Tuesday, January 16, 2007

Rant against privatisation

Today was damn hot, it was over 40 degrees centigrade. It looks like it's not enough to be told we don't have enough water (no new damns have been built in the last 30 years) but now we don't have enough electricity to go around. I'm waiting for whatever lame excuse will be given for massive power failures caused throughout Melbourne - will it be that there are too many air conditioners running all at the same time? This seems a plausible excuse. (BTW, I'm going to invest in a power generator). You may well ask how we've managed to get ourselves into this situation. The answer is simple. The government, which used to own public utilities, and was therefore responsible for infrastructure has sold these utilities off. The government wanted to balance the budget. Whoopee!! Now, with private corporations owning gas, water and electricity (not to mention public transport, and other assorted loss making public infrastructures), the public is again shortchanged because private owners of these previously government owned public utilities isn't bothering with investing in infrastructure. They just want to make a quick buck and get out. At some dismal point in the future, the government will be forced to buy back these utilities because nobody else will want to invest in a dilapidated and outdated gas, water, electricity grid. Either that or the government will subsidize the corporations (via our taxes) to invest in upgrades and modernization. Welcome to the third world economy.
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7 comments:

Kirsten N. Namskau said...

We are soon back to private wells, candle-light dinners and horse and carriage.
Even the way of legal rights, we are soon back to the 12th century.

7:47 pm
none said...

Weird that the companies aren't interested in investing for future profits.

Almost everything here is private and or co-op where the customers are the owners. Sometimes a city will own a power grid but it will be an asset instead of a government entity.

Our buracracy is so bad that I would hate for them to control my power.

8:14 pm
Lexcen said...

Hammer, the corporations that end up own our utilities are usually foreign companies that have no interest other than making a quick profit. For example, since our electricity company was broken up into multiple corporations, the ownership of these corporations changes from year to year so we end up not knowing the name of the company that provides our electricity. Even worse, at some stage both electricity and gas were provided by the same company (billed that is) then it split into two distinct branches then each branch (gas and electricity) changed ownership again and again.

9:01 pm
Josy said...

To have such problems in a third world country (like mine, for exp.; and we do have such problems on daily basis and since long long time ago), is understandable! But, in Melbourne? I'm shocked.

12:25 am
Red Ink said...

There is a lot of hot air and hysteria about this. There is a difference between public service obligations, commercialisation, and state owned corporations, government business enterprises, statutory authorities, corporatisation and privatisation.

In my opinion, and I work in this area, there is an argument that says that the State should fund and own the life-support (to be defined) functional, mainstream, infrastructure network.

This includes railways, airports, and the catchment, production or generation, transmission and distribution of gas, water (drinking, storm and sewerage networks), buses, ferries, post, hospitals, schools, universities, telcos and bandwidth. In terms of allocative efficiency there is no sense in the private sector duplicating infrastructure with the exclusion of operating assets (e.g. rolling stock, treatment plants). New investment may be managed through PPPs, although there is not a great success story here either in Australia or elsewhere.

Everything else should be "privatised", by licence, franchise or other instrument, and access and operations should be controlled for quality, priority and priced by a statutory regulator according to contracts and service level agreements. Compensation for the fulfilment of community service obligations should be payable in cash.

5:53 pm
Lexcen said...

boondoggler, I am not against privatization per se but I can't help the frustration knowing the public is being screwed. Take the electricity grid for example, if there isn't any investment for the future, what will happen to the power grid? It will be run down to the point where it cannot supply the community. Do you think the current owners care? The world economy is awash with hedge funds like those of George Soros, looking for a quick return on their billions of dollars. They won't be around for the long haul, they will make their profits and move on, selling the electricity grid to who? Who will want to buy a decaying and obsolete grid? Only the government will be left to take on the burden. The efficiency of a free market is sometimes limited to the text books, and doesn't extend to the real world.

7:55 pm
Red Ink said...

Fair enough.

Disagree. Whereas some initiatives have indeed failed and had to be reversed in part, the general model I think is well established and should not be undone. The proof of any retro activity will soon be evident in Chevez' reversals. Time (3 years) will tell.

On the other hand there have been some real disasters e.g. British Rail, Victorian trams and tight wing "rogernomics" in NZ, so balance without hardline Thatcherite, purist Treasury ecomomics based on marginal short run costs (rather than discounted long-run fully absorbed and costed business cases) or pinko politics is needed ... but I dream.

b

11:48 pm

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