7 ms·

I'm just not convinced that privatisation of natural monopolies is ever sensible. Especially when failure isn't option, you can't just stop the trains running b

I'm just not convinced that privatisation of natural monopolies is ever sensible. Especially when failure isn't option, you can't just stop the trains running because some operator spent all of their budget on executive bonuses. It's privatised profits and public liability.

skippyboxedhero 10mo ago
You can see that it is highly effective even within the UK. Ofgem publish components of the energy price, of the average annual cost of £1300 I recall that profit was £40. Government subsidies are now £200-300 and are growing (I believe I read a story the other day that said that if the wholesale cost of energy fell to zero over the next few years, the cost of energy would not fall...that is how expensive the government's corporate subsidies to high-cost suppliers is...for some reason, no-one talks about this). If you compare to the 70s when the government was throwing cash at these industries (largely because of the political incentives), it is unbelievable how low costs are. The problem is that the political intervention has been very bad, the public liability comes from bad regulation (which was just as true in the 70s). For example, in energy the regulator has encouraged operators, like Tomato Energy the most recent failure, who are very clearly not operating in a financially sustainable way. If you look at who works for regulators (and look at what they get up to outside of regulation, in other parts of government), I am not sure how you can conclude that it could ever be any other way. We are paying for people who are largely unemployable outside of government to attempt to govern companies that are responsible for powering the whole of the country. Why does anyone think is wise? Another example mentioned in the OP is retaining much in public ownership and then privatizing ROSCOs...it isn't just this is a bad idea, it is so clearly a bad idea that it is unclear who could have thought this is a bad idea. Again, this happened because of very ineffective regulation/political leadership. Finally, what profits? One of the issues with most regulated industries is that the profits are very low because of the politics (for some reason, people think that public ownership will fix this...rather than make it much worse...we don't need to imagine, the UK has tried this several times, it has failed every time but the politics mean that there is no option but to keep trying it). The result has led companies to do things that are not wise because, otherwise, investors will pull capital. If you read any article about this is any paper in the UK, you would assume that the profits on offer in these industries are wild...they are not, share prices are collapsing, the reason why the government is taking over rail operating companies is because they are going bust, there is massive demand destruction in almost all of these areas because prices are sky-high, profits are non-existent, demand is being destroyed, and no-one wants to deal with the lack of supply because it would require admitting that the world isn't divided into Monopoly Man and a Victorian urchin. There are countries that have made it work but the UK will never be one of them because of the political environment (significantly more raucous than the European style of managed democracy).
ndsipa_pomu 10mo ago
England's water companies are a classic example of why you don't want a natural monopoly to be privatised.
- KaiserPro 10mo ago
  Yes, and the way that they were privatised was markedly different to the railways. The failure point was subtly different (regulatory capture and incorrect powers to say "fuck off thats fraud") I think the issue is that there you need infra to be at arms length, so that they can make long term decisions free of political interference. (for example can you imagine the noise if "rates" went up by as much as the water bills went up to fund the modernisation of the water system?) But if you're at arms length, how can you have enough oversite to correct for regulatory capture (ofwat) or failure to build future proof infrastructure (defra). That requires industry experts, who are in government and are trusted to advise. It also require politicians who are willing to take such advice and evangelise it to a skeptical public.

skippyboxedhero 10mo ago

You can see that it is highly effective even within the UK. Ofgem publish components of the energy price, of the average annual cost of £1300 I recall that profit was £40. Government subsidies are now £200-300 and are growing (I believe I read a story the other day that said that if the wholesale cost of energy fell to zero over the next few years, the cost of energy would not fall...that is how expensive the government's corporate subsidies to high-cost suppliers is...for some reason, no-one talks about this). If you compare to the 70s when the government was throwing cash at these industries (largely because of the political incentives), it is unbelievable how low costs are. The problem is that the political intervention has been very bad, the public liability comes from bad regulation (which was just as true in the 70s). For example, in energy the regulator has encouraged operators, like Tomato Energy the most recent failure, who are very clearly not operating in a financially sustainable way. If you look at who works for regulators (and look at what they get up to outside of regulation, in other parts of government), I am not sure how you can conclude that it could ever be any other way. We are paying for people who are largely unemployable outside of government to attempt to govern companies that are responsible for powering the whole of the country. Why does anyone think is wise? Another example mentioned in the OP is retaining much in public ownership and then privatizing ROSCOs...it isn't just this is a bad idea, it is so clearly a bad idea that it is unclear who could have thought this is a bad idea. Again, this happened because of very ineffective regulation/political leadership. Finally, what profits? One of the issues with most regulated industries is that the profits are very low because of the politics (for some reason, people think that public ownership will fix this...rather than make it much worse...we don't need to imagine, the UK has tried this several times, it has failed every time but the politics mean that there is no option but to keep trying it). The result has led companies to do things that are not wise because, otherwise, investors will pull capital. If you read any article about this is any paper in the UK, you would assume that the profits on offer in these industries are wild...they are not, share prices are collapsing, the reason why the government is taking over rail operating companies is because they are going bust, there is massive demand destruction in almost all of these areas because prices are sky-high, profits are non-existent, demand is being destroyed, and no-one wants to deal with the lack of supply because it would require admitting that the world isn't divided into Monopoly Man and a Victorian urchin. There are countries that have made it work but the UK will never be one of them because of the political environment (significantly more raucous than the European style of managed democracy).

ndsipa_pomu 10mo ago

England's water companies are a classic example of why you don't want a natural monopoly to be privatised.

KaiserPro 10mo ago
Yes, and the way that they were privatised was markedly different to the railways. The failure point was subtly different (regulatory capture and incorrect powers to say "fuck off thats fraud") I think the issue is that there you need infra to be at arms length, so that they can make long term decisions free of political interference. (for example can you imagine the noise if "rates" went up by as much as the water bills went up to fund the modernisation of the water system?) But if you're at arms length, how can you have enough oversite to correct for regulatory capture (ofwat) or failure to build future proof infrastructure (defra). That requires industry experts, who are in government and are trusted to advise. It also require politicians who are willing to take such advice and evangelise it to a skeptical public.