Question Privatization

[Killswitch]

Okay, I've puzzled over this in my head for a while (and on and off for like 20 years or so!) and I've never come up with a good answer, so I'm throwing it open to the FH hivemind;

Why and how would privatization ever lead to an improved outcome? People talk about free markets and competition driving down costs and so on and so forth, but how would that work in theory, let alone practice?

The Government is a single, not-for-profit entity. It has no shareholders, no dividends to pay, massive bargaining and bulk-purchasing powers. As the sole provider of a service it would be a strong force in the labour market, able to drive down wage levels. While there would be a large amount of red-tape involved, I would imagine a single large company has less overall red-tape than 20 small companies doing the same job.

I don't really want to argue politics or capitalism vs socialism, I'm just interested in the mechanics of how privatization provides a positive outcome for the country.

 

[Cerb]

The argument can be made (and I actually don't agree with complete privatization) that privatization leads to harder work and more innovation.

What you said is true, the government has no shareholders and doesn't work for profit but very often this works against it. There is a reason there are jokes about county council road workers slacking off. With no incentive to be really efficient because you do not have shareholders breathing down your neck, stagnation can and does easily occur. In essence it's like this, if you are in a job that pays you the same regardless of how well you perform, why try hard?

Just my two cents.

 

[Helme]

It's a sound idea in theory but it practice it won't work. Putting humans in a system where profits are what matters only leads to increased greed, and while innovation can happen it's more likely profits will be diverted to shareholders offshore accounts.

The same goes for maintenance, Sweden is a good example - instead of re-investing profits to maintain our railways after converting the rail company from state owned to private they squirrel them away and our trains have serious issues running during winter, or more recently electric companies price gouging their customers while reporting record incomes for the past year.

Greed simply put destroys any possible good intentions it might have, perhaps the best example of what happens if you let privatisation rule is the US, their healthcare is unavailable for 40 million of their population, and it will bankrupt most of the rest. Identical medical drugs drop 3-4 times in price just by crossing the border etc.

That is clearly not the free market driving prices down, rather the opposite with huge corporations buying out smaller ones to remove competition and keep prices high.

 

[ford prefect]

In general it doesn't, usually because one or two companies corner that particular market from the word go and charge pretty much what they please. A good example is Directory Enquiries. Ofcom decided that BT had a monopoly, and next thing you know people are being charged £1+ a minute for a service which at one point was free and then cost a standard charge of 45p.

The UK is littered with attempts at privitization which ultimately cost the consumer a lot more. A free market only works if the companies involved have a level playing fiedl - in such cases services usually start out very expensively and then come down slowly but steadily until they are very cheap, but with privitization the exact opposite is usually true.

 

[Wij]

Some good examples of when it doesn't work but there's also plenty of examples where state-run services don't work.

Different government departments are too busy fighting with each other and creating their own empires to co-ordinate purchasing. Usually it's all done on an ad-hoc basis.

Public services don't treat you like a customer because they know you have no alternative. I pay council tax to get my bins taken away. Do they treat me like a valued customer ? Do they fuckaz like. If I have a little bit of a plastic bag hanging out of the bin they refuse to take it. I can't give my money to another company to do it. They can take the piss.

Government departments aren't driven by teh demands of a general ledger and have no appreciation of the value of the money they are spending. Often they think it's perfectly right to have gold-plated service contracts with suppliers where there is no justification. They'll pay thousands a year to have a dedicated team of engineers on the end of a phone to support their printer pool when they could replace a printer with one from PC World EVERY DAY of the year for less money. It's not their money so they demand the best.

OP's reasons for why state-services should be better are all very valid in isolation but they ignore the fact that most humans are pricks, and if left unchecked by the cold prospect of bankrupcy or the sack, they will act like the pricks they are.

(must point out though that I still agree that many privatisations have been complete balls-ups.)

 

[Raven]

Public services don't treat you like a customer because they know you have no alternative. I pay council tax to get my bins taken away. Do they treat me like a valued customer ? Do they fuckaz like. If I have a little bit of a plastic bag hanging out of the bin they refuse to take it. I can't give my money to another company to do it. They can take the piss.

Its the same case for the trains though. That has nothing to do with whether something is private or state. If its a monopoly then the customer gets shat on. Despite there being (however many) train operators, on the whole they all give the same crap service because the customer has little or no choice in who takes them from A to B.

 

[tierk]

Its the biggest con /myth about privatisation. Every single one of them promised better services and lower prices, challenge anyone to show me which one of them provided either.

 

[DaGaffer]

Its the biggest con /myth about privatisation. Every single one of them promised better services and lower prices, challenge anyone to show me which one of them provided either.

Gas and Electricity. Airlines. Steel. Telephones. All have done both. BT is orders of magnitude cheaper than the old Post Office, and this has been reflected in the privatisation of pretty much every PTT in the world (it doesn't matter what you think of BT, the nationalised version was way worse). Ditto with airlines, all the flag carriers got better and cheaper after privatisation, or they failed and stopped costing their taxpayers money (why did taxpayers need a state airline anyway?). The most surprising is gas and electricity; it feels wrong somehow to privatise a "natural" monopoly, but in real terms, despite massively higher source energy prices than 20 years ago, its only in the last couple of years that home energy bills have gone up in real terms (as the efficiency and competition gains of privatisation were finally outstripped by the cost of oil, gas and coal).

There are lots of reasons to dislike privatisation; effects on labour, "fat cat" bosses, profiteering (although that's a failure of regulation, not the privatisation process itself), but its definitely a myth that it doesn't work at all.

 

[tierk]

Gas and Electricity. Airlines. Steel. Telephones. All have done both. BT is orders of magnitude cheaper than the old Post Office, and this has been reflected in the privatisation of pretty much every PTT in the world (it doesn't matter what you think of BT, the nationalised version was way worse). Ditto with airlines, all the flag carriers got better and cheaper after privatisation, or they failed and stopped costing their taxpayers money (why did taxpayers need a state airline anyway?). The most surprising is gas and electricity; it feels wrong somehow to privatise a "natural" monopoly, but in real terms, despite massively higher source energy prices than 20 years ago, its only in the last couple of years that home energy bills have gone up in real terms (as the efficiency and competition gains of privatisation were finally outstripped by the cost of oil, gas and coal).

There are lots of reasons to dislike privatisation; effects on labour, "fat cat" bosses, profiteering (although that's a failure of regulation, not the privatisation process itself), but its definitely a myth that it doesn't work at all.

I ahve to admit that in some opf the cases, it was a good move and yes they did offer improvements in service.

However, i still think that it was wrong and was done more for ideological reasons than what was best for the country. The government wanted to break the back of the public sector unions and by removing all those companies from the public sector they no longer had to fund the various companies and forced the work force into the private sector. In affect reducing the level of public sector borrowing.

By doing this they forever removed any potential income from these industries. Also some of the privatsaions were ,imo, just plain bad for business and the consumer. Utilities and rail in particular come to mind.

 

[old.Tohtori]

Just wanted to say;

The Government is a single, not-for-profit entity.

Sure doesn't feel like it.

 

[Job]

Public ownership has it's place and many so called private companies are
partly state owned.
I worked for BT when the were owned by the government and it was run
for the staff, the customer was right at the back of the queue and no innovation whatsoever would have happened with competition, you'd still have fixed to the wall phones and everything would have to pass some slow-ass authorisation process to be used on the system.
I went to fit a phone in a guys house many moons ago and he was using an iron lung (yes a freakin can he laid down in) and he couldn't reach the phone, so I rang control to see if I could move the box...NO! How about a long lead then?
..NO! It's not company policy, so the poor f**cker had to bang on the wall and the next door neighbour would rush round an answer it.

Seems totally ridiculous..but that was their attitude and that sums up public companies.

 

[ford prefect]

That may be the case, but BT is still one of the most expensive telecoms providers - although none are particularly cheap and all provide shocking customer service generally, the same is true for all private utility companies these days.

For the better part of 50 years, we had the most advanced telecoms infrastructure in the world - way ahead of anyone elses. When we privatized, things started to change and companies were less interested in investing money in the actual infrastructure, assuming that big boys like BT would solve those particular problems for them with the aid of government funding, but obviously that didn't happen, at least not to the extent it did elsewhere. The only thing the government did was interfere with rediculous regulations about where and how fibre optics could be laid, so that the copper network wouldn't loose too much of its market share. We now have among the worst western telecom and broadband systems, where many people are still without broadband and those who do have it often get substandard service and speeds which are way below par and well below what most of us are actually paying for.

I can't help but think that constant year on year investment from the government in a public company would have produced a better infrastructure - others I am sure will disagree.

 

[DaGaffer]

I can't help but think that constant year on year investment from the government in a public company would have produced a better infrastructure - others I am sure will disagree.

I present to you...France Telecom, which pretty much followed the route you're suggesting, and France ended up with the proprietary minitel system, and is now playing internet catch-up and France has a worse phone system than the UK, and FT ended up getting privatised in the end anyway.

You actually pointed out the problem with BT in your post, and its not privatisation, its regulation, most of the things that are fucked up about former PTTs in the UK and in an awful lot of countries, including the US, is down to government regulators who couldn't find their arse with both hands.

 

[ford prefect]

Perhaps you are right, but I can't say I am convinced. I will say that when I stayed at a friends house in france in 2007, she had a 44MB around 60 miles outside of paris, which was a damn sight faster than anything on offer over here at the time and had been using that connection for a couple of years apparently. I forget the price, but it was only slightly more than I was paying sky at the time as I remember. For the most part we would struggle to do that anywhere here in the UK now.

 

[Genedril]

The argument can be made (and I actually don't agree with complete privatization) that privatization leads to harder work and more innovation.

What you said is true, the government has no shareholders and doesn't work for profit but very often this works against it. There is a reason there are jokes about county council road workers slacking off. With no incentive to be really efficient because you do not have shareholders breathing down your neck, stagnation can and does easily occur. In essence it's like this, if you are in a job that pays you the same regardless of how well you perform, why try hard?

Just my two cents.

The irony being that 90% of those County Council Road workers don't work for the County Council. That was all farmed out to PLC's yonks ago and those workers doing jack all are doing it for the greater good of capitalisation and not because they're paid by the state to do sod all.

IIRC not one motorway is maintained by a government department (though the PLC's will ofc report to one) and the majority of A roads have been farmed out too.

Nurses are, of course, another good example of people that don't work in anyway for the state provided whopping wage - as are teachers.

There's a place for both state owned and private companies. Unfortunately someone went and sold off as much as they could for peanuts to balance the books and now the UK is left with a mess of laughable proportions.