Chicago sold rights to 36k parking meters for $1.2B that generate $200M per year
chicago.suntimes.com
chicago.suntimes.com
The grid was originally bought by the state from private operators to support the state's industrialization and economic growth as foreign investors didn't want to help grow our economy. That was decades ago under an old-school conservative leadership that was pro-business and the interests of all and not just looking after their mates and themselves. I think we need to rethink our conception of political parties and who they represent because I question how many truly represent me.
Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that.
Services such as electricity benefit from long-term investment, and create much hard to capture value. In theory, a government will be efficient at allocating resources for that.
We HAVE to stop thinking that business is always more efficient at everything. Business is great, I've started a few and see what they've done to lift people out of poverty-- but it is built on the back of responsible government.
(Of course, the goal of government is not efficiency either)
Not necessarily true, many power generation projects are built knowing that they won’t be profitable for many decades and are happily funded by pension companies that treat them like bonds. Many government projects don’t get done because their payoffs won’t be seen within the election cycle.
But politics, (at least democracy) has the double edged sword of election cycles. This heavily incentivizes short term thinking.
Ex. Should the mayor pour millions into sewer system maintenance or millions in flashy projects and waste?
If the sewer maintainance is done right, none of the electorate notices. But the electorate will see the flashy spending and vapid superficial projects. And who cares if we defer sewer maintainance, that will only cause issues 20 years from now.
But we’ve spent 45 years hollowing out those organizations in the US.
It is run by commissioners chosen by the mayors of the cities they serve and a few are chosen by the county.
They all have graduate degrees in engineering. The employees are similarly qualified.
I suspect the reason they do such a good job is that theyre insulated from the rest of government.
Bureaucracies make change happen slowly. They preserve the status quo.
And yes, we've been busy gutting the gov't status quo for decades.
My point wasn't that all governments fail at sewer maintenance but that governments aren't automatically superior at long term planning, and in many ways have structural problems that can inhibit long term planning, whereas a private sector company may not have those same mal-incentives.
Furthermore, private companies can fail, be sold for scrap and parts to competitors, and go nonexistent whereas governments don't. If pets.com loses too much money, they can go get a little more and extend the runway, but eventually they go out of business and other companies get their market share. If my government loses too much money, greater amounts are borrowed, taxes are raised, and the money furnace continues to be fed.
Look at price/earnings ratios. They have crept up from the 80s which means investors are willing to pay more for each dollar of future earnings. Look at individual companies like Amazon that was extremely valuable while losing money for years and even now its very thin. Look at all the VC companies throwing money at companies with just an idea. How about private industry, like billions of trees being planted every year by private businesses just so they can harvest them in a few decades.
This doesn’t come anywhere near passing the sniff test.
There are plenty of companies with very bad business models that still have a decent stock price (Spotify, Uber, Lyft).
Yes I know that you can’t have a P/e without a profit.
And some of the most valuable companies are in the oil industry extracting non renewable resources.
bureaucracies that are not allowed to die do not face this evolutionary mechanism of creative destruction- this includes governments but also a lot of business edge cases like PG&E for example.
This is pretty key.
Imagine a train line that allows commuters to get to work. Trains are expensive to run, so the actual cost to get a commuter to work and back is £100. The commuters are paid (say) £150 a day, after tax. Is this train worth 2/3 of their post-tax income? Probably not, so they won't use it, and the company can't get workers if there's no other practical way to commute. Workers can take less good jobs near home, earn less, but take home more. Or even no job at all. However, a worker generates substantially more than their post-tax salary in value to the economy as a whole, so subsidy of the train fare creates value by getting them to work and generating that value, even though the train cannot actually turn a profit itself by charging the commuters out of their income.
Even if you say "well the company should just pay more if they've made that value", not all that value manifests directly on the company's bottom line, it includes downstream value, as well as intangible things like worker skills that are more of an abstract societal benefit.
In the same way, roads produce massively more value than people would be willing to pay individually: all the food deliveries in a week might be worth, at retail, about £4 billion, say. If those deliveries can't be made, what will be the cost? £4 billion? Or more because the whole country will become a much less effective economy when everyone is starving and looking for food? And the universal-delivery postal system. Healthcare, childcare, energy, etc etc.
There are edge cases, but in general inhibiting the ability of workers to work (e.g. by making it expensive to get there, or expensive live near enough to the work, fail to allow them to be healthy enough to do the work, make it hard to take care of children while working, restrict access to or quality of education etc) is not good for a society built on work.
Regardless of the specific case here, businesses do a horrible job of accounting for the externalities of their decisions. This shows up in two ways:
1. Negative externalities - there is a large cost to society of my company doing this, but I'm not the one paying the cost. As a result I can still make money off of it so I will do it. Even though it is a net negative for society. Dumping toxic pollution into a river is a great example. You need an external force (government) to step in to ensure they account for that. Either through things like laws to make it illegal (and actual enforcement of those laws).
2. Positive externalities - there are larger benefits to society of performing the action, but the company itself doesn't get that value as a result they don't do the action. Subsidizing things like the US interstate project is a great example of this. Again markets fail to capture this so don't do it. Or if they do it's in a way that's a net negative for society and becomes a defacto tax on all economic activity making other useful businesses unprofitable. Again an example would be if all interstates were privatized and drivers were charged maximal rates. It would drastically reduce economic activity.
There are absolutely situations where markets are not the right solution to the situation and government intervention is, and they usually fall in where there are significant negative or positive externalities.
Today they aren't expected to. They're expected to extract profit and then socialize any losses, externalities or otherwise.
It doesn't have to be that way.
Our economy and politics are indeed favoring short-term gains by design and that is « simply » what should be controlled to a certain extent. Not easy as this should be a global move, otherwise the long-term advocates are likely to be outperformed by their short-term competitors and not have the time to implement fully their strategies.
If businesses account for them, they stop being externalities.
This bears emphasizing.
The main benefit a company provides is the goods they produce. The money is a measure of how much people value the goods at the time, but the main benefit is in the actual goods themselves.
Eg the electric grid is more beneficial than what people pay for it. If the cost of electricity doubled everyone would still keep using a fridge. If the cost of fridges doubled everyone would still keep using a fridge.
And that's the success of modern society - all the beneficial stuff we have access to that make our lives a little bit better.
This is hopefully obvious, and yet the excess road building problem is ubiquitous in the US and costing us fortunes.[1]
So we can’t just hand-wave and suggest that all infrastructure and all subsidies always create more value than they cost, we have to be critical and especially careful not to pretend that non-financial benefits can pay for real financial costs.
Just because a government builds it does not mean it is worth it for society. And if it was worth it at time X, it does not mean it will be worth it at time X+1.
See the multitude of comments and threads about living in communities with work and play in the same community, as opposed to driving 30min each way from a suburb to a work area and back.
Pretty much all of your examples can be rewritten to reflect the above. One example would be: what if it is only marginally more expensive for the company to build the workplace nearer the workers, making the train unnecessary? If the subsidy exists they will capture the value of avoiding that cost while foisting the cost of the train subsidy on tax payers, which is a net negative.
The main reason politicians are anti-public enterprise is because they are entwined in the profits of private enterprise. "Lazy union workers" is a handy cover, though.
No, but also yes.
The grandparent commenter is correct in saying 99.99% of US rail is designed entirely around moving freight. And I’d usually agree it does it well, but the system seems to be breaking down fairly publicly of late. Regardless, it’s essentially an apples to oranges comparison vs European/Asian passenger rail - a (very poor) reverse analogy would be to fault hyper regional business airports for not facilitating giant cargo planes.
Everything else you mentioned is basically correct but a large portion of the dysfunction is due to the specific need to lay new rail to get around the freight priority system that dominates essentially all of our existing rail lines. States are trying to roll out modern dedicated passenger lines but the projects keep getting derailed (pun intended) by politicians.
The Acela dedicated passenger line in the Northeast is (possibly) the only place in the country where you can make a reasonable comparison to the rest of the world.
And having ridden both Acela Express and Eurostar in the past decade, my opinion is that Eurostar is a very clear winner but not quite as obscenely as most people would expect.
Eg: The Amtrak cars are MUCH comfier but the train runs at approximately half the speed of Eurostar (Acela is supposedly capable of 135mph but it only hit 125ish when I rode - I clocked an avg ~90mph vs avg ~180mph on Eurostar iirc). No freight priority issues, etc. Still extremely last gen feeling, but more in a “this can be fixed” way and less in the “well this is utterly hopeless” like the rest of the country.
Wouldn’t even call what you have a rail network at all, let alone a bad private rail network. Like what you have doesn’t even make sense privatized
But I can show you PGE and SDGE as examples of privatization WITHOUT any of that good-faith investment, and then when the situation went critical (massive wildfires a few years back due to bad electricity infra), electricity consumers being forced to foot the bill. Where I live, my utilities bill has quadrupled in the past three years (from ~$100 to ~$450 a month for literally identical usage, I checked my statements), rate regulation (the CPUC) is seemingly toothless, and my utilities company sends me these insultingly understated letters about how they can't control energy pricing and have to pass on rates to consumers.
Except they won't tell you that they are owned by the company they buy their energy from, and that THAT company happily will set prices to whatever they want if it means sucking off their pathetic little shareholders just a little bit more. Sempra Energy has been doing gangbusters on their quarterly earnings reports!
We have and have had sufficiently advanced climate modeling to inform whatever decisionmaking they may have needed when they had the best opportunities to invest and maintain infrastructure. Our forest management policies have not changed in forever and California faced seemingly annual firestorms in the years leading up to PGE's disaster. People have been sounding the alarm on climate change for YEARS and YEARS. The current predicament is no excuse.
You want less forest fires? Fucking remove all the overgrown underbrush and older trees that have overstayed their welcome. The Native American Indians of the area would be happy to tell you this, something that worked for millenia before westerners came along, said "MUH CUTE TREEZ", and refused to take care of the environment.
Places like Yosemite National Park even refuse to put out naturally occuring forest fires anymore, because guess what: You need periodic forest fires to avoid disasterous forest fires.
It is a vicious cycle and feedback loop. Weather patterns the previous year create a tinderbox for the next. And then we aggressively suppress the inevitable fires that spring up, leaving even MORE unchecked undergrowth and denying the forest bed the nutritional products of burned foliage, which just worsens its health and creates even BIGGER fires when they eventually roll around.
It's almost like being a public company vs being a government run entity isn't the major decider of effectiveness / optimal outcomes for end users.
Instead, it seems to be "is this company (etc) run by self-interested arseholes trying to enrich themselves at the expense of others?"
If it is, then the structure isn't going to matter. End users are going to have a bad time, regardless of the PR/bullshit said company puts out to say otherwise.
Likewise, if the company (regardless of structure) is run by clueful people dedicated to actually providing the required service, end users are going to be in a decent position.
Unless of course they get screwed over by above mentioned arsehole types. eg starved of budget if they're a gov org, have activist investors cause trouble if they're a public company
1. Don't think of themselves as self-interested arseholes.
2. They are in fact self-interested arseholes.
We have no methodology that allows us to put "good people" in power. And even if we had, power corrupts. So the best we can do is to build a system that works even when all actors are self-serving.
Doesn't seem to be working though eh?
That being said, I don't have any fantastic suggestions either. :(
Typically you just fix a bug, though of course some systems reach a point where a rewrite (either incremental or from scratch) is the only option. I see absolutely no evidence that we reached that point, all arguments are just emotional factoids. I also see no attempts for an incremental rewrite, all people want is to burn the system and hope that something good rises from the ashes.
You mention business efficiency being built on the back of a responsible government, but I've often heard here where I live (South Africa), if you want to know where to deploy capital look for companies doing something the gov should be doing...because it's easy to compete (port management, electricity, rail, air lines, mines, refuse management)
As opposed to government? The reason every government is so bureaucratic is precisely because it's incentives are structured to optimize for the short term. At least private business pays with blood for it's mistakes.
> In theory, a government will be efficient at allocating resources for that
In theory dictatorship is more efficient that any other form of government. In practice, humans are more flawed than we like to admit.
> We HAVE to stop thinking that business is always more efficient at everything
Nobody thinks business is always more efficient. But it turns out to be way more efficient on average.
> it is built on the back of responsible government
The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are.
> The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are.
I think the laid off tech workers and people of Ohio might have a few things to say about that..
I’ll play the smallest fiddle for those who didn’t save during the good times.
Yes, I work for $BigTech and I save a significant portion of my income.
Curious how you glossed over the folks in Ohio.
Government rarely has incentives to be efficient. It's mistakes are always covered by taxpayer money, effectively punishing those who are efficient.
Why are we always comparing real thing that has downsides with magical thing that's perfect? I don't disagree, magical thing is indeed perfect. The only issue is that it doesn't exist.
The government also covers bailouts for banks using taxpayer money, effectively punishing everyone.
> Why are we always comparing real thing that has downsides with magical thing that's perfect? I don't disagree, magical thing is indeed perfect. The only issue is that it doesn't exist.
Again, the original claims were 1) that corporations pay for their mistakes with blood and 2) that the beauty of capitalism allows for a thriving society with an entirely irresponsible set of actors.
All that's being said here is that 1) private business do not in fact pay for their mistakes in blood and 2) capitalism doesn't allow a society to thrive when all actors are irresponsible, in fact, you only need to have a select few actors to be irresponsible in order to degrade the state of society.
What's the alternative? Other than more scrutiny and harsher punishments for banks, which very few people are against.
> private business do not in fact pay for their mistakes in blood
Just because 0.1% of businesses gets bailouts, you're going to ignore 99.9%? Are you the type of person that says vaccines don't work because people still get sick?
> capitalism doesn't allow a society to thrive when all actors are irresponsible, in fact, you only need to have a select few actors to be irresponsible in order to degrade the state of society.
The "degraded state of society" is still orders of magnitude better than the alternatives I heard of. I'd say it still fits whatever the definition of thriving you can come up with.
Nothing is perfect, it's quite easy to criticize anything. But if you're criticizing without offering any alternatives, your criticism isn't worth much.
So I'll ask again, what is alternative that you're offering?
Few people are against it, yet we didn't hear about too many bankers getting sent to the locker, did we?
> Just because 0.1% of businesses gets bailouts, you're going to ignore 99.9%? Are you the type of person that says vaccines don't work because people still get sick?
Not sure where you're getting the 0.1% figure but "privatizing gains and socializing losses" is hardly a new idea.
> Nothing is perfect, it's quite easy to criticize anything. But if you're criticizing without offering any alternatives, your criticism isn't worth much.
I think we're some ways apart from being close to perfect, no one is asking for perfection just that things not be awesome for 1% of the population at the expense of the rest.
> So I'll ask again, what is alternative that you're offering?
I won't give you a primer on different economic models, at the risk of bringing too much taboo magic into the discussion, just know that not all models depend on the exploitation of workers, labour pressure via unemployment, and minimum wages that require government subsidized food stamps in order to allow workers to live while working multiple part time jobs with no benefits.
edit: In the spirit of hn guidelines and for the curious, I think some of the discussions with B. Sanders may be appealing to some.
Privatizing gains and socializing losses is what happens when governments are corrupt. That isn't a private sector problem, that is a public sector problem, if your politicians is giving away your tax money to corporations then the solution isn't to give those politicians even more money or power.
Please.
Lobbying + gerrymandering > deregulation > look ma, government inefficient let's reduce spending > reduced government capacity > look ma, government inefficient let's reduce spending > reduced government capacity > ..
Ever heard of the revolving door or regulatory capture?
Who is served by a reduction in government spending? In what world is "let's cut government spending and further provide privatized corporations with the means by which to provide the necessities of life for the population" a sound objective when the stated goal of corporations is to maximize profits and provide infinite growth?
Just this week: Eli Lilly announced [1] that it would cap insulin prices at $35. Why is that? In order to maximize profits.
California announced [2] that it would start producing it's own insulin. Tell me why, in an efficient market, the government would need to step in and start it's own production [2] or even mandate [1] price caps? What does this say about the state of competition prior? Did EL just recently find efficiencies that allows it to _still_ profitably produce and sell a vial of insulin, which costs $10 to produce, at a reduced price of $35 (from "over $300")? Of course not!
Free market at work. It only took the inefficient guberment to step in for _competition_ to materialize.
[1]: https://www.cnn.com/2023/03/01/health/eli-lilly-insulin-pric... [2]: https://www.theverge.com/2022/7/8/23200404/california-insuli...
Your lack of knowledge on the matter mixed with self-righteousness is astounding. I suggest you to research beyond newspaper headlines.
Insulin that's being sold today is very different from insulin that was invented a century ago. The reason it's so different is precisely because private businesses had incentives to innovate, which resulted in prolonged patient lives.
You know what slows down modern insulin from becoming cheap in the US, even after patents have expired? A government agency called FDA. By the time you can get your generic insulin to the market, it might become obsolete. Competition isn't materialized, it is artificially limited by the bureaucratic government.
(not to mention that patents themselves are also enforced by the government, but that's a much more complex topic)
In order to get cheaper insulin you need less government, not more. Evidently, that's why insulin is cheaper in India, China, or Mexico.
> Tell me why, in an efficient market, the government would need to step in and start it's own production [2] or even mandate [1] price caps?
Californian local production of insulin is an attempt, we've yet to see the results. It is quite possible that those funds would be better off spent on directly buying insulin instead of producing it.
Oh and by the way, you know how California plans to "produce" the insulin in the first years of the program? By outsourcing it to private companies. Isn't it convenient that those exist?
And, as illustrated earlier, price caps are a government "crutch" to cover a bigger government (FDA) inefficiency.
Before anyone accuses me of being a heartless business owner or executive, I’ve never in my 27 year professional career been in a position to fire anyone.
1) To entertain this point, maybe? If your optics of the situation was efficiency for the company, but why would you not look at efficiency as a whole and for whom?
As a society, don't you think we should be structuring things such that they are efficient? Is the company that doesn't end up paying for large ecological disasters "efficient" because it offloaded the cost of the cleanup onto the people/government? Sure? But I think society as a whole would benefit from adding resources to maintain infrastructure to prevent these types of ecological problems.
> Hiring and firing people who are only seen as "resources" when needed is efficient from a business point of view.
2) If the companies involved in the current layoffs are, by your definition, "efficient", what would you make of Apple [1] in this situation? Super really efficient? What's their secret sauce? Are the in/efficient because they didn't overly take advantage of the hiring craze? What are the costs associated with engineering layoffs and how are those costs manifested in society?
Line items like headcount on a spreadsheet are easy to quantify, organizational knowledge loss, loss of trust/moral, impacts of layoffs on mental/communal health, are harder to quantify.
I’m going to first answer that question by speaking about the $BigTech company I know best because I work their and my RSUs are worth half their all time highs - Amazon - and the industry I know best - cloud - because I work at AWS.
Amazon Retail thought that the Covid induced online shopping was going to be the new normal and over hired.
AWS didn’t really get hit with layoffs (https://www.datacenterdynamics.com/en/news/aws-employees-amo...). Azure also didn’t suffer layoffs (https://www.channelfutures.com/business-models/microsoft-lay...).
Google has so many useless money losing products and the attention span of a crack addled flea. No one ever accused Google of being well managed. I can’t speak about GCP.
Apple outsources most of the people who build its products. While Apple hasn’t laid off people, the contractors who create its phones who work for Apple for all intents and purposes have laid off people.
Facebook now is down to its employment level of a couple of years ago.
My moral would be fine if I was working for Facebook [1] for a couple of years at FB salaries. I would have saved more than I already do.
And many 2nd tier tech companies aren’t profitable. The easy money ran out. [1] I don’t hate myself enough to work for Facebook.
In government or union heavy industry they’d still be forced to pay them.
Let’s keep that in mind as we see Twitter still running completely fine months later after firing so many.
Not everyone has inherent value, many are being paid but not actually creating value the other side of the transaction and it’s silly to pretend that’s fine.
But it turns out to be 'thought' to be way more efficient on average. Or there's an actual number?
It looks like the business optimized for the long term while government optimized for short term
And in practice it’s all about ass covering and getting re-elected.
If such meaningful independence doesn’t exist, it arguably doesn’t make much of a difference who’s name plate is on the ownership?
Unfortunately, Australia really doesn't have much leverage in this space, and forcibly re-nationalizing an asset like that, would cause major diplomatic problems, like the harsh trade sanctions imposed by China over the last few years due to Australia backing a COVID inquiry.
https://legacy.trade.gov/steel/countries/pdfs/exports-china....
Australia doesn’t have much in the way of domestic manufacturing need for steel, so there’s little internal base demand to support production. Australian labour costs more, so as a steel producer it would have trouble competing with China on export markets.
The US and Japan do have domestic steel production, but they both have steel hungry manufacturing sectors, and anyway they specialise in high quality specialist steel products. Those take expensive specialist facilities and highly skilled workers, but there’s no real way for Australia to develop such specialist facilities and skills from scratch.
I never imagined that steel production would be particularly labour intensive.
I'm just confused how it would be cheaper to ship the unprocessed ore across the ocean at a cheaper cost than processing it locally and shipping the finished product.
Set a maximum power rate, service level agreement, and mandatory renewable generation. Drive them into bankruptcy and have the court offer it to a new operator when they can't comply. Eminent domain to prevent power outages, before they can even shut things down.
If Sri Lanka (or Africa) didn't need more money from China (eg US, India, etc.) they could take back their port tomorrow by passing a law.
But in any case, transmission grid operators are natural monopolies that are usually heavily regulated and can’t simply charge whatever they want. I’m sure South Australia’s grid is no different.
Frankly, I'm doubtful this is a case of actual enforcement of global trade rules, it's pure economic power. That works until it doesn't, and even the purchasers of these profitable "rights" know this. That's why they want to get their money out quickly, but once the local government has turned against you it's rarely worth fighting even for the largest funds.
If a state made a bad deal they can either renegotiate it (eg. negotiate in a fee to cancel the whole contract) or try for arbitration (and the tribunal might set a fee for cancellation), or assert their sovereignty.
Of course with China everything that reaches political circles becomes a power-play, but at least in the first two cases they are less motivated to respond in kind (ie. levy tariffs or fuck with the business of Australian companies in China).
Turns out the South Australia grid isn't really owned by China anyway - they have a 46.6% stake, with the other 53.4% controlling interest now held by Australian Utilities, a consortium of Australian infrastructure and pension funds.
https://realassets.ipe.com/news/australian-utilities-trust-e...
Ontario, Canada sold one of the countries most important highways back in the 90's to investors for 100 years but at least the owners were still Canadians.
That said, on this level it's almost 100% politics. There are many ways to get out of these unfair deals made in times of desperation, the question is - like you said - are they worth it or not.
I’m not sure I’ve ever seen an example where “efficiency” wasn’t just giving up on social obligations (either by screwing employees, or screwing customers, often both).
I’m looking around and see postal services (it still breaks me that “going postal” means what it means), roads, railways, energy production. I don’t see any of them having gotten meaningfully cheaper or providing better service or handling their employees better through privatization.
As an hybrid, splitting into nationalized infra management and privatized customer facing service potentially worked for ISPs. That’s the only mildly positive example I can come up with.
An additional one that comes to mind is following the privatization of airlines in many countries, air travel got much cheaper. India is also a glaring example, there are instances in Europe as well. (The US was never a monopoly but it was highly regulated up until the Carter admin in the 1970s. Deregulation produced a similar positive result)
Going further back there are numerous academic examples. The classic figure is that private farms in the soviet union worked only 3% of the total sown land, but produced 66% of the eggs, 64% of the potatoes, 40% of the meat, and 39% of the milk. China had similar figures.
In general I think privatization works best where that force of competition can influence things. I'm not sure exactly how Chicago parking meters companies could compete with each other or improve 'service', but for industries prone to competition, privatization makes a lot of sense to me over government monopoly.
This is the problem, your example is too new. Give it a decade or two for amalgamation to occur and let's see where things are once 2-3 companies own the market.
Telecoms used to be a natural monopoly when it was based on land lines to every house. It made no sense to lay competing infrastructure for that. Now with mobile networks the infrastructure is a fraction of the cost and competing networks can coexist seamlessly, so a competitive marketplace for services makes sense.
Waiting years to get a phone line was the norm for most people I knew there. I've known several folks where the wait list for getting a land line was over a decade - and we're not talking some remote rural village. If we project how long it would take to get the country connected at the pace they were going vs the progress private companies made with cell phones, it is several orders of magnitude. The number of people in the former category who would have died before having a chance at merely having a phone is in the millions.
It comes down to who can get away with what: do you have more leverage on your officials or on your local conpanies? If your local companies are monopolies that benefit more from not serving you, you'll be in the same situation as you descibre.
As opposed to simply not having the service for all those decades, and continuing to not have it?
Keep in mind that these governments have a longer history of not delivering, and not maintaining existing infrastructure than most of these private companies. By a margin of decades. There is more data on their inability to deliver than there is on the private companies' malfeasance.
> do you have more leverage on your officials or on your local conpanies? If your local companies are monopolies that benefit more from not serving you, you'll be in the same situation as you descibre.
The difference being local monopolies still provide service to those with resources to pay, whereas the local governments wouldn't.
If there is a market, they will continue to provide service. If they leave, another company will take its place.
I'm not a believer in the free market. But this is one of the classic examples where in corrupt countries international private companies really were way, way better. When the lowly street vendor can afford a cell phone, everyone's life is way better.
As it’s mining, I was kind of expecting the gov to just have laundered the env impacts to a private company, but it seems it actually has positive developments at this point: https://share.america.gov/peruvian-copper-mine-also-produces...
Kudos.
> Telecom in India
I don’t know much about India, from a quick it looked to me like they refused to privatize the low level (cable lying) infra for a long time, and are now in the process of looking into it: https://www.business-standard.com/article/companies/telecom-...
I must be missing something
> airlines
There was competition happening before the privatization though ? I only followed the european ones, but the quality of service and reliability mostly went down after the privatizations. The more interesting part to me is how much this industry resisted unleaded gas because of the costs associated. Could gov regulation be an answer to force a better direction when it makes no economic sense ?
> competition
100% agree on not keeping blocking competition for non critical, lifeline services. I think gov managed infra is inherently prone to bloat and corruption, but that’s a price we pay to keep that infra working (postal service costing 20% more is better to me than 20% of the country losing access to postal service). That calculus doesn’t make sense when it comes to fields were other players are thriving and/or lower service quality isn’t life or death issues.
They privatize the registry services (driving, business, birth certificates) in Alberta, Canada.
It went from a US DMV experience - shitty attitudes, bankers hours, two locations in the city
To…
Dozens of small businesses around the city, hours that cater to people that work, lower prices (they all competed with each other) and good attitudes (because you could always go somewhere else).
A massive jump in quality of services that took it from time wasting drudgery to a simple, easy process that was cheaper.
Australia Post is wholly owned by the Australian Government represented by two Shareholder Ministers, the Minister for Finance and the Minister for Communications, Urban Infrastructure, Cities and the Arts.[1]
[1] https://www.finance.gov.au/government/government-business-en...
This just seems like a really bad deal for whoever buys it.
Regarding your 10% assumption: In June 2014, the Adelaide Advertiser reported that SA Power Networks made after-tax profits of $420 a year from each customer compared with $92 for another Li Ka-shing-owned utility in Britain. I don't believe the average customer paid $4,200 for energy in 2014, so their profit margin must be much higher than 10%.
But it's also an ever constant presence when the assets are state run. In my (LatAm) country, privatization has generally been a great success where it's happened because when the companies are run by the government, there's constant grift going on. The privatization of the mines in particular was wildly successful. Production went up, costs went down, and the state still collects profits in the form of mineral taxes. The mines were a black hole of public money when the government was in charge of them.
We're talking about government services here. Of course a mine will be more profitable in private hands.
Not to mention if you rub the wrong people your house might get fire bombed:
With electrical rates above $0.35/kWh, that's the point where I would get a loan to install a massive off grid solar system with LiFePo4 batteries and probably have a ROI period of under 7 years. And then leave a basic meter and panel connected to the grid with nothing on it.
That's something of a stretch.
State Grid Corp of China bought a 41% stake in South Australia's transmission network owner ElectraNet. See:
The 200 year lease was mentioned as it is unusually long and there was some misrepresentation over the length of the lease to people who voted for it and the public.
The question of sovereign interests is real. The original nationalisation in the 50s or 60s was I think due to issues the state government had with the British owners interests not aligning with the state's ambitions. But at the time of sale tensions with China were not the same and the problem was that it was a terrible deal for the state that led to a subsequent explosion in power prices.
So no, they did not "sell the grid" to China.
[1] https://www.cki.com.hk/english/ourBusiness/home/inv_au.htm
Certain kinds of pro-business politicians tend to think that privately run services are morally superior to government services. Because this is an ideological argument, they are unwilling to listen to empirical counterpoints. As politicians they are also prone to teleological thinking: because the purpose of privatization is to benefit the public, it will benefit the public. Hence they care less about the details of the privatization deal than they should.
A two-party system with misalignment between the axis between the parties and the main axis of political variation (as often happens for a short time during realignment periods, and happened for an unusually extended time in the US from about 1932 to about 1994) is not a four party system, its just a two-party system with ideologically incoherent parties.
When my power was off for multiple days in subzero temps and i seriously considered one morning we might just not wake up I had a realization. Another way to look at “inefficiency” is: “redundancy”. And I sure as heck wish our grid had a little more redundancy.
Edit:
Unfortunately, because of the nature of much of what is privatised, these investment opportunities are often rent-seeking opportunities.
It's not because it's private. It's because it's forced to compete. You can't just transfer ownership of a monopoly into private hands and call it privatisation. You need to split it first, sell parts to adversarial entities and prevent them from buying each other.
Their new hospital is (from wikipedia)
> the most expensive building[1] ever built in Australia, and the most expensive hospital[2] ever built anywhere in the world, at US$2.44 billion in construction and equipment costs.
This is around the same time that PA tried to lease their turnpike, and cities all over the US were facing a post-boom hangover when projected revenues from permits and property taxes didn't align with budget realities.
I'm not defending the decision, but it was far more shortsightedness than corruption.
Democracies often force short sighted thinking because of
1. Frequent elections
2. Situations outside of your control but you are blamed by the public or attacked by the opposition for
3. Voters who may have nostalgia, emotions, and or a bad memory
That deal fell apart; it was never completed.
But Chicago did lease the parking garage underneath Millennium Park to the same parking meter investor group. And that deal went bankrupt with the lease going back to the lender (who set up a new consortium which is also on the verge of bankruptcy).
So basically the two parking deals have just now broken even ;)
> Amid a legal skirmish with the city over the underground parking garages, the venture is in talks to relinquish them to banking giant Societe Generale S.A., which provided a $403 million loan to finance the 2006 deal, sources said. It's a sign that the investment has lost so much value with little prospect of a turnaround that the venture no longer sees a reason to own it.
https://www.chicagobusiness.com/article/20130912/CRED03/1309...
> Chicago CFO Gene Saffold said the Midway Investment and Development Company, the group that successfully bid on the 99-year airport lease in September, was unable to secure financing, leading to the deal’s demise.
https://www.reuters.com/article/us-chicago-midway-lease-idUS...
It clearly said it was in Chicago and involved a Daley.
Oulu is at least as cold as Chicago and has twice as much snowfall https://en.wikipedia.org/wiki/Oulu#Climate vs https://en.wikipedia.org/wiki/Chicago#Climate . I'm not saying that _you_ would wish to cycle in December but making it practicable for many is a choice, as Oulu shows.
Either way, cars are inherently less space efficient than bikes, because they occupy so much more road space per passenger.
That must be a very big car, or very tiny tightly packed bikes?
At 7x2.5m I can imagine 10 bicycles side-by-side with ~70cm each, with another 10 'interleaved' opposite.
Right now Austin is trying some very dubious eminent domain measures (which were pretty drastically clobbered in court) to get out of a long term lease they signed just a few years ago to have a private operator run a small separate terminal at the airport. I think it was especially braindead for Austin to ever sign that lease - we were (and still are) growing like crazy, it didn't take much foresight to think Austin would eventually need to seriously expand the airport.
Of course, hardly anyone involved with the original bad decision is still on city council, so it became someone else's problem.
The company doesn't actually control the prices. See https://parkchicago.com/about/
> The City Of Chicago retains control over pay station parking rates. CPM does not – and never has – set pay station parking rates. The City retains exclusive authority to determine and establish rates, set hours of operation, and place, add or remove metered spaces. The initial five‐year rate schedule, which ended in 2013, was approved by the City Council to align with rates comparable with other large U.S. cities. Prior to the agreement, parking rates in Chicago were much lower than the national average. Seventy percent of meters had not seen an increase in 20 years.
Chicago is pretty famous for corruption.
That might be an understatement of all time winner, I opine, as someone originally from there.
Daley didn't raise their taxes. The meters didn't skyrocket in price under his tenure. People rarely look for causes to things. Ah, so he didn't fund pensions so now my taxes are going up? No, it's the newer mayors who are the ones raising my taxes!
Yes, if you look at the situation, he might have caused those problems, but during his tenure people probably felt better. They had more money in their pocket and weren't being told bad news.
Why can't things be like they used to be? Well, turns out it was never sustainable for things to be like that and when you mortgage your future the bill eventually comes due.
Nobody could honestly think a $1B windfall appearing from nowhere was worth signing without significant review. Every person involved understood the significance of the deal.
I get “civil speeding tickets” (traffic cameras) all the time in my state. I simply throw them away without repercussion because the cost of suing to collect from every individual who hasn’t paid just isn’t worth it. Not sure if it applies in this case but in my state these also cannot legally be reported to credit agencies or insurance companies.
If this is not the case and the city is criminally prosecuting people (with taxpayer resources) to enforce private debts owed to the meter company, there’s a good chance a court would find the practice to be illegal. At least I hope that’s how it would turn out…
In my case, the tickets I get are usually $150 to $350 per and there isn’t a single instance of someone being sued for non-payment.
https://www.youtube.com/watch?v=mfTcZbOmLl0
https://www.youtube.com/watch?v=bJg9m0eOjsM
https://wgntv.com/news/wgn-investigates/rogue-towing-some-to...
I can't find a reference now, but when I visited in January there was a story on the news where a tow truck was starting to tow a legally parked car, the owner showed up and tried to stop them, so a tow company employee pulled a gun and left with the car. The police came and basically said they couldn't do anything and suggested paying the fine to get the car back, or something to that effect.
Edit: Found the story - https://www.nbcchicago.com/consumer/unlawfully-towed-refunds...
The deal structure is as follows:
- if the city fails to prosecute a parking violation, the city pays to the parking company anyways.
- so your debt is to the city: fee for a parking violation, not a debt to the private company.
- the city can immobilize / tow your car if it has an unpaid ticket. That’s very expensive.
Ridiculously advantageous to the partners of the LLC, and good on them for securing this. Easily one of the best rev deals in history..
Can't knock it
I guess what I'm saying is that these are long term grifts and the city could deal with it (the fleecing of their voters), but chooses not to, because they know where their bread gets buttered.
Source: have had visibility into businesses that look like they ought to print money reliably, but actually don't.
> private investors have already extracted $2.1 billion from the deal, in part by refinancing three times.
> CPM does not – and never has – set pay station parking rates. The City retains exclusive authority to determine and establish rates, set hours of operation, and place, add or remove metered spaces. The initial five‐year rate schedule, which ended in 2013, was approved by the City Council to align with rates comparable with other large U.S. cities. Prior to the agreement, parking rates in Chicago were much lower than the national average. Seventy percent of meters had not seen an increase in 20 years.
And it's definitely not true on a risk adjusted or cash flow basis. Also these deals can be (and probably was) levered to levels which equity investments cannot. Borrow at SOFR+x% and earn on the spread between that value and 16%. Extremely profitable and uncommon carry trade
In 2021, Chicago Parking Meters LLC had $136M revenue minus $50M of various expenses, leaving $86M of net operating income.
But of that $50M, $15M is "amortization of intangible asset", and I think "intangible asset" refers to the right to operate the meters. So it's effectively only $35M of "running-the-business" expenses, leaving $101M of effective profit.
Selling something with long-term value for a short-term lump sum is the kind of thing a politician would do. He or she isn't going to be around later, so why not get reelected now?
On the other side, Richie Daley didn't have the acumen of David Bowie, who did the same thing:
https://www.investopedia.com/terms/b/bowie-bond.asp
https://www.billboard.com/music/music-news/david-bowies-bowi...!
Just think: who knew that parking meters would continue to throw off money? what happens when self-driving cars are cruising around and no one needs to park anymore?
Some businesses are best owned by government and some privately. It's not just a blanket good thing that governments should ratchet their way towards communism. Natural monopolies and public goods can be better owned by government because the private sector needs competition to be efficient.
But no. So what is it? He has lots of quotes.
It’s weird to think that the state Highway you drive on is owned by some private equity company.
https://www.npr.org/templates/story/story.php?storyId=569539...
Anything developed with public money or eminent domain should be off the table for selling to a private entity. If private investment wants to own parking spots or highways, it can pay to create them itself. Private investment should result in development, not rent seeking on things that were already developed.
Law should be fully mutable and not subject to privately owned restrictions. Any terms that have been written in to keep the city from doing things like lowering parking rates should be considered unenforceable. And since the city is no longer getting revenue from the meters, citizens should vote to eliminate the parking fees.
Furthermore, most long term debts or contracts that a government could enter into should be repudiatable due to the principle agent problem - specifically the corrupt incentive of politicians to favor short term benefits and ignore long term liabilities. There should be very limited exceptions such as purely financial bonds that are voted on directly, and even those should have time limits of a few decades.
It’s not sold, it’s leased.
In general we should want capital to stay distributed throughout many different actors, especially our governments, rather than them being hollowed out and the assets centralized into the financial markets. For example, all throughout this thread there are people pointing out the newly created difficulties of implementing specific policies (for example bike lanes), due to the inflexibility created by divestment.
So if the highway goes well, the company makes money hand over fist, and it all looks like a giant scam. If it goes really badly, the government takes a bath, and it all looks like a bunch of waste. So ultimately it's very difficult to set up a deal that lasts very long and doesn't seem like a regulatory mistake, one way or the other.
Also note that this isn't purely a US situation: Some form of privatization of toll roads happens all over the world, and success rates are also not all that great
"SNC-Lavalin Group Inc. will sell 10.01 per cent of its stake in 407 International Inc., the private consortium that controls the profitable tolled highway in north Toronto, for an expected $3.25 billion, the company announced Friday.
That’s more than a billion than what the government earned 20 years ago – for selling the leasing rights to the entire highway.
In 1999, the Ontario government leased Highway 407 for the next 99-years for $3.1 billion, or $4.4 billion in today’s dollars.
At the time, it was the largest privatization of a public asset in Canadian history. But in hindsight, it may be considered one of Ontario’s biggest financial missteps, considering the SNC-Lavalin sale pegs the value of the highway at at least $30 billion.
The company running the 407 reported revenues of $1.4 billion in 2018"
...they sold the 10% to... Ontario's pension fund...
https://www.yahoo.com/now/worst-deal-ever-the-407-is-worth-3...
What a sad fiasco.
That being said this deal was absolutely horrible for Chicago. My least favorite part is that now the city has to pay millions every time they get rid of a paid parking spot, so they couldn’t close streets during the pandemic.
What does it mean to buy the rights to parking meters? Are they buying the physical meters along with the right to collect and enforce fees on them? If the city passes a law that says "no more parking meters, we use drone enforcement now", what happens? What happens if parts of Chicago become car free zones, do the investors get to sue the city? This seems so dumb. So, so dumb.
https://www.thespec.com/news/canada/2019/09/03/birth-of-a-fi...
Reminds me of how princes of old used to sell the right to collect taxes on all sorts of things to the highest bidder.
https://news.ycombinator.com/item?id=33712685
Also:
How much does it cost to upkeep the network?
Do they expect demand for parking in Chicago to somehow decrease over time…?
If this was a sale of music royalties (a “security” that loses value over time as songs get played less) the multiple for the sales price would still be much higher.
Either the Chicago government is stupid or deliberately lowballing the sale in a brazen act of corruption
Could Chicago use "eminent domain" to undo the sale?
Infuriating