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UK Gov't Outlines Plans To Privatize Royal Mail
Ellie K writes "After 500 years, Britain announced plans to fully privatize Royal Mail today. Shares of stock (common equity) will be offered to the public 'in coming weeks', according to Reuters. 10% of shares will be given to current Royal Mail employees, Deal size is estimated at $US 3 to 4.7 billion. Goldman Sachs and UBS were chosen as lead advisers." That doesn't mean you'll be able to buy a piece tomorrow, though; as the BBC's report notes, "The plans have provoked strong opposition from unions. The Communication Workers Union (CWU) is currently balloting members on strike action. Ballot papers are due to go out on 20 September to 125,000 Royal Mail workers. The earliest possible strike date would be 10 October. Plans to privatise the 250-year-old postal service have been on successive governments' agendas since the early 1990s."
We have a thriving competitive market in telecoms? Oh, Sir, you crack me up. We have VIrgin Media, Sky and BT, and almost all your "competitors" are actually using re-sold BT services which only exist thanks to a stringent framework of regulation which nevertheless still operates in BT's favour ("regulatory capture"). Fuck, BT are even required to artificially separate the operations of their divisions - BT Openreach, BT Wholesale, and BT retail, so it isn't so obvious how they take advantage of their position as a natural monopoly.
The US is certainly worse - because it's an order of magnitude more spread out than the UK, and its privatisation was even less regulated (so, for example, BT are required to provide a certain level of service, which in a lot of cases e.g. remote Scotland is provided through government sponsorship).
RM had already been broken up into such inefficiency (as above) that it was necessary to drive up prices to make it profitable again. Even the NHS suffers this problem: all your greatly indebted Trusts were involved in New Labour's horrible public-private partnerships. The problem isn't the lack of private sector involvement: it's the existence of subcontracting to the private sector, where none before existed.
The belief that profit produces a better service per se is ideological. It sometimes does - e.g. when there is a free market - but not for essential services, especially not when they form natural monopolies.
One of the things I've never understood about these privatization deals is that people think it will save taxpayers tons of money. The simple truth is that some public goods should be provided by non-profit or state-owned companies simply to maintain the level of service.
An example from the US is the Postal Service vs. FedEx, UPS, etc. The private delivery services have squeezed every single nickel out of the process of delivering packages, and one of the ways they do this is cherry-picking the easy services to perform. They also charge a lot of money for this service unless you're a big company with a better contracted rate. Anyone can get a package from New York to Atlanta overnight . It's very different when an organization has a mandate to provide affordable delivery of letters from anywhere to anywhere in the US for the cost of a stamp. I can mail a letter from Key West, Florida to Prudhoe Bay, Alaska for 46 cents - that doesn't even cover the fuel required. FedEx and UPS don't directly deliver to areas of the country where it's not cost-effective to do so. The Postal Service has a Constitutional mandate to do this, so it has to be inefficient by nature. Since I'm not a business, I usually use the USPS to ship stuff just because the walk-up rates are way cheaper than FedEx, and now they even offer cheaper rates if you pre-pay the postage online. The USPS is under pressure to keep these rates low, has a huge workforce to pay, and has a congressional mandate to prepay their retiree medical and pension costs
There's plenty of other examples. Electric and gas utilities have to provide service at a cheap enough rate so almost anyone can afford it. Amtrak in the US has to run very unprofitable long-distance rail service and subsidize it by using the money it makes from its Northeast and California rail services.
The other thing to consider is employment. Especially now, given the fact that suitable jobs for the majority of the population are going away with no replacement work on the horizon, we need to find something for people to do. A privatized postal service will lay off everyone but the bare minimum number of people to keep the lights on, and outsource all the business processes to cheaper countries in the name of cost savings. This is where my "lefty socialist" tendencies kick in - Do we really want a world where 5% of the population are fabulously wealthy, 15% are working in jobs like IT, engineering, and others, and 80% have nothing to do and no prospects? Remember, the seismic shifts in employment last time generated better jobs. Subsistence farming went to organized agriculture, then mechanization of that caused a shift to factory work, then outsourcing of that caused a shift to service and paper-pushing jobs, now outsourcing and obsolescence of that leads to.....hmm....there's nothing for Joe Average to do anymore and a well-protected aristocracy with no incentive to help. That's a recipe for French Revolution 2.0.
I know economic theory isn't on my side, but I think monopolies are more efficient at delivering some types of services than others -- not from a dollar perspective but from a service delivery perspective. It may be more expensive, but think back to how reliable AT&T phone service was back before they were broken up. It was expensive, but it almost never went down. Obviously this doesn't apply to all goods and services, but those that have to be universal and cheap are not good candidates for privatization IMO.
We just give the profits to private entities.
Nope!
One of our train operators is a subsidiary owned by SNCF, another by DeutcheBahn.
Both of those are public entities, proving very nicely that public entities can run the railways well. We're actually subsidising the French and German public rail networks.
You know because the free market works and private woo woo etc etc.
SJW n. One who posts facts.