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After privatisation January 16, 2014

Posted by WorldbyStorm in Economy, The Left.
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We’ve mentioned some “What If’s” over the last month or two and more to come. Anyhow, there was an excellent overview in Prospect last month asking ‘What if British Rail had never been privatised?’ by Christian Wolmar. Prospect I can take or leave, there’s something altogether too comfortable about its worldview, as if policy alone can determine positive outcomes – and one knows more or less what sort of policies they will be. Though on reflection perhaps that is as much an expression of the contemporary period as might be expected. Still, Wolmar’s piece is useful if only to point up, once more, the enormous gulf between where we once were and where we are now in respect of privatisation and how that has altered and shifted economies in a very particular direction.

Wolmar notes that Thatcher thought that British Rail was too too closely identified with the nation by the British people – for all its flaws – and that selling it off would be too risky. And ironically – or perhaps not, it was that vastly more emollient figure John Major who oversaw this privatisation in the Railways Act of 1993 which saw a unitary entity broken into over a hundred parts. As Wolmar says this ‘went against the grain of a century and a half of railway history: Railways are a natural monopoly thanks to their capacity limitations and the requirement for heavy investment’. Indeed if one wished for an example of ideology at its most perverse – and artificial – one couldn’t hope for a better one.

Wolmar argues that it was also the wrong time to privatise. ‘It had recently got its act together and benefited from excellent board chairmen. It created popular brands such as InterCity and Scotrail, and developed a business oriented structure that meant subsidy was on a downward trend, except in hard economic times’. And he argues that despite ‘stubborn myths… relating to [curly] sandwiches and strikes’ by the time it was privatised the former were a thing of the past and the latter was massively overstated ‘the industrial record [being] good with relatively few strikes’. And that’s a crucial point. British Rail could and was run well and efficiently under state ownership. Privatisation was no magic bullet that improved matters.

He concludes by pointing to still nationalised services such as SNCF or Deutsche Bahn. A cursory examination of what those companies do is revelatory. They are involved in a vast number of profitable enterprises (he notes that BR was forbidden from attempting to do likewise hobbling its development). And it reminds me of a journey I took in 1972 or so from Dublin by ferry and train to Britain and then ferry and train to Paris. All of it, including one night’s stay in a hotel, in state owned organisations – bar a couple of nights with family in London and people in France.

I repeated the same journey, more or less, ten years ago taking in Rome as well. This time only the France/Italy leg of it was using fully nationalised transport (the status of the channel tunnel service is a bit opaque), and it’s worth noting that that was by far the most efficient and cleanest component of the trip. Anyone who has travelled in the UK or Europe by rail will attest that it is significantly easier to navigate the nationalised services than the hotchpotch that is what came after British Rail. So this isn’t mere nostalgia for a time now long gone, in many states this is a central part of the economic mix and regarded as such.

But the crucial point is that all this is increasingly forgotten, certainly both here and in the UK, in a context where the default position is more and more that private is good and public is not and that the state has no business in commercial and semi-commercial enterprise. Having worked most of my adult life in the private sector my scepticism about the first contention is considerable. But it is examples like this and others that prove the lie about the second contention. It seems to me that the left should be a lot more vocal in making a case based on experience that state services can offer as good or better provision than the private sector in many many instances and that it shouldn’t be shy to point out that a mixed economy has to be genuinely mixed.

Just on rail travel, I’m guessing many are aware of this site. It’s easy to lose hours seeing how to get from one part of the globe to another by rail.

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1. sonofstan - January 16, 2014

Funny, I was thinking about exactly this over yesterday and today: in one of those blinding flashes of the completely obvious to which I am still prone after years of being an adult, I realised what a con the supposed advantage of ‘competition’ was for the consumer/ passenger in this. Unless you’re traveling between London and one of the major cites, there is no competition; you’re stuck with whatever underperforming, in debt provider that has the franchise for the station in your town. So here, where getting to London in time for work is what most people need Chiltern Railways for, the price is extortionate up to 10am, pretty cheap after that. Equally, there is simply no logic to the pricing structure: I bought a return ticket yesterday to Brum for £15, dependent on traveling on particular trains – I could have paid up to £150+ – even more ridiculously, I had to explain the fare I wanted to the woman at the counter, and the only reason I wasn’t buying it online was because the Chiltern site is virtually unusable (except for info)

Even more absurdly, if I want to use the one intercity service Chiltern provide -Birmingham to London, the cheapest ticket on the day is about £90 – still cheaper than the competing Virgin service. If, however, I go from Brum to Wycombe, it costs just over £20 – I can then cross the platform and get on the next train to London for another £20 – and they go every 10 mins, so my journey is unlikely to take much longer.

It’s no wonder ranting about trains is up there with the weather as a major English topic of conversation.

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2. CL - January 16, 2014

Paul Sweeney had an interesting piece in the I.T. a few weeks back. It comes down to ideology. For whatever reason the Irish Labour party has adopted right-wing political beliefs.
“The view that private endeavour is superior to public and that the State has to be pushed back as much as possible is an ideological one and is open to challenge. ”

http://www.irishtimes.com/business/economy/ireland/why-sell-a-successful-state-company-in-the-service-of-a-doubtful-ideology-1.1640710

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Jonathan - January 16, 2014

Don’t y’all realise that all failures of the private sector are as a result of the State interfering in the workings of the free market? How can the Swiss watch of the free market run with precision if the State keeps jamming its inefficient screwdriver in?

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3. Gewerkschaftler - January 16, 2014

I wish I could point at a thoroughgoing study that demonstrates how and why private is so often less efficient that public provision of many services. Surely we have more than enough evidence 30 years after Reagan & Thatcher.

Clearly the short-termism and fact that private profits have to be skimmed off here there and everywhere puts private provision at a planning and financial disadvantage from the get-go.

Plus the fact the patchwork privatisation like British Rail deprives the players of any network synergies and economies of scale, and imposes the burden of middle-men skimming of their cut.

I’d love to read such a book.

Can anyone name it?

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Michael Carley - January 16, 2014

NHS Plc: The Privatisation of Our Health Care, Allyson Pollock is pretty good.

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