me budget this. my family is dying
- onion2k 3y agoStop buying candles.
- maxboone 3y agoIt's been a while, but iirc you increase leverage of a company (by putting the company in debt) to be able to deduct taxes using tax shields on the interest. 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.
- tibbydudeza 3y agoRepayment of the loans of a billion USD per year afaik.
- smcl 3y agoWell it kind of demonstrates the problem here. They've taken on an enormous amount of debt, slashed essential maintenance and paid out a ridiculous amount of dividends. To be able to do this prices have skyrocketed across the board. What you're describing just sounds like a clever little tax dodge - to shuffle things around so that you can do a bit more with less for a period. But what consumers are actually seeing is a decline in service for an increase in prices, that's the opposite.
- tnel77 3y agoWhen profit becomes the main motivator, quality of services always seem to drop. I get that the government can be annoying, but I feel like there are many services that we should aim to provide as a society where profit isn’t the goal. For example, you don’t need to price gouge people for electricity, but charging enough to cover expenses and future infrastructure upgrades is fine and to be expected. No costly CEO or shareholder overhead thrown in there.
- PartiallyTyped 3y agoAdd education to that too. It should be pretty obvious to everyone that quality education is a matter of national security but here we are, with people proudly uneducated, who - in their wilful ignorance - harm others. Thank you to everyone who flagged me and now I can't respond or comment in this thread <3
- brutusborn 3y agoI think education is actually case where the free market would solve a lot of issues. Making schools compete for students would incentivise schools to provide a more valuable education.
- jamil7 3y agoYou end up pricing people out of the best possible education unless you regulate heavily, at which point you may as well have state-run education.
- em500 3y agoAs opposed to state run education where the best possible education is available to everybody? Is that what we see in public education?
- eertami 3y agoWe do see this in Switzerland, Finland, etc. But this is due to a competent Department of Education, which simply doesn't exist in the UK. Infact the UK DoE isn't even just incompetent - it is quite clearly maliciously sabotaging education, there is no other logical conclusion for the farcical policies that are in use.
- rob74 3y agoThe Economist, publishing an article (even just an opinion piece by a guest author) about privatisation being a failure? Wow...
- fsloth 3y agoThe Economist holds to it's guns, until it's proven 100% the other side of the argument in fact is correct. After which they change tack. It's not only value but ALSO data driven publication. Although it's in some positions ridiculously conservative, it's also an excellent bellweather on the current 'accepted norms' in discussions on "macro scale economy stuff". 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.
- pydry 3y agoThe failures of this one have become a bit too obvious to deny. 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.
- rado 3y agoExactly LOL
- mnd999 3y agoIt’s reached the point where it’s not credible to say otherwise. That doesn’t seem to stop the government though.
- Borrible 3y agoSurely no one wants to pass on future costs to the general public after the cream has been skimmed off.
- lebski88 3y agoThey had an article by Michael Howard last week about it being a success: https://www.economist.com/by-invitation/2023/07/06/thames-water-may-be-troubled-but-privatisation-has-served-britain-well-argues-michael-howard 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.
- wolframhempel 3y agoI am a deep believer in free markets as the most efficient mechanism for distributing goods and services, creating better offerings and lower prices through competition and encapsulating risk in innovation. Unfortunately, none of these apply to the privatization of inherently public commodities that run on top of an underlying network infrastructure. This can be streets, railway tracks or water pipes - whenever there’s a shared, standardized network that needs to be maintained by all market participants a lot of the mechanisms that make privatization appealing don’t apply anymore and you basically end up with the same tragedy of the commons only in private hands. I believe the best way to make this work is by keeping the network itself in public hands and then having a competition of contributors to the network - e.g. electricity providers that add energy to the grid.
- juujian 3y agoIt's even simpler than that. All of these privatized entities are incredibly efficient... at extracting profits from the public. Of course their goal is to extract profits. And you don't extract profits from a rail line by offering the best service. Bonus points if you can convince the government to bail you out and provide some extra cash.
- mrfumier 3y ago"And you don't extract profits from a rail line by offering the best service." So how do you extract profits then?
- aloisdg 3y agoYou don't.
- notahacker 3y agoBy raising the prices of your local monopoly to the yield-maximizing level whilst cutting overheads as much as possible.
- waldothedog 3y ago
- spiralpolitik 3y agoThe intention of privatization in the UK was never to improve service. It was to transfer wealth from the public to the private sector. From this perspective it's been successful. From the perspective of the British public it's been a complete disaster.
- boomskats 3y agoFortunately, largely owing to our free press, the British public has now learned their lesson and such unfortunate situations will almost certainly be avoided in future. Especially when it comes to our healthcare system.
- quickthrower2 3y agoI can’t make out the implied /s because it is too big to fit on my 4k monitor
- deleted 3y ago[deleted]
- PartiallyTyped 3y agoLooking forward to the same happening in Greece :')
- bowsamic 3y agoYes, and the conservatives have been clear on this from the beginning. I remember watching Question Time a decade ago when I was turning 18 and people obviously asked about austerity and the conservatives response was not "we need to stop spending in order to help the economy which will then help poor people", it was "the goal of our government is simply to grow the private sector". Thatcher even said that the eventual goal of the UK was for all the labour to be highly skilled. The vision is a nation of software devs, engineers, financiers, lawyers, and managers driving their car to work or paying whatever for the expensive train ticket. We even have a pipeline that takes you directly from university graduation to these high end jobs. These jobs then re-educate you with their own bespoke courses. Basically, the point of austerity was always to try and starve all of the public aspects of the country. It is almost all by design.
- Lockyy 3y agoIs this surprising? People have been crying out about the effects of privatisation for years. When basic services mandatory for modern human life like water, ISPs and energy are privatised you end up with funds that could end up going towards investment or towards funding other public services are instead funnelled out towards shareholders. 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
- Vaslo 3y agoISPs are not mandatory for human life.
- Lockyy 3y agoI didn't say human life, I said modern human life. At this point, and especially considering the recent pandemic and the lockdowns that lead to large swathes of the public having to work from home, internet connections are a non-optional component of participation in society. Especially as more and more services go digital only, for example bank branches closing in favour of online only services. However, you're right that ISPs aren't the right target, open infrastructure for the network to operate on is closer to what I meant.
- jacquesm 3y agoNo, but internet access is a requirement for many mandatory interactions with the government and various service providers so even if you can breathe without internet access you're going to be doing so from a cardboard box. Unless you want to lead a normal life you are not able to live without internet access in many developed countries. Bit by bit all alternative pathways to interact with parties that you have to interact with are phased out.
- spiralpolitik 3y ago
- tibbydudeza 3y agoWe have state enterprises, and they are all colossal failures today because it is so easy to hide corruption when the books is not open and they don't have to answer to shareholders. State owned enterprises are fine if something needs massive capital investment to start off and nobody has the resources but there must be a plan for the state to disinvest. Then again I prefer subsidies like the US does for semiconductor plants.
- mnd999 3y agoSo legislate for transparency, why shouldn’t state owned companies be subject to the same rules as public companies?
- tibbydudeza 3y agoPublic sector companies are audited by a state institution and the reports are tabled in Parliament where the oversight committees are majority controlled by the corrupt ruling party. Members of said committees are usually clueless about financial affairs. State = useless
- LatteLazy 3y agoThe real issue here is that privatisation was and is a political football instead of a practical policy. 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...
- mnd999 3y agoJust to keep jobs? No. To ensure resiliency of supply? maybe. Probably moot as this point though since we should be getting away from coal anyway.
- tialaramex 3y agoSure, Margaret Thatcher accidentally did us a favour by killing the coal unions. But just in case you thought "Good, no more coal" the Tories actually authorised a brand new coal mine not so long ago, because sure, it's a terrible idea but it will make somebody wealthy and as we see here, their priority is to make the wealthiest people even wealthier.
- mnd999 3y agoThe new coal mine is actually a green energy scheme. They plan to attach a dynamo to Maggies corpse - the expectation is it will be spinning pretty rapidly in her grave.
- CrzyLngPwd 3y agoEveryone in the UK with a utility bill or that uses a train has known this for decades.
- Wildgoose 3y agoIt's actually even worse than this - in the case of Water, the original water companies were built by local government providing clean water to their own residents and paid for by long-term loans. First, the Labour Party nationalised the local water companies with no recompense to repay the local government debts. Then, the Conservative Party sold off the "nationalised" water companies, but kept the money raised rather than handing it back to local government. 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.
- SilverBirch 3y agoI think it's kind of a mistake to focus too much on the principles of this story than on the execution. Sure, we can make arguments about how it should be more efficient to run water privately because of a profit motive, or how it's a natural monopoly. But if you look at the details the claim is very simple - that the water companies charged high prices, didn't invest and paid out huge dividends. Well there's a simple answer to that: we have a regulator who can control that. It's very simple. The government didn't go "Here private enterprise, have a monopoly! Off you go!". The key here is that whilst private enterprise might be more efficient at acheiving it's goals than government enterprise, but that becomes a problem when it's goal is finding ways to screw money out of people despite the regulator. 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.
- anonymousDan 3y agoBut this is the fundamental problem with the way these privatisation deals are structured. If it relies on a strong regulator to make it work, then as soon as a 'red-tape' cutting government comes in that is being lobbied hard enough the whole thing breaks down.
- SilverBirch 3y agoExactly the same problem with public ownership though - as we've seen. All it takes is one libertarian or corrupt government to sell of whatever it is into the private sector and once it's gone it's practically impossible to ever buy back.
- devjab 3y agoWhen I worked in a medium sized municipality in Denmark I was exposed to a lot of cases where good intentioned privatisation ended up being very expensive. I don’t have a good solution in mind, and I’m not for or against private and public services as a general rule, so you should read this as more of an insight into some of the issues you face with these things. 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?
- jacquesm 3y agoI love the free market. But when it comes to education, health care, public transport, utilities, law enforcement + associated services I've yet to see even a single example of where the free market made things better for the public. As a rule after privatization prices go up, the service level drops and people suffer as a consequence whilst being given a fake increase in choice. This is one of the big failures of the last 30 years and can't wait to see it rolled back.
- ilikerashers 3y agoWould love to see that happen but no government can stop that train now. Too much money is required and they can't just seize the assets.
- auggierose 3y ago> Too much money is required and they can't just seize the assets. But they can. That's why they are the government.
- ilikerashers 3y agoAre there any examples in modern economies? I know banks were temporarily nationalised but that wasn't a long-term plan.
- jacquesm 3y agoAbsolutely. Recently lots of Russian assets got nationalized in Germany on account of German national security in light of the energy crisis and the war with Ukraine. In NL we nationalized a bank (SNS bank) that failed, and one that would have failed (ABN). In Japan, in the wake of the Fukushima disaster there was an energy company nationalized. The USA (though they don't like to call it that) nationalized a bunch of stuff in the wake of the financial crisis.
- ilikerashers 3y ago
- deleted 3y ago[deleted]
- kome 3y agoYou need competition to create a market. You cannot have competition on a natural monopoly. You can create the simulacrum of a market (that was the EU and UK approach), but you cannot create a real market. It's better to keep water, streets and telecommunications public. Privatizing them is a waste of resources.
- lushy-typeable 3y agoFrom my standpoint its obvious privatisation has been a failure for service quality, and I am glad that major institutions are finally catching on. In spite of attempts to introduce choice (see the way British Rail was privatised into rolling stock owners/operators, since scrapped railway operators, and brands) there is no efficient way to introduce choice with fixed infrastructure. 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).
- sanxiyn 3y agoI think competition driven by low-cost carriers produced enormous value by lowering fares. From my admittedly uninformed viewpoint, I am not sure why airlines market can produce competition benefiting customers and rail market can't.
- lushy-typeable 3y agoWith airlines, it is comparatively easy to just plot a new route between a new destination (given that there is an airport). The airports also tend to be in popular areas where there is enough demand. Air routes are also generally not essential forms of transport (where they are, such as Alaska, US or remote islands in Scotland, they tend to be very subsidised). The airplane is often the superior option for the cost and time too, over rail or car. The train is the opposite of all of this. The people that can afford it, are able to get a car and drive there at little perceived expense and better flexibility (people don't often factor in the cost of the car, road, road maintenance, MOT, road tax, repairs to their journey). So public transport ends up being for those who cannot afford it, or is convenient enough for. Not all routes in the UK are profitable. Closing unprofitable routes is unpopular with constituents, and disrupting and isolating if the residents do not have the financial means to get a car, causing social incohesion. So to balance this out, companies had to have both unprofitable and profitable routes balance out, in the hope that they will find more efficiencies than being state run. Existing routes are also very difficult to shut down in the UK. Keep in mind, budget airlines pioneered enshittification because there are few equally convenient alternatives. RyanAir infamously charges for everything. In principle this seems fine (pay for what you use), but then the poor UX hits. In some airport, if your suitcase wheel sticks out 2cm - you get a bill for £50. It costs £4-10 to sit with your friends. What also is working is that the budget airlines have not yet colluded to only run certain routes, and older, premium alternatives still exist. Once the old airlines either change or go out of business, and the companies start colluding, it will be high-cost, unpleasant stagnation.
- Gareth321 3y agoThis is really an eternal debate because both public and privatised services fail in numerous and various ways. The answer is a hybrid model, but because of complexity, there are always examples of failure to point at. So we’re doomed to swing between these models forever.
- Puts 3y agoNo there is a middle ground called socialism.
- Gareth321 3y agoDo you mean socialism or democratic socialism? They're very different and people tend to use the terms interchangeably. Socialism is an authoritarian system of social control which requires that the means of production, distribution, and exchange be owned or regulated by the community as a whole. Democratic socialism is, in effect, restrictions on free markets and democratic control over tax redistribution. Most Western nations (arguably all of them), including the U.S., are democratic socialist nations. Socialist nations have a long and sordid history of failing at managing public infrastructure, so I assume you're not referring to socialism, but democratic socialism. If so, the distinction doesn't help us here. We still need to figure out the right balance of control and independence.
- 0xDEF 3y agoDemocratic socialism is socialism. My country (Denmark) is social democratic which has nothing to do with socialism. Tired of Americans calling this place "socialist" like we are Cuba.
- Puts 3y agoI think to Europeans – especially Germany, France, Scandinavia… socialism refers to what you call Democratic socialism. Wheres the far ends of the spectrum are Communism vs Capitalism. I think this actually used to be a very natural distinction although the Neo-liberal movement have done a good job to paint out any form of socialism to be equal to Communism.
- refurb 3y agoI think it's funny when people lump all privatization other. Yeah, it can be done poorly, but I would argue that's more implementation than some condemnation of privatization all together. 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.
- supertimor 3y agoThe major difference in you’re example is that plastic surgery and vision correction are elective procedures. When your choice is eating the cost of an inflated procedure or permanent disability/death, it’s really not much of a choice at all. Most people will opt to pay outrageous prices rather than the alternative. Privatization may work for non-essentials, but when essential public services are privatized, it needs heavy regulation (which, in itself, is not a permanent solution as it is subject to lobbying and regulatory rollbacks). Without strict regulations that are lasting, a company has little incentive to keep reinvesting in itself/improving its services when it has a captive customer base that is rooted on a basic human need. Essentially, the public has little choice but to use the privatized company’s costly but increasingly broken services.
- refurb 3y ago80% of all medical procedures are elective. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8542497/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8542497/
- supertimor 3y agoApologies. I meant cosmetic or optional surgeries (which is what you originally referenced). Elective surgery just means that it is scheduled in advance, not that it is a trivial or unnecessary procedure. Elective surgery covers everything from cosmetic surgery to non-emergency procedures like mastectomies. But I’m not sure what point you’re trying to make here. Many medical procedures are necessary even if not urgent, and healthcare costs in a privatized system like the US are astronomical. Emergency procedures and life-sustaining medications like insulin, that cost a fraction of the price in other nations, are bankrupt-worthy events in America. And people have no choice but to pay it. People’s health are being held hostage by these companies. The number one priority of a functioning healthcare system should be the care of their customers, which is antithetical to a company’s priority of delivering value to shareholders and executives. And when your product is a basic essential and you have a captive customer base, it’s really easy to make huge profits by cutting costs and jacking up prices because you’re customers have no other options. Most nations care about the health of it’s citizens, hence why every single developed nation has some form or other of universal healthcare. Because a healthy population makes a robust workforce and actually substantially reduces healthcare spending by the government.
- roenxi 3y agoScenario 1 - Decisions are based on the opinion of Mathew Lawrence and, by proxy, the editors at the economist.com. 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.
- andy_ppp 3y agoI find it astonishing Thames water were allowed to rack up billions in debt while paying huge dividends and compensation packages and they are about to go bankrupt.
- tonyedgecombe 3y agoI don't see a problem with them going bankrupt. Shareholders would get wiped out and debtors would go to the back of the queue. The administrator would run it until new investors were found. If they can't find investors then that is a reasonable justification for nationalising it on the cheap.
- gonzo41 3y agoI'll say the quiet part outloud. It doesn't work. Military, Health, Social Services, Justice, Power Generation, and Regualtion are all things that at their core function should be done by the state at a cost to taxpayers (in a progressive way). The private sector can make widgets and sell junk, as long as they can do it without harming people. 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.
- somsak2 3y agoFINRA works pretty well
- ricardo81 3y agoBT (British Telecom) is perhaps a good example of where a UK company could have succeeded (more), but this quasi-privatisation-yet-public-commodity thing has held them back. 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.
- stoobs 3y agoCritical national infrastructure should never have been placed in private hands, their only interest lies in minimising expenditure and maximising profits for either themselves via nice bonuses, or to the shareholders. It's never been about delivering the best service to the customer for the most reasonable cost. 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.
- lhnz 3y agoThe UK is increasingly resembling the rest of the world's rentpig. The UK government has made Britain into one massive investment vehicle for foreign capital -- our utilities, leading firms, football teams, landmarks and property all serve to enrich sovereign wealth funds in the Middle East and Asia. These foreign investors have all received lavish incentives and grants, and in return we have been allowed to live way beyond our means for decades. 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. [0] https://i.imgur.com/dxK3pUB.png https://i.imgur.com/dxK3pUB.png [1] https://i.imgur.com/SV909oB.jpg https://i.imgur.com/SV909oB.jpg
- fnikacevic 3y agoIt's voluntary colonization.* * The volunteers being a limited group of decision makers.
- 3y ago
- sgt101 3y agoLook, the shareholders in water companies need to be wiped out. 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.
- oliwarner 3y agoOne of the [many] problems with privatisation-by-tender is that the public provider doesn't compete. And they can't compete because they can't commit budgets up to y10. 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.
- deleted 3y ago[deleted]
- FL33TW00D 3y agoIt's clear that Britain is degrading fast. Is there anywhere english speaking, open to immigration and actually improving?
- lumb63 3y agoMany comments here say the key to maintaining a fair free market economy is regulation. I’m curious how that works for other countries. From a US perspective, regulation is next to useless. 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.
- asimpletune 3y agoI guess you just keep trying, but learn from past mistakes. It would make sense that policy has to constantly be evolving in a free market.
- avar 3y agoThe article asserts that water bills have gone up 360% in Britain since privatization, then that "bills are lower in Scotland, whose water company is government-owned". 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.
- deleted 3y ago[deleted]
- jollyllama 3y agoSomewhere, Tony Blair smiles.
- zouhair 3y agoPrivatization is a costly failure everywhere.
- ehnto 3y agoI always use train infrastructure as examples of infra that should remain public, as it's so essential for modern day cities. Privatisation seems to inevitably lead to service degradation and reduced utility, even corruption. 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.
- Jochim 3y ago> 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. 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.
- notpushkin 3y agohttps://archive.ph/nVc3W https://archive.ph/nVc3W
- noonething 3y agoBusiness's will have infinite money and time to influence Countries to eventually incorporate some form of privatization so they can make even more money. Were literally paying them to eventually screw us over.
- everdrive 3y agoA lot of folks seem to have a view which is as simple as “government is inefficient, and companies are efficient.” There is certainly _some_ truth to this statement, but it’s so simple as to be effectively meaningless. And such simple takes on this issue can lead to some pretty adverse and unintended effects.
- jmyeet 3y agoPrivatisation and everything that goes along with that (eg deregulation, "small government") is nothing more than a scheme to extract money from government to private corporations. There is a revolving door of politicians and civil servants who go from overseeing and enabling privatization to the industries they privatize. It's why Ajit Pai, former FCC Commissioner, now works for Verizon. 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.
- phemartin 3y agohttps://playtext.app/doc/cljyby0f30003l80fzff4fmx8 https://playtext.app/doc/cljyby0f30003l80fzff4fmx8
- thanatropism 3y agoI was a big proponent of privatization in my South American country and I'm reversing some of that position. But I still don't regret or recant the underlying theories that made me a proponent in first place. People are going all Ken Loach on this like this has been obvious all the time, but it wasn't; privatization arose as an approach to paralyzing problems (here, a phone number was an asset, like a car; you could rent it and there was an income tax law for that) and there's no outstanding alternative approach to address them. 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.
- schnable 3y agoShould be noted that this isn't an editorial from The Economist but an opinion piece from a contributor that was run side by side with a counterpoint: https://www.economist.com/by-invitation/2023/07/06/thames-water-may-be-troubled-but-privatisation-has-served-britain-well-argues-michael-howard https://www.economist.com/by-invitation/2023/07/06/thames-wa...
- efields 3y agoJust browsing the comments on this one, it struck me how users of this website, an incubator for new technologies and ostensibly private businesses, seems to not believe in the capacity of private businesses to provide the most socially-useful goods and services. 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?
- Jochim 3y ago> Just browsing the comments on this one, it struck me how users of this website, an incubator for new technologies and ostensibly private businesses, seems to not believe in the capacity of private businesses to provide the most socially-useful goods and services. 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.
- majani 3y agoMuch as this is the yc website, most of the commenters here are probably employees from deep blue states
- efields 3y agoGood point.
- kossTKR 3y agoI just want to chime in and say that most "free market" ideologies have been engineered, spread and astroturfed by the robber baron classes to siphon as much money from the many to the few while distracting everyone with tension and circus - so much that this fact is hard to even find in the anglosphere. 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.
- jmacd 3y agoCanada privatized our railways in the 1990s. While it created a hugely profitable company for shareholders, it has been a pestilence on Canadian society since. Canadians do benefit from a somewhat more efficient freight network, but overall we've seen an unsafe, poorly maintained, but highly efficiently run rail network. It is no longer possible for Canadian provinces or cities to make any effective use of 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.
- twobitshifter 3y agoAt the same time, private carriers are losing out to trucking because trucking doesn’t pay a fair cost for the use of roads and RRs have to pay to upkeep their tracks. In the end, it may have been better for them to be able to offload the infra costs. Due to this, they followed the model of minimizing infrastructure, equipment, and crew expenses which left them with slow service only good for a sliver of shipping. The freight RRs are efficient from a monetary cost standpoint but people are willing to pay more to get something quickly and they can’t compete on speed. If someone else owned the tracks, and leased capacity, the track owner would try to maximize the use of tracks and clear trains quicker and provide new services. We’d see the complete opposite effect, the return of passenger trains, improved signaling, and maybe even electrification.
- jcarrano 3y agoIf you wanted to asses the success of privatization based on observations alone, then you would need an alternate universe in which it did not occur. 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.
- asdajksah2123 3y agoPrivatization 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. 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.
- iamflimflam1 3y agoPrivatization 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. Can you give some examples?
- sdfghswe 3y agoI'm also very keen on this.
- philjohn 3y agoAbout the only "successful" privatisation in the UK was of telecoms. 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.
- skrebbel 3y agoI know of a Dutch waste processor that got privatized but the municipalities that the plant serviced stayed the majority shareholders. As far as I know (my source, its former boss, surely is biased) this worked very well. It was a for-profit company, could pay competitive salaries, people got bonuses etc if they out-innovated expectations, but the majority of the profit landed at the municipalities, which also meant that if it did profitable but shitty stuff, they’d get forced to course correct. 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
- RagnarD 3y agoIt's worth noting that partial privatisation isn't privatisation at all. Take a closer look at most so-called failures in this category and the half-assed situation generally becomes apparent. It'll be "private but one organization is given a government enforced monopoly" - or "private but price is fixed by government" - or "private but expansion is limited by government force". The list is endless.
- randomcarbloke 3y agoyes a divi recap of a utility is pretty shit but this opinion piece is a rare-miss from The Economist, Mathew Lawrence is not worth listening to, nor the deranged leftists in this comment section.
- fallingfrog 3y agoIt's only been a failure if you think the goal was to better serve the public. In terms of extracting money from people with no alternative, it's been a resounding success.
- chanana 3y agohttp://archive.today/nVc3W http://archive.today/nVc3W
- JohnFen 3y agoIt's rather hard to find examples of where privatization worked well. They exist, but they're the minority.
- dusted 3y agoWait, so you're saying that somehow, transferring the responsibility for a service from an organization who merely need to achieve net zero, to a for-profit organization is not going to result in a better service? Wow, who'd have thought.. </LiberalSocialistScarcasm>
- jarek83 3y agoOne good thing is that homeowners, don't really have to pay for water in the UK - it is not possible to cut off a non-paying customers. Also, once your water bill debt grows, the debt is sold to a collector company, that have little power in the UK, so you just need to ignore threatening mail and you'll be good. I've practiced it for 5 years, I'm not too proud of it, but the water bills were a crime in the other direction.
- pipes 3y agoWell I'm glad telecoms were privatised, we have great competition, I shop around every two years and end up with a great deal. Compare that to the early 80s waiting god knows how long for a phone line. 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.
- amai 3y agoMaybe counterintuitive privatisation of infrastructure often leads to inefficiencies in resource consumption. E.g instead of a single phone line for a house, multiple private provider will built multiple phone lines. Instead of a single cell phone tower every provider will build its own one. Instead of a single delivery car on the street there will be several (and are sometimes blocking each other). I believe a well managed monopoly is often more resource efficient and cheaper, because it doesn’t need to pay for all that redundant infrastructure.
- snthpy 3y agoGood display of integrity by the Economist to publish this given that economic libertarianism is their core tenet.
- dave333 3y agoSo privatized entity goes bust and has to be taken over by the government. 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.
- fennecfoxy 3y agoRegardless of what everyone thinks, the real situation on the ground is that companies like Thames Water have been siphoning off profits rather than using them to keep the infrastructure up to date/repaired. 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.