What are the pros and cons of state owned businesses?

[Imran Siddiqui]

Because capital can subvert the democratic mechanism by flooding elections with money and making it hard to successfully run for office without the backing of capital. Like in your country.

My country is very healthy, politically and economically, thank you .

Are you telling me that in your country a guy with no money can make a run at office and win? Come on... you either need money or be a party suck-up to win anywhere.

[Agathon]

Originally posted by Flubber

True-- However, I think the role of government should be to determine those areas that government should involve itself and work to deliver those services. Now if private business can get involved, I see no problem with that.

It depends. Power generation is one area where privatisation has been disastrous in my country. The public system worked very well and provided cheap power without interruption. People didn't realise how good it was until the privatised services started jacking up the price.

I don't think the government should be opening up corner stores, but health care and large scale infrastructure is certainly worthwhile.

For instance, I see garbage collection as a valid municipal government function. But if government hires a company in the business of garbage collection, I have no problem with that.

I don't disagree, but a well run public utility will always be more efficient than a private one because the private one must make a profit. Often it's cheaper in the long run to contract out garbage collection, but there are plenty of people who want to open everything up to private interests.

A lot of people differ on what services government should involve itself. For instance, I accept government's involvement in the provision of health care. I don't expect everyone to agee with this.

But it doesn't matter as long as everyone is compelled to fund it. Most people are incredibly dumb when it comes to taxation. They all want increased services and a tax cut at the same time (what they really want to do is throw the costs onto others).

No wonder governments have such a hard time - their citizens are venal morons.

[Imran Siddiqui]

a well run public utility will always be more efficient than a private one because the private one must make a profit.

Aroo? BECAUSE the private company must make a profit, it will always be more efficient than a public utility, even a well run one.

[Kuciwalker]

Agathon - still, the person with the most votes wins! (leaving the electoral college out of this )

Think. What does money allow a politician to do? Advertise. So what if more advertisement results in more people convinced? You still have more people convinced!

The only potential conflict is bribing an elected official to do something not in his/her campaign, and enacting laws against bribery is not inconsistant with democracy or capitalism (and there ARE laws against it).

[St Leo]

The only industries that should be publicaly owned are the ones where monopoly is unavoidable (like electricity infrastructure (but not production), etc.). A state monopoly is infinitely preferable to a private monopoly, but regulated competition is infinitely preferable to a state monopoly.

[Kuciwalker]

Originally posted by Imran Siddiqui

a well run public utility will always be more efficient than a private one because the private one must make a profit.

Aroo? BECAUSE the private company must make a profit, it will always be more efficient than a public utility, even a well run one.

Well, actually that's not so. There can be exceptions. However, companies that don't have to make a profit tend towards inefficieny, whereas those that do tend towards efficiency.

[Imran Siddiqui]

St. Leo, .

[Agathon]

Originally posted by Imran Siddiqui

a well run public utility will always be more efficient than a private one because the private one must make a profit.

Aroo? BECAUSE the private company must make a profit, it will always be more efficient than a public utility, even a well run one.

Why? Presumably efficiency for such a company would be reducing the cost of operations to the lowest possible. There is no reason why a well organised public utility can't do this. Moreover, the private company has to have a profit margin which will mean higher prices.

[Kuciwalker]

Agathon, companies that don't need to make a profit tend towards inefficiency because they survive whether or not they are efficient. Thus, inefficient things are not removed, and the system is not self-regulating.

Plus, you are saying a "well-organised" company. You cannot guarantee that a company will be well-organised. You have to account for situations with poorly-organised companies. Capitalism does so, because there are multiple companies all in competition, and so those that are not well-organised and efficient go bankrupt or change.

[Imran Siddiqui]

Why? Presumably efficiency for such a company would be reducing the cost of operations to the lowest possible. There is no reason why a well organised public utility can't do this. Moreover, the private company has to have a profit margin which will mean higher prices.

Well organized public utilities do NOT reduce the cost of operations nearly as fast as private companies do. The main reason for it is governmental bureaucracy. Private companies can just initate the change. However, public utilities, after getting convinced to make the change, has to go to the government structure and petition for a change. They have to justify it to the government officers and have to wait a while for anything to be done as it goes down the various channels.

That costs money, and adds to the input side of things. It also prevents public utlities from making minor efficiency changes because the hassle of going through the government.

Secondly, price for profits doesn't mean jack in efficiency concept. Efficiency is merely a product of input and output.

Also usually private companies have lower prices than public utilities (though it may take time to get there). Adam Smith (the poster) has a lot of research on this.

[Kuciwalker]

Imram - well-organised public companies may sometimes reduce the cost faster. However, the tendency is to reduce the cost more slowly, not at all, or increase it.

[Agathon]

Originally posted by skywalker
Agathon, companies that don't need to make a profit tend towards inefficiency because they survive whether or not they are efficient. Thus, inefficient things are not removed, and the system is not self-regulating.

Plus, you are saying a "well-organised" company. You cannot guarantee that a company will be well-organised. You have to account for situations with poorly-organised companies. Capitalism does so, because there are multiple companies all in competition, and so those that are not well-organised and efficient go bankrupt or change.

That's because public utilities used to do things like keep unnecessary workers on so that unemployment didn't go up.

I favour the State Owned Enterprise model. The company is owned by the government and has a mandate to provide efficient service and it's bosses are rewarded for efficiency gains. It's not much different from a private company except there is no profit.

[Agathon]

Originally posted by Imran Siddiqui

Well organized public utilities do NOT reduce the cost of operations nearly as fast as private companies do. The main reason for it is governmental bureaucracy. Private companies can just initate the change. However, public utilities, after getting convinced to make the change, has to go to the government structure and petition for a change.

Not if it is a relatively autonomous SOE. I'm not suggesting a move back to the bad old days of a bloated state sector, but something new.

[Imran Siddiqui]

I favour the State Owned Enterprise model. The company is owned by the government and has a mandate to provide efficient service and it's bosses are rewarded for efficiency gains. It's not much different from a private company except there is no profit.

And no competition which pushes efficiency much more. What's a bigger push, a bonus or going out of business?

[Kuciwalker]

However, state owned enterprises still don't achieve the self-regulation that capitalism does, because they don't have competition (and "efficiency" can be measured in terms of "things are doing well in my district, so I'll be reelected" ). There are certain state-owned enterprises that are necessary, because without them, essential liberties would be suppressed (postal service for example, which allows people in out-of-the-way places to send mail without paying exorbitant fees). However, anything that is not necessary to preserve essential liberties should be privatized.