Home > Economic policy > Governments are buying up where the market has failed. Is this the end of privatisation?

Governments are buying up where the market has failed. Is this the end of privatisation?

July 5th, 2017

That’s the title of my latest in The Guardian. The write-off sums it up nicely.

What we are seeing is the inevitable chaos that follows the collapse of a dominant orthodoxy. But we shouldn’t see it as a new dawn of socialism

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  1. hc
    July 5th, 2017 at 19:24 | #1

    The core issue should still be to establish a rationale for public ownership. It is not so much market liberalism that is at fault in recent privatisations but the inadequate use of standard economic theory. Privatising natural monopolies and then leaving them inadequately regulated seems a recipe for ongoing problems. There is also the problem that JQ often discusses of selling public assets to reduce debt. This is dumb economics rather as well as a flawed belief in the universal value of markets.

  2. July 6th, 2017 at 04:46 | #2

    JQ’s overall argument looks sound enough. It is somewhat weakened by reliance on two made-in-Australia messes, the electricity grid and the NBN. In a good number of other countries, regulated capitalism has delivered perfectly adequate electric grids (UK, Germany, Texas) and broadband (France, Korea…) Even the slothful near-monopoly incumbent telco in Spain, Telefonica/Movistar, is about to give me fibre telecoms. In the latter case, it has been the EU bureaucrats that have forced a measure of competition in the last mile. The glaring technical monopolies in both sectors have imposed some common sense on pro-market reformers.

    The NBN map is truly weird. Normally you would expect rollout to start in the big cities and their suburbs, places with the highest density of consumers, not the outback.

  3. Greg McKenzie
    July 6th, 2017 at 09:13 | #3

    European examples of successful privatisations usually ignore the heavy background regulation of private enterprises in the Euro zone. As for Texas and Korea, my nephew lived in both places and was less than impressed with these attempts at market liberalisation. Some states of the USA have even bought back their once publically owned electric grids, due to market price gouging by private equity owners – shades of what is happening in NSW. As for South Korea, the corruption is so bad there that any supposed benefits, money and social, are overwhelmed by corrupt practices, largely unregulated and unpunished. Too often the so called black economy is ignored when offering up examples of “successful” privatisatised public assets. The black web is filled with corrupt deals using formerly public owned and protected assets for corrupt profits.

  4. Paul
    July 6th, 2017 at 15:49 | #4

    @Greg McKenzie

    Interesting about South Korea. I think westerners take the rule of law for granted. I hadn’t heard that about S Korea.

    Waleed Aly has a piece on the possible end of the political party that has pushed privatisation in Australia:

    http://www.theage.com.au/comment/tony-abbott-v-malcolm-turnbull-are-fighting-for-the-soul-of-the-liberal-party-20170706-gx5ruu.html

    It’s in the same vein as Prof Quiggin’s comments about the Liberals running out of philosophical puff.

  5. rog
    July 7th, 2017 at 09:27 | #5

    Last year the NSW govt announced that they will be entering into PPP for a number of their hospitals. Public outcry and representation has seen them shelve or dump the proposals.

  6. Ernestine Gross
    July 7th, 2017 at 19:35 | #6

    “In a good number of other countries, regulated capitalism has delivered perfectly adequate electric grids (UK, Germany, Texas) and broadband (France, Korea…) ”

    I doubt it is useful to compare Australia with the UK and Germany because of the vastly different geographical dimensions. Furthermore, Germany is rather evenly populated, in stark contrast to Australia, which is highly urbanised. Except for some overland high voltage power lines and the odd farm house or tiny village, power lines are underground due to regulatory requirements in Germany. So, how much ‘capitalism’ is left?

    (Interesting, ‘Taxas’ is treated like a ‘country’).

  7. Ikonoclast
    July 8th, 2017 at 05:40 | #7

    Ah, “regulated capitalism”! Regulated by whom and for whom?

    “The Western world has reached a new stage of development: now, the defense of the capitalist system requires the organization of counterrevolution at home and abroad. In its extreme manifestations, it practices the horrors of the Nazi regime. Wholesale massacres in Indochina, Indonesia, the Congo, Nigeria, Pakistan, and the Sudan are unleashed against everything which is called “communist” or which is in revolt against governments subservient to the imperialist countries. Cruel persecution prevails in the Latin American countries under fascist and military dictatorships. Torture has become a normal instrument of “interrogation” around the world. The agony of religious wars revives at the height of Western civilization, and a constant flow of arms from the rich countries to the poor helps to perpetuate the oppression of national and social liberation…. The counterrevolution is largely preventative and, in the Western world, altogether preventative…. Capitalism reorganizes itself to meet the threat of a revolution which would be the most radical of all historical revolutions. It would be the first truly world-historical revolution.” – Herbert Marcuse, Counterrevolution and Revolt, 1972.

  8. Ernestine Gross
    July 10th, 2017 at 20:34 | #8

    The term ‘regulated market economy’ makes some sense to me (product quality, health and safety, labour laws ….) in the context of a society which recognises that not everything, which is essential to human survival (eg environment, flora, fauna…), is marketable and infrastructure, other than trivially small examples such as a server for an internal company computing system used by perhaps 10 people) requires coordination that is beyond the price mechanism to coordinate .

    The term ‘regulated capitalism’ makes no sense to me. From my perspective, one of the characteristics of ‘capitalism’ is that only monetary values, which are recognised in financial accounts, are the object of desire – the bigger the better (even though it is quite stupid because we are dealing only with real numbers, there is no natural limit and, I would suggest, therefore perpetual dissatisfaction is assured). How is one to ‘regulate’ this apparent mass stupidity?

    Sometimes (often) people use the term ‘capitalism’ interchangeably with ‘market economy’. This is a mistake, IMHO.

    My casual observations concur with JQ’s premise that the end of ‘naive market economics’ is near – privatisation is part of this ‘naive market economics’. And the opposite to ‘naive market economics’ is not socialism.

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