What are the pros and cons of state owned businesses?

[Spiffor]

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.

[Kuciwalker]

Is there competition in Britain, or just one company?

[Az]

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.

[Spiffor]

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.

[Az]

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.

[Spiffor]

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).

[Panag]

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

[Imran Siddiqui]

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).

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.

[Bugs ****ing Bunny]

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.

[Az]

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.

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.

[Myrddin]

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

[Imran Siddiqui]

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?

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

Another bureaucratic mess, then?

[Spiffor]

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.

[Imran Siddiqui]

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)..

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.

[Dinner]

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.