Why is Privatisation so popular for governments? Is it anymore efficient?

Britain has just recently sold off the post office, an institution which had been government owned for hundreds of years, it was turning a profit, and was as efficient as any privately owned organisation, so now it joins the rank of the railways, water companies, gas, electric and even the air traffic control and some portions of prisons all being in private hands. Do they become more efficient, or is that a con trick so we believe so whilst having to pay more for the same service?

Can’t anything be owned by a government anymore for the benefit of society? Will this mindset change? I can’t imagine a country in which nearly 100% of all services are privately run, what does the Government get out of doing this?

What the government gets out of selling doing it is that it gets out of doing the work and paying people to do it. So in theory taxes go down, or at least don’t go up,

The same theory says, “Fuck public services and the general welfare.”

So why are Chinese and French and even German state owned companies allowed to have a stake in the UK infrastructure we’ve sold off if they should be less efficient than private entities?

Privatisation was done here in the UK mainly for political reasons and short-term profit.

For example, since our railways were privatised, the Government subsidies paid out to the private companies dwarf the losses made by British Rail.

No subsidies! If a private company can’t make a go of it on its own, it deserves to go under. If people actually wanted a rail system, they’d pay fares high enough to operate it, and to provide for a handsome profit for the company that runs them.

Or something.

‘The Public Good’ is just another name for Socialism!

The difference is incentives.

If a private company runs badly, it goes bust. The theory is that this threat alone is enough to make a private company more efficient than a public one.

Its complete bollocks though, it works only in specific and pretty narrow fields. If you have an operation that is completely commercial and operates in a truly competitive environment then you would have some merit to this argument.

Private companies do tend to have more flexibility and also in the UK they also have better access to investment funding.

The model of privatisation in the UK has a well trodden path -

First ensure there is a public service imperative and burden the business to reduce any hope of profit. that was you can reduce its performance compared to a private company that provides similar services but without the public service imperative

Next, deny the opportunity for access to commercial investment funding and all the oversight that such borrowing would imply.

Next, if its a monopoly, then strip all the profits it has been making and do not use any of those profits for investment, better still, use those profits to give taxpayers a tax cut just before and election.

Make sure that as a nation you run it down over the course of a few decades, and then to sell it off you undervalue the assets remaining and sell it off. It helps if you can con the public into buying some shares of the organisation for something they already owned - its really a way of giving money to people who have a little bit over and can invest - so it does not benefit those who are struggling the most.
The run down of various public services has taken place despite different administrations having differing political outlooks, you can never get politicians to understand the meaning of on-going operational investments, and if you did, they would still have to sell that idea to an inherently selfish public who are incapable of understanding the very basic principle of deferred benefit. They never understood it as 2 years olds in the famous psych test, they don’t want to understand it now.

Of course this is all done to increase choice and competition, so it helps not to bother effectively regulating the market for the services it provides, and then you wind up with a private monopoly or a cartel.

So now you can look at telecoms, gas, electric, rail and now postal services and see fine examples of markets that are not operating freely at all.

You can also add that the profit motive works well enough for Rail company executives to cut maintenance, and end up with a significant number of serious accidents - and yes, I can cite for that in a number of rail accident enquiries.

Have you noticed how every single one of those former public service charges have risen well in excess of inflation? That’s good old privatisation for you - our Prime Minister keeps telling us were must all bear the burden of austerity, and yet the real profits- that is adjusted for inflation - are still rising and will continue to do so due to regulatory agreements that have already been made.

If investment is needed, instead of borrowing, what they do is put up the prices and state that the consumer must pay, and yet every year the share dividend has increased above inflation - this alone reveals how little choice and competition there actually is.

I can choose my energy supplier, but they all seem to put up the bills by almost identical amounts so there is no real choice at all. I can’t freely choose my water and sewerage supplier though, so you have a monopoly there, its nice to see the French holding companies doing so well out of it.

Of course, all private companies are fantastic, and those great institutions of commercialism - the banks - did well didn’t they? And they are exactly the reason we have austerity in the first place and need to sell everything off.

Now what was the big motivation for private companies to perform effectively and efficiently? Yes that’s right, the threat of going bust, yet you the public bailed them out. Too big to go broke, and if we didn’t allow them to keep paying themselves huge bonuses, why they would up and leave to other countries - methinks maybe they should just fuck off and screw up someone else’s economy.

If I was running an investment bank in , say Belgium, I can’t imagine I would want to take on the current set of wankers having seen their performance over the last ten years and how they basically screwed the whole world over. Regulate and cut their pay, maybe we need an avalanche of all nations to bring these selfish greedy idiots into line with real markets.

The concept of state-run bureaucracy being inefficient is factually based. States tend to run with an insulation against the outside world. Even if the economy is bad, most people with a government job, for example, don’t lose them. This recent recession caused the most downward pressure on government jobs since the Great Depression.

However, the variance of how inefficient a particular government job is varies so greatly that it must be looked at in a case-by-case situations. The laws that govern those jobs as well as how much of the government is appointed versus voted in creates huge separations with even the same government as to which jobs end up as “efficient” versus “bloated.”

In addition, many areas of government lack an effective “Efficiency indicator.” In most businesses, they will rate you on some aspect of your job versus how much they are paying you. It can be crude, but it’s easy to say “Jim is doing well, Jake is doing bad.” using some sort of metric. Since the point of government isn’t to make money, it becomes much more nebulous. As a front office clerk, should they rate how many calls you take? How many people that walk past you that you smile at?

However, I don’t believe that the answer to this disparity between public and private process control is to simply privatize. I think it’s more equitable and will increase efficiency overall if government jobs would need to define an efficiency indicator and the desired efficiency target and then eliminate most of the red tape to eliminate those people that consistently underperform.

Actually the Post Office (well, really Royal Mail, which is only the letter-carrying bit of the Post Office) has been on the downward slope for some years, with dismal industrial relations, FedEx and UPS and DHL creaming off its parcels business, and letter volumes in steep decline with most business communications going by e-means now.

Neoliberalism and anti-statism would be the major components I would assume. As would a resentment of communism (even though communism hasn’t been an issue for 20 years).

But I guess it depends on a case by case basis if it works better or not to have a public or a private entity. Health care and military works better under public entities (cheaper, more efficient). Auto manufacturing and consumer electronics works better under private. etc.

Privatization leads to higher rates to the consumer.

If a private firm isn’t making money, they jack the rates up, it’s as simple as that.

Neither UPS nor Fed Ex are as cheap as the USPS, & USPS gets no tax money.
And is being deliberately destroyed by Congress, & crony capitalism, for daring to do better than the crummy private services.

This is the silliest thing ever written. If this is true why do so many businesses go bankrupt? Why didn’t all those dead businesses just jack their rates up? Where’s Kodak? Why didn’t they jack their rates up?

In fact, why would any business WAIT to not make money if they can just make more money by jacking the rates up?

Then why has the Post Office raised it rates year after year after year…

And they get no tax money? I’d like a cite on that one, unless you’re saying the USPS isn’t a government institution - which negates your point.

As to the OP, maybe it’s just a European thing, but I’m not seeing the US government falling all over itself to privatize any of it’s functions, quite the opposite.

From the USPS site.

And it’s rates go up for the same reason all prices go up. Wages, fuel, etc. gets more expensive.
And the USPS must get permission from the Postal Regulatory Commission to raise rates.

The price of a first class stamp has been nearly flat, when you adjust for inflation, since the 1970s.

Most of the money that USPS makes in the first class mail department comes from advertisers and not the end user.

Got a cite for that?

Already noted as silly, but let’s add: just plain wrong.

I’d like to see a cite for that also, with respect to packages. You can’t compare this for letters since UPS and FedEx can only deliver “urgent” mail, and are required by law to charge a rate higher than the USPS.

But the USPS does get a government granted monopoly to deliver mail and use mail boxes. UPS and FedEx are legally not allowed to put stuff in your mailbox.

I think you need to find a better example to prove your point, if it can be proven.


A self-supporting government enterprise…” - sounds like the perfect government entity; all the power and responsibility, as long as they can pay for it themselves.

Other departments should take similar note. I approve, thank you for bringing it to my attention.

Ideology. It might be correct or wrong in a particular instance, but a political decision has to be glaringly obviously wrong before politicians refrain from deciding based on their ideology.

The USPS vs. FedEx/UPS probably isn’t the best comparison to make. First, and probably most telling, the USPS is mandated by law to serve everywhere in the country, no matter how far in BFE it may be. FedEx/UPS actually tend to contract with USPS to deliver to such places.

Second, USPS has a large set of regulations / mandates beyond that which aren’t present for private firms.

A better comparison would be something like food and janitorial services and groundskeeping on military bases. Back in the day, soldiers peeled potatoes, cooked meals, polished floors, mowed lawns, etc…

Nowadays, it’s both cheaper and more effective overall for the military to contract with private firms to provide those services. For the same out-of-pocket cost to the military, the private firms can pay less (an E1 makes something like $8.75 in base pay) for the same job and make money, and the military can spend that soldier’s time making him a better soldier. Win-win for both sides. Same thing for some poor E1 peeling potatoes, running a floor buffer or a lawnmower.

That’s the classical idea behind privatization- the military pays the same or less, the private firm makes money, and the military frees up resources to be better used elsewhere.

Of course the big driver is that in many cases, private firms don’t have to abide by the same regulations or provide the same pay/benefits that the public sector does, and that’s where the cost savings come in. Why pay a E1 his salary, allowances, bonuses and benefits to mow a yard, when you can have a private firm hire some broke-ass Hispanic guy for minimum wage + no benefits to run that same mower?

Whether or not this is good is up to you; it clearly saves public sector money on its face, but has its own set of issues.

It’s not about long term efficiency. It’s about getting money out of the deal* right now*.