Hacker News Reader

Comment by rvkennedy | Hacker News Reader

It's very simple, when you privatize something, it magically becomes cheaper. Because of "efficiencies". The way this works is you can always get a private company to pitch a service for a lower price than you're currently paying. Then it's up to them to squeeze a profit from that service by providing a lousy service. This is called "the power of the market". But because the service is lousy, and the public doesn't like that, the government has to step in and bribe the private company to make their service better. This is known as "a public-private partnership", or PPP.

View on HN

It's very simple, when you nationalize something, it magically becomes cheaper. Because it doesn't have to pay out "profits" to "shareholder". The way this works is that you can always get a politicians to promise whatever to whomever, as long as it will get him reelected. Then it's up the the public company to constantly pursue quick successes (usually in the form of various prestige projects which includes hiring huge swaths of overpaid and unfireable employees) while neglecting long term planning and maintenance. When called out on it, they demand a larger operating budget, which if allocated, goes mostly towards making the allocating politician look good, and which if not, results in cuts to front line services to make the responsible politician look bad. This is called "rent seeking". Because the service is lousy, and the public, while not liking that, also isn't going to deliver the required landslide in an election, nothing happens. This is known as "the reason large public companies too often become bloated ungovernable unreformable monsters".

While we have the OP as a fine example of my point, it might help to provide an example of your own. In developed economies, nationalization has historically occurred when a business that the public relies upon has become literally or effectively bankrupt. Can you think of an example of an inefficient nationalized industry in the UK, the EU, or the USA? And in what way has nationalization contributed to that inefficiency?

In many cases the services that have recently been privatized were never nationalized to begin with - they were public services, like garbage collection or public transport, that have no obvious market competition model to follow.

Your definition of "rent-seeking" is also incorrect. Rent-seeking behaviour is when an economic agent attempts to manipulate public policy for private gain. A government body cannot engage in this behaviour by definition, as it does not take a profit, and is not private. It can fight its corner though - seeking more funding - but then it must spend that money on things like schoolbooks or hospital beds. This is considered a horrifying waste of resources to the private sector, which knows that those funds could better be spent on yachts and hookers.

I wrote a snarky reply to illustrate that your broad and generalizing assertion didn't really hold up.

My use of "rent seeking" is fine, there is other gain to extract than pure monetary profit. One is personal prestige: Being the boss of a big department with a big budget is nice (and well paid, even in the public sector).

An example of a public company, a railway one even, squandering billions on useless prestige projects: Danish State Railways procuring a small run of entirely custom made intercity trains instead of getting something off the shelf. It's a 5 billion DKK project, close to a decade late now. Also, changing governments failed to maintain the signals, so they're utterly rotten, causing delays daily.

Like for like, people in the public sector in the UK often get paid quite a bit more than people in the private sector:

http://www.bbc.co.uk/news/business-13329634

I'd be quite interested to see the comparisons they make and the raw data they use.

When I worked in the public sector the minimum wage came in and boosted a lot of the low grades pay levels. At the time this was said to be an embarrassment for the government as the minimum wage did little to similarly skilled workers outside of the public sector.

Indeed where I worked practically any of the staff could work for substantially more in an equivalent role in a private firm.

Teachers seem to get less money often in private sector, but benefits of shorter terms, better discipline, better working conditions and the like help considerably. Nurses in private employment seem to get quite a bit more.

What's equivalent to the police force?

Armed forces are supposedly poorly paid, but they get bed and board too.

>The report said the gap - or pay premium - between what a typical public sector worker earns above their equivalent in the private sector has increased to 16.5% over the past two years for salaried workers.

But it says this has risen by 35% for workers paid by the hour, despite efforts by the government to reduce the public sector wage bill.*

At the same time, real pay has fallen for the bottom 30% of private sector workers.

/ Is this a case of damn lies and statistics. If private sector pay falls then the gap widens, no? Is this article just about falling private sector pay due to recession?

More cash perhaps - but the private sector can't offer a job for life nor a gold-plated pension. Funny how people forget about those.

Policy Exchange are a Tory think tank and are generally seen to be full of shite. Of course they're going to be trying to create a wedge between private and public sector workers. The reality is that everyone is being screwed by the people at the top, and they know that if they divide us up and get the private sector to hate the unions, and think that they're getting a better deal somehow, the anger about cuts and rising food prices and whatnot is going to be directed onto other people at the bottom, instead of the true tyrants here. Read what the TUC says in the rest of the article.

Don't post reports from centre right think tanks if you want to be balanced. You could find an opposing report from a think tank on the other side of the spectrum.

I can assure you that I'm not naturally on the right of the political spectrum, but I have a fair amount of knowledge of how the public sector works (particularly at the higher levels) and it pretty much aligns with my personal experience.

Reply on news.ycombinator.com