03-07-2003 03:00									#31
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quote: Originally posted by Agathon It depends. Power generation is one area where privatisation has been disastrous in my country. The public system worked very well and provided cheap power without interruption. People didn't realise how good it was until the privatised services started jacking up the price.. I don't disagree, but a well run public utility will always be more efficient than a private one because the private one must make a profit.

I worked on a planned but aborted privatization of a generation company. It was amazing, but every private company that looked at buying was amazed at the layers and layers of top level management. One CEO said to me that they would have to cut 2/3 of the people to approach efficiency and the workloads typical in private companies doing exactly the same type of work.


I will admit that electricity deregulation and privatizatioon has been a downright mess in some places but that does not mean that government ownership is either good or efficient. Your precondition of a "well-run" government utility breezes past the biggest problem with the vast majority of government ownership . . . its generally NOT well run. I do not know the cause of thise phenomenon but it seems pretty rare that a government-run business is seen as being efficient



QUOTE] Originally posted by Agathon


But it doesn't matter as long as everyone is compelled to fund it. Most people are incredibly dumb when it comes to taxation. They all want increased services and a tax cut at the same time (what they really want to do is throw the costs onto others).

No wonder governments have such a hard time - their citizens are venal morons. [/QUOTE]


Actually, here in Alberta, I see less demands put on government than I did down in eastern Canada. Take snow-clearing-- people in Calgary just seem to accept that very few roads get ploughed . .. they seem to understand that this is one of the tradeoffs to get lower taxes.

This attitude permeates in that I find Albertans generally are less likely to look to government to solve their problems. Government is for roads and schools and health-care and even in those areas people are looking for private options

	03-07-2003 03:00									#32
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hi ,

any type of public transportation , port authority , etc , .... that cant be in private hands , ......

the rest , it can without a problem

have a nice day

	03-07-2003 03:20									#33
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Actually, I'd like to add something to what I said in my previous post. There are a few companies that should be state-run, not due to essential liberties or anything like that, but simply for issues of convenience and feasibility. For example, the Metro. It's hard to imagine even two competing metro companies, and it would cause many inconveniences, so it's better off just leaving it state-run.

	03-07-2003 21:55									#34
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How about this. What if in a state company the better the company does and the more efficient it is the more the management gets paid, but of course the profit still goes to the government. The management of public owned companies is elected. The people would elect them, and the leaders of these companies would be judged on by how much profit they make towards the government, efficiency, and how well they serve the people. The people would want the company to make more profit because that would mean more services and/or less taxes. This would cause the companies to be efficient, profitable, and great for the people.

No one has said anything about insurance. Don't you think you would rather have elected leaders, who want to help the people, serve you, rather than some corporate owner who wants to make money.

	03-07-2003 22:00									#35
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The problem there is that a) it's difficult to measure efficieny and b) the measurement is likely to be "how likely am I to be reelected" (for the senator).

	03-07-2003 22:22									#36
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Since most of the managers these days are paid employees, I see no reason why can't everything be owned by the government.

	03-07-2003 22:23									#37
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JohnMcLeod:

The biggest pro of state owned businesses is that their objective is to provide a service, rather than to make money. I.e, it is a way to provide directly a public service to the population without the use of a profit-driven middleman.
For example, let's say the country's interetst (as defined by the democratic government) is to have a fast and efficient railroad, which can be affordable to any citizen. The state-owned railroad company will provide this efficient service (if sufficiently funded) even though the prices are too low for the railroad company to be profitable. OTOH, a private company wouldn't make the costly effort to improve its service, or to lower its prices, because it is profit-driven. In this situation, the private company cannot satisfice the country's interests.

The biggest con of state owned business, as someone else put out, is that they're using someone else's money. It generally leads to a bad and wasteful management. Besides, public companies have generally the same culture as public administrations, as they are very bureaucratic, which adds to the inefficiency. This has to do with the fact that high-ranked politicians or administrators will tend to put a fellow politician or administrator in charge.

The worst thing that can happen to a state owned business is to keep its managerial habits, but to have private-like objectives. That what happened to the French public bank Crédit Lyonnais:
- There was an ambitious boss at the bank, who wanted to turn it into one of the biggest banks in the world. He hired reputed traders etc.
- The State trusted him blindly and poured huge money into the bank, with little to no control over what was done. The guy was expected to do his job like a model civil servant, i.e honestly.
- The strategy was terrible. Hazardous acquisitions, unchecked loans etc. sunk the bank in a few years. The climate was completely lax: so much money being poured and so little control made blunders the norm and successes the exception. In the meantime, the boss gave false reports over the bank's results to the State. And he was trusted.
- The resulting 200 billions Francs lost (about $ 40 billion at the time IIRC) was the worst financial debacle in decades in France. Guess who paid for the losses ? The French taxpayer of course !

	03-07-2003 22:29									#38
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Spiffor, the rail company in your example (the privately owned one) would improve service, because better service = more people ride on your trains instead of competitor's trains = more profit.

However, the person running the state-owned company has no incentive to improve service. He was probably put in place, as you said, by politicians he has connections with.

	03-07-2003 22:29									#39
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If all the Industry is government owned, you can predict what will be the supply and the demand, and regulate various manufacturing capabilities, the training of specialists, etc. accordingly. The Market is good, in that that it's self-correcting, but it uses resources less efficiently.

	03-07-2003 22:31									#40
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Azazel - it uses resources more efficiently. Just look at the IRS, the Pentagon, any government agency.

EDIT: forgot the flag

Last edited by Kuciwalker on 03-07-2003 at 22:39

	03-07-2003 22:33									#41
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quote: Originally posted by Imran Siddiqui Laz: Or you could use the example of British airliners after privatization (ie, a more favorable example to use).

Not really, given BA's monstrous reputation for dirty tricks and shady business tactics (see Laker, see Virgin, etc....).

	03-07-2003 22:34									#42
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quote: However, the person running the state-owned company has no incentive to improve service. He was probably put in place, as you said, by politicians he has connections with.

If he was democratically elected, he would care because the better he did the better chance he had of staying in power.

How come everyone that is at this thread seems to be for privatized business? How come hardly any communists have come? There doesn't seem to be enough argument, most people are on the same side.

	03-07-2003 22:36									#43
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You want to democratically elect business leaders???

How would that work? You'd have hundreds or thousands of simultaneous elections.

And he wouldn't have a better chance of staying in power for doing a better job - he'd have a better chance of staying in power for cutting prices.

	03-07-2003 22:36									#44
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Any reasonable debate about privatization takes these both aspects into account:

- The necessity to satisfy the public interests where the market can't do it.
- The bad managerial habits of public companies.

Today's 'consensus', at least in Europe, is to have private companies do the job on behalf of the State. This means:
- private companies provide services that would be considered public services
- the State signs the contract only with a company that can satisfy its conditions. These conditions can be extremely precise, ranging from client-prices to technicalities (for example, French private highways are built according the strict orders from the government).
- As such, the State gives subsidies to the private company to compensate for activities willingly not profitable.
- The private business is assumed to have a better efficiency, and on the whole, it is considered the service for the end user will be the same, while being much less costly for the community.

However, this idea is far from being perfect. Several companies will compete to have the market, and the deciding factor will be the price they'll charge. As such, rivaling companies are incited to reduce their costs as much as possible in the many grey zones not covered by the contract. It can lead to cuts in the client's security or comfort, it can lead to inhumane working conditions for the staff, it can lead to overused and aged hardware, etc.

I personally think state run enterprises have a bright future before them, if they keep in mind their public services missions, while having high standards of performance. This means these services should be much less bureaucratic, and that employees should be accountable for their performance, to a reasonable extent.

I don't know about the British Royal Mail, I'd be glad if someone could tell me more about its success.

	03-07-2003 22:37									#45
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quote: Originally posted by Myrddin On the rail service it is privatisation, or is it something else that has wrecked the rail industry in the last 5 years (clue: Prescott., Byers, etc)

It's 10 years of unbelieveable incompetence on top of 20 years of neglect. While it's convenient to blame present politicians, it's hardly realistic to consider them to be the key factor behind the laughably amateurish services provided by Connex and Virgin.

	03-07-2003 22:40									#46
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quote: Originally posted by skywalker Spiffor, the rail company in your example (the privately owned one) would improve service, because better service = more people ride on your trains instead of competitor's trains = more profit.

Ever seen a British train ? The crap that is rolling through Britain spits in the face of your arguments. As does the French railroad network, the last gem of France, perfect service 340 days a year.

	03-07-2003 22:42									#47
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Is there competition in Britain, or just one company?

	03-07-2003 22:45									#48
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quote: Originally posted by skywalker Azazel - it uses resources more efficiently. Just look at the IRS, the Pentagon, any government agency.

Just look at the stories about the corporate world. You'll quickly realize that it's all the same there.

I'll give you this, things must get better. And people must be responsible for the job they're doing. But that's right for every system, both Capitalism, and Communism.

	03-07-2003 22:52									#49
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quote: Originally posted by johncmcleod How come everyone that is at this thread seems to be for privatized business? How come hardly any communists have come? There doesn't seem to be enough argument, most people are on the same side.

I am not for privatized business. In my ideal world, only microbusinesses would be privately owned, and anything big would be public.

However, in my two long posts, I tried to be as neutral as possible describing the problem as it stands today. In short, it is:

- Public companies are needed in some domains to satisfy the country's general interests where the market cannot do it, because it doesn't bring profits. They serve different aims as private businesses.

- Public companies are generally badly managed in comparison to private companies because of bureacuratic habits and insufficient performance-accounting. As such, public companies often have superior costs than private ones to provide the service.

- The current idea on how to conciliate public's and private advantages is to have private business operate public services, as defined and funded by the State.

- My idea would be to change the ways of public companies instead, and to make them more accounting to their performance, AND to get rid of the bureaucratic habits.

	03-07-2003 23:00									#50
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There is an office in Israel. The State Auditor's Office. He's an independent public servant, and is a-political. He manages wonderfully to put his fingers on all of the ailments of the Israeli government. Alas, he has no power whatsoever, he can just point these things out, he can't change them.

	03-07-2003 23:01									#51
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quote: Originally posted by skywalker Is there competition in Britain, or just one company?

Competition (however there might be local monopolies, maybe a Brit will correct me about it).

I am a big train-traveler. My only experiences with private and competitive train companies (Eurostar on the Paris/London and Thalys on the Paris/Brussels) were much worse than what I have had on the French national railroad company (SNCF). The quality was good and the trains were as punctual, but the prices were about the double.
Besides, I'm taking the German Railroad Company (DB) quite often too, and I have been very disappointed by the high prices, the slowness and the frequent lates (the in-train comfort is higher though). In Germany, the DB has been asked to become profitable in preparation to opening the market to competition. That explains the gap of quality between French and germany's RR companies.
If these companies operated French trains, it would be much harder / expansive for people to look for jobs or universities in other cities, and it would hurt the general dynamism of the country (think externalities here).

	04-07-2003 00:14									#52
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quote: Originally posted by Azazel There is an office in Israel. The State Auditor's Office. He's an independent public servant, and is a-political. He manages wonderfully to put his fingers on all of the ailments of the Israeli government. Alas, he has no power whatsoever, he can just point these things out, he can't change them.

hi ,

but nine out of ten they listen to his advice , ......

its like a giat ombudsman , ......

a thing many countries should have also

have a nice day

	04-07-2003 00:15									#53
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quote: If all the Industry is government owned, you can predict what will be the supply and the demand

How do you predict demand? It is almost impossible to do so without a market. With a market you can tell demand by changing price and seeing what happens. Supply will then match the best demand... leading to more efficiency.

It isn't really contested in economics that private firms are generally more efficient than public ones. The problem is that in SOME industries efficiency isn't as important as other goals (such as getting everyone water, etc).

quote: If he was democratically elected, he would care because the better he did the better chance he had of staying in power.

A directly elected business leader would do things to get elected, not to necessarily increase efficiency. Such as keeping more workers than he needs to. That's inefficient, but the more workers he's got, the more votes he's got.

	04-07-2003 00:32									#54
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quote: Originally posted by skywalker Is there competition in Britain, or just one company?

There's competition. Several companies operate, tendering for certain regional networks. Connex has been stripped of it's operating licence on two networks for surreal levels of incompetence.

It's a joke compared to France's rail system.

	04-07-2003 01:08									#55
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quote: How do you predict demand? It is almost impossible to do so without a market. With a market you can tell demand by changing price and seeing what happens. Supply will then match the best demand... leading to more efficiency.

How do you predict demand? Since all of the industries are government-controlled, You can predict what they need, with some final recipients being the population and the government.

quote: A directly elected business leader would do things to get elected, not to necessarily increase efficiency. Such as keeping more workers than he needs to. That's inefficient, but the more workers he's got, the more votes he's got.

That's true. That's why he won't be elected. He would be appointed by an independent body.

	04-07-2003 01:17									#56
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Rail privatisation is the UK is complex

Under EU law the operator of the tracks has to be independent from the operators of the trains, to allow open access. This now Network Rail, which is sort of semi-private. Most of the tracks and signal maintenance is done by private companies

Rail operators get regional franchises of up to 15 years to operate services, bidding service levels and amounts of public subsidy

Most of the trains are owned by other companies, who lease them to the rail operators (as operators wouldn't want to own trains whose life is longer than their franchise)

Then there is the Rail Regulator who intervenes in disputes between companies and governs changes to subsidy levels

There is also the Strategic Rail Authority who is supposed to plan for the future of the railway

and their is a politician, the Transport Secretary, who isn't treally supposed to intervene, but does

Did privatisation help?

Partly

There was more investment in new trains, staff training and marketing. Passenger numbers went up, fares fell, and if your train is late you get compensated (if you know where to go and who to ask)

But then there were a number of rail accidents, the media went mad, the rail industry had a nervous breakdown and now it is a complete mess for the forseeable future

	04-07-2003 02:38									#57
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quote: How do you predict demand? Since all of the industries are government-controlled, You can predict what they need, with some final recipients being the population and the government.

How do you predict what 'they' need? Do you know what every human needs?

quote: That's why he won't be elected. He would be appointed by an independent body.

Another bureaucratic mess, then?

	04-07-2003 04:13									#58
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quote: Originally posted by Imran Siddiqui How do you predict what 'they' need? Do you know what every human needs?

Sorry to stumble into your private debate, Imran and Az, but I indeed don't think the State can predict anything the individual consumer wants (I don't think the market can do it perfectly either, but this is a different point, we might open another thread about it if you want).
The State, however, defines what are its interests in general, and those are often the same as the population's as a whole. The definition might not be perfect, since the State is no more rational than anybody else, but it can give a pretty accurate idea of the big picture.
If the State owns companies, he can use many more resources to directly fulfill his ends, without the tedious process of convincing private actors to do the job.
For example, there was a time where the French State owned #1 car manufacturer Renault and #1 oil company Elf. It could have easily pushed for non-polluting fuel, thanks to the extensive distribution networks of both cars and gas stations. Unfortunately, these companies were privatized before clean fuel made it to the political agenda .
In this example, had the State used his economic might, it could have reached his political objectives, jeopardized by a pure market economy. Assuming that the State's interests are about the same as the population's interests (i.e democratic State), state run businesses would have helped the population big-time, whereas profit-driven companies couldn't have done so.

	04-07-2003 06:16									#59
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quote: The State, however, defines what are its interests in general, and those are often the same as the population's as a whole.

I'm not sure they are. MAYBE in a homogenius state like France, but in the US, it is like we have multiple countries without our borders. The State's interests are probably going to run counter to at least 1/3rd of the population, maybe even more.

This is assuming that the state has the best interests in mind, rather than other beneficial interests (like companies hiring as many people as they can to have less unemployment... more people with jobs, more happy voters... though perhaps less efficient)..

quote: state run businesses would have helped the population big-time, whereas profit-driven companies couldn't have done so.

Why do you think so? IF the population wanted less poluting cars they would have made that clear by their purchasing choices. Right now you have hybrid cars. If the population wants cars that pollute less then they'll buy them, and every manufacturer will quick produce them. The market is infinetly better than planned economies in deciding what the consumers (which are the population at large) want.

	04-07-2003 06:26									#60
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quote: Originally posted by Imran Siddiqui Laz: Or you could use the example of British airliners after privatization (ie, a more favorable example to use).

Or you could look at the other side of the equation and see what a totally dismal politically run feasco the nationalized British Automobile & Aircraft manufacturing businesses were.

They were the second largest industries in the world for both fields and state ownership turned them into fat, lazy, and incompetent wrecks which were fit for nothing else but bankruptcy.