Hey private enterprise enthusiasts. You believe that the public sector can save money by handing over utilities to companies, which are inherently more efficient.
Here's why this doesn't work.
You have to pay someone to monitor the private companies. Because they have no incentive to deliver what they promised. They always cut corners in the name of profit. And that monitoring eats the savings you hoped for. While you have no control over your utilities.
If you think I'm exaggerating, think about it.
What is the incentive for a private company to fulfil every detail of the contract?
Only your monitoring. If nobody can tell whether they have done what you paid them to do, then it is economically rational not to do it. Avoiding that expense goes straight to the company's annual profit.
@mrundkvist Public sector and private companies share a lot of the same issues, and the need for monitoring is needed regardless.
Cutting corners for profit is one of the ways to extract money into pockets, as is not exactly uncommon for management in public companies either. There isn't exactly a lack of examples of management in public sector stuffing their pockets, the difference is of course that this is corruption, and illegal, not a "part of the game" like with private corporations.
Lack of incentive can be an issue with both.
I am not arguing that this invalidates what you say, public companies that do not have to make investors happy have a clear advantage, but the transformation from private to public must include monitoring and requirements as well, or else we risk a quick "look! told you so!" and a rapid hand-back to private sector.
@Theriac @mrundkvist OTOH if it's publicly owned then there is no regulator, just a government department marking its own homework and probably declaring its failings a state secret.
You can't win.
@mrundkvist
Another reason not to outsource.
Years ago I worked in a big software research and development group; enthusiastic nerds built some wonderful things. Senior managers from head office were impressed, then archived the projects and bought in inferior products from outside. "Why?" I wailed to the R&D boss.
"Liability."
Being able to sue for failures was the policy.
Customers lost out. At least two of those in-house products were better than what's available even now.
you are probably well aware of the debate in the UK about the totally abysmal performance of the water and the train companies. Thames Water may well be renationalised soon.
Considering that these people were being paid for polluting and robbing citizens, I think they should be made to pay the cost of renationalisation.
Shareholders? Fuck'em. It's an investment and investments contain an element of risk. Or did you not read the prospectus.
@tribactam @mrundkvist strangely right wingers always bring up "moral hazard" in relation to welfare but always want to protect shareholders from the consequences of thier avarice
https://en.wikipedia.org/wiki/Moral_hazard
"In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it will not bear the full costs associated with that risk."
I say the shareholders have to bear thier own costs for the sake of the economy
Exactly, an investment is like going to the horses. You may pick a good one, and some are a relatively safe bet. However, it is still a bet.
I would argue "for the sake of the economy" implies "for the greater good". I don't agree; these guys are buying into a monopoly and expecting constant returns while the horse is getting older and is running a one-horse race. The incentive here is that it is a monopoly - people can't decide to get their water from another supplier.
The reason why the Farages and the Tories of this world do everything to maintain the status quo is that they are the main investors.
I'm not an economist, but this is clearly not a market.
Public good generating private profit - then collectivize the debt when the horse dies.
So, I'd say that they should bear the costs and put the loss down to the risk that being greedy sometimes comes back to bite you.
they don't really believe that, no person with spark of intelligence can really believe there is a positive purpose to emptying public resources into the pockets of the few
we need to start mocking them more & respecting their "arguments" less, rational argument doesn't work with those who don't operate based from logic
@mrundkvist Empirically disproven by basic mathematics. And this isn’t like “Male/female is basic biology!” which is expanded later. Profit doesn’t get more subtle than “surplus value”. There are things to be learned from private industry, but efficiency definitely isn’t one of them.
People who believe privatizing government services can improve the service are economically illiterate. And sure, tons of people are economically illiterate.
Reminds me of how many businesses went “Moving to AWS will save us so much money!”, then they were shocked their ongoing bills were 20x as high. Like they thought *Amazon*—one of the biggest storefronts in history—is a charity.
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