Debate and Discussion

Nationalised utilities work better than privatised ones
ozoneocean at 10:14AM, June 23, 2009
posts: 25,986
joined: 1-2-2004
WARNING- lots of text ahead.

I've thought about this on an off for many years, thinking which is better: privatising or not privatising essential utilities like electricity, water, transport, even telecommunications…

Towards the end of the 1980s everybody thought it was such a great idea, starting in Britain and then spreading all over the world. The U.S. had done it long ago in many ways though.

The justification is that “government” doesn't know how to run businesses, it isn't efficient or innovative because there's not competition. Now that can be true to an extent, where there really can be competition… but there's an essential fantasy involved in the concept- If you're providing a mass service that is basically essential to an entire population that, then you don't really have any competition. You can't (electricity, water, gas etc can't go down alternative lines and pipes, you can't duplicate the infrastructure). In order to introduce competition it has to be artificial, pretend.

And because you're providing the population a mass service, it still needs heavy government oversight, and interaction in order to run- because the populace relies on it for survival. Utilities are too important to fail.

So what happens then is a pretend hands off approach by the government, where they still support the utility just like they did when they ran it, but now they don't have any control. They provide HEAVY subsidies and force various people to buy from them etc.

And what happens in the end is that for some reason, there are no efficiencies gained and the utilities become drastically more expensive, because there never was or could ever be competition, but now they also have to make a profit, even if in reality they can't do that.

And most damningly of all, most of the money tends to be made out of defrauding the government through various ways, and rather than providing the service, this is the real way they actually make their money.

I admit there are exceptions- The telecommunications industry WASable to break free of this paradigm with the advent of cellular phone networks. Prior to that with the copper wire it was still the same old fake competition con-game.

Feel free to disagree or just pass this by altogether. :)
last edited on July 14, 2011 2:34PM
Orin J Master at 4:15PM, June 23, 2009
posts: 437
joined: 12-16-2007
aside from the telecom “exception” (which is really just a shell game, since all the other companies have to buy their traffic space from 2-3 corporations that own the network hardware) you're pretty much spot on.

….is this supposed to be news? vital services work better when in the hands of people not trying to make a profit off them?
last edited on July 14, 2011 2:22PM
BffSatan at 9:32PM, June 23, 2009
posts: 1,478
joined: 3-2-2008
I completely agree, privatisation of essential industries is an awful thing. In Chile water was privatised from 1998 to 2005, now that's just completely crazy, yet it followed the same argument as privatised health care.

There is a very good documentary about this on youtube called “the corporation.”
This part talks about privatisation,
last edited on July 14, 2011 11:21AM
bravo1102 at 2:57AM, June 24, 2009
posts: 4,061
joined: 1-21-2008
How can utilities compete when nearly all the infrastructure is basically state owned? Imagine competing sewerage authorities with competing sewer systems. The water companies in NJ compete with each other but they all use the same pipes and are really management companies for a government owned infrastructure.

Utilities are governmental subcontractors and always have been since the Roman sewers. I don't believe you can privatize a necessity unless you can somehow create seperate private infrastructures. Natural gas versus fuel oil heat is in competion as they can have seperate infrastructures. However even then it ends up being which company manages your supply. It's only the guy who delivers your oil who competes. The Gas company is the gas company and are regional management companies. The government funds the Natural gas infrastructure and is intimately involved with its construction. The management companies aren't allowed to fail and if they did the government just brings in another one. They repaint the trucks and life goes on as before. It relieves the government from day to day management, but then when one fails… in comes the government. Tons of examples about this in the NYC area especially out on Long Island as well as the NJ water companies.

Enron was trying to sell something they didn't really own. It was a bubble and bubbles always burst. :) It fits the model quite well.
last edited on July 14, 2011 11:33AM
ozoneocean at 3:22AM, June 24, 2009
posts: 25,986
joined: 1-2-2004
Exactly, so the privatisation model is based on a fallacy. The only things that change with privatisation is that services become less efficient, more expensive, and certain individuals redistribute a great deal of public wealth into their own bank accounts.

Enron was more like a middleman energy broker. They conned all sides.
There was no bubble, just a con-job that went catastrophically out of control. Like they usually do when they're managed by morons. -_-
last edited on July 14, 2011 2:34PM
Product Placement at 1:20PM, June 24, 2009
posts: 7,078
joined: 10-18-2007
My opinion on the matter is this:

The main purpose of an efficient, government run business is to provide quality service to all, to the best of their ability.

The main purpose of an efficient, corporate run business is to make money.

Hence, there are places where privatization shouldn't belong. Health care, utilities, mass transit and similar things that should be considered an essential is better of being run by the government.

All in all, I agree with what Oz is saying.
Those were my two cents.
If you have any other questions, please deposit a quarter.
This space for rent.
last edited on July 14, 2011 2:51PM
artdude2002 at 8:02PM, July 10, 2009
posts: 10
joined: 11-14-2006
While I agree that the primary purpose of a private corporation is to make a profit, it is a false assumption that a government operated utility will not also be concerned with the bottom line. The difference is that the government can do something no private corporation or utility can do. If there is a short fall, they can raise taxes in order to make up the difference. Regardless of who runs the utility, the potential for continued rate increases still exist.

I live in a town that has had both a private and government-run water/sewage utility. In a couple years, it became apparent when the private company took over that the rates were increasing at a more accelerated rate than when the utility was owned by the city. It would be easy to assume it was just a means to increase profits, but this would be wrong. The largest increases in our water/sewer rate came due to mandates from the federal, state, and local governments. We have seen run-off taxes, storm drain taxes, water purity standard changes, and taxes added to our bills for “fire hydrant utilization” in the event our homes caught fire. Our utility was ordered by the federal government to construct a new sewer and waste water facility in order to meet increased purity standards. Our local rates increased as a result. Then the federal government decided that a small neighboring town also had to meet these standards. The decision was made to run new sewer lines, more than twenty miles of them, to connect the small town to our new waste water facility. Again, our bills went up in order to pay for this mandated extension of service.

I guess what I am saying is there are no guarantees that utility rates will be better under a government controlled utility. Private utilities are essentially controlled by government oversight anyway. No matter who calls the shots, it it is the consumer who always pays, either by paying rates, or paying taxes.

I don't pretend to know the answer to the private versus government question, but I do know that paying for any service we have provided is unavoidable

last edited on July 14, 2011 11:02AM
isukun at 4:06PM, July 11, 2009
posts: 2,481
joined: 9-28-2006
I know this certainly isn't always the case with public transportation. Look at the DC Metro for a good example of a government run public service which jacks up the prices, fails to meet safety standards, and has little concern for the comfort, convinience, or safety of those who use their service. I have also noticed large discrepencies in utility costs depending on where you live, too. Amazingly, of the two metropolitan areas I've lived in in the past few years, both had city managed water supplies. The area that was surrounded by fresh water sources, however, routinely charged more than twice as much and had a quality of water far inferior to the location that is primarily desert. Something seems wrong about that.
last edited on July 14, 2011 1:04PM

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