One of my commonly read Australian sites is catallaxy* set-up by Jason Soon and some of his friends. There’s a beneficial mix of opinion of different ideologies and philosophies and while I might often disagree, I am usually enlightened or provoked into examining my ideas more thoroughly which is always a good thing. Though sometimes it does get a little depressing, especially when the ideological splits get nasty. There was a post yesterday on NSW Liberals to get a brain transplant? Some guy who was responsible for the previous state government’s privatisation policies is returning to help it out now that it is in opposition. Anyway, I’m not a big fan of privatisation but in the comments to the aforementioned post, someone mentioned an alternate system where the government retains ownership of the public infrastructure but contracts the running of it to a private company. [What follows is copied heavily from my posted response to some of the arguments.]

Efficiency and Accountability would appear to be the main arguments used for privatisation. It was raised a number of times that somehow private industry was more accountable than public (apparently no public servant ever gets sacked): “But businessmen who do are more likely to be held accountable.” (whyisitso). While it is true that we do see people getting sacked more in private industry (though if they are really high up and the company is still solvent, it usually involves v large sums of money paid out) and perhaps that makes them more accountable to something, the question is who are they accountable to?

Unless regulated or constrained in some way, the public good/welfare doesn’t usually list high on considerations. As long a decent profit is returned and the means are legal, I don’t see any calls for resignations from the company’s shareholders when the company causes harm to the public good. The problem is when you grant an irrevocable monopoly, there’s little incentive to be competitive, only the incentive to be profitable at whatever cost.

Perhaps privatisation isn’t inherently evil (however, I don’t believe such sell-offs are democratic, at least with the current electorate) but HOW it is done. Unfortunately, we’re relying on these same politicians and public servants who we can’t rely on to run the infrastructure efficiently (one of the arguments for selling it off) to do the selling off. If they can’t do one, why do we think they can do the other?

The problem is that once the selling off is done, no more safeguards can be created. If it was done badly then there is often no accountability as far as public welfare concerns go. When it is a critical piece of infrastructure, it starts to get very scary.

As I mentioned, I think it is undemocratic. I don’t believe that voting in a government because they are less incompetent/offensive than their opposition does give them that “mandate” to do what they wish. If a piece of criticial infrastructure was paid for through so much of our taxes, then the public deserves more of a say whatever your economic philosophy (hmmm, don’t know why, the whole democracy v economics thing brings up the image of the baby v rhino penny-arcade strip I guess which is which, if either, depends on you). If the vast majority don’t approve the sale, which they don’t, then “accept it because it’s good for you” arguments are flawed.

Shouldn’t we be looking for a solution that is democratic and efficient, but most importantly, accountable rather being sticking ourselves in ideological holes of privatisation = good/bad, government owned = bad/good?

Going down only the regulating route is crazy if only because who knows what our circumstances will be ten, twenty, a hundred years for now? If we create safeguards for now, who knows how relevant and harmful they will become with change. We need a system that is flexible but one that still allows accountability.

I like the previously floated idea of publicly owned infrastructure but privately owned operators with normal business contracts where non-performance equals no more contract, not the government bailing them out. If the company was worried that if they didn’t do the job properly they would lose the contract to another company, then that to me would have the best chance of creating the sort of beneficial competition we need to shake up these industries. We then remove the destructive forces of monopoly and the electorate is happy because they still have some control over the infrastructure and thus there’s the hope of holding some body accountable.

*for those without economic training, here is the Wikipedia description of catallaxy, but I prefer this from catallaxy.com :

“Catallaxy is an English word formed by Friedrich A. von Hayek indicating the special kind of spontaneous order without pre-determined ends produced by the market through people acting within the rule of law. It was derived from the Greek verb katallassein, which means ‘to exchange’, ‘to admit into the community’ and ‘to change from enemy into friend’.”

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