[ralferoo]

It does seem to be the inevitable consequence, but often privatisation is required too.

Publicly run services and utilities often suffer from inefficiencies because there's no incentive to change the processes and lots of government funded agencies suffer from the "we must spend our entire budget or we'll get less next year" syndrome.

Privatisation replaces the leadership with people who are incentivised to make the organisation as efficient as possible, but the actual quality of the services delivered matters if people are stuck with a now privatised monopoly and they have no choice of provider (or e.g. energy companies where the choice doesn't really make a meaningful difference anyway).

Probably the sensible middle ground is for the government to maintain a sizeable but minority share in everything that gets privatised, with a general policy of never exercising the voting rights unless it's against a course of action that is clearly detrimental to public interest. Probably even the threat of being able to vote out key personnel would be enough to keep them focussed on serving the public better. And with something like a 40% share, the shareholders have enough incentive to keep profitability high, and the government would also share in the profits of the previously public entity.

[franga2000]

> Privatisation replaces the leadership with people who are incentivised to make the organisation as efficient as possible

This is the core lie that economists have sold us. Private companies are not incentivised to be efficient, but to make as big a profit as possible. This usually means they cut quality, reduce unprofitable activity and extract every last cent they can out of their customers or other source of funding.

Public benefit companies run on a service-first principle. They deliver the required service to everyone, at the same quality, at a reasonable price - at all cost. They're sometimes inefficient at doing that, but more often than not, any "efficiency" gains would mean reducing service quality or accessibility, which is not acceptable when you work for the people, not the shareholders.

[dgroshev]

This logic breaks apart in high positive externality areas, like public transport (or indeed postal systems).

Public transport brings a lot of value to other businesses and communities it operates in that can't be directly captured in fares. Which means that if a public transport system is profitable and the goal is maximising total economic (and social) value of the area as a whole, the system either under-invests, or is too expensive, or both.

The classic economic solution to this is subsidies: capture some of the generated value in taxes, re-invest back into the transport system. However, this makes the business part of the whole arrangement almost meaningless, because the amount of optimal subsidy can't be objectively determined. It's impossible to distinguish a bad business losing money from inefficiencies from a good business asking for subsidies to optimise its total impact.

There are some peculiar arrangements that some countries and systems were able to create, like direct land value capture through transport companies buying and selling property. But those cases are pretty exceptional and for practical purposes don't scale.

[moooo99]

> but often privatisation is required too.

Based on what exactly? That privatisation is required is something you hear quite often, but rarely a solid explanation. Often times, the organization or service operating at a loss is cited. But this is barely a good KPI to look at when it comes to public services. Even if a public service operates at a loss on a business level, it can still mean the very same service is „profitable“ in a macro economic scope.

> Publicly run services and utilities often suffer from inefficiencies because there's no incentive to change the processes and lots of government funded agencies suffer from the "we must spend our entire budget or we'll get less next year" syndrome.

This is not inherent to government services, it is a leadership issue. One - as I may add - is frequently encountered in many large entirely private organizations as well. As such, it barely serves as a good argument in favor of privatisation. Private companies are not incentivized to be efficient, they are incentivized to make money. Money can be made by being efficient. But the ultimate way to be „efficient“ and make loads of money is by being a monopoly - something that you‘re often supporting by making formerly public services private.

Beyond that, what counts as inefficient? A public service can and should have different bars as a private org. For a private company, anything where the process cost is higher than the expected return is inefficient.

Take a postal service as an example. Running a postal office in a small town with few people and little postal traffic is almost certainly inefficient. But is this a good enough reason to cut people off such a critical service?

> Privatisation replaces the leadership with people who are incentivised to make the organisation as efficient as possible

That is what the theory states. In the real world, efficiency gains almost always come down to cost cutting in terms of reducing the service quality, reducing the service availability or a combination of each. In my opinion, to talk about efficiency gains, you need to provide the same service for less - this is rarely happening.

> Probably the sensible middle ground is for the government to maintain a sizeable but minority share in everything that gets privatised, with a general policy of never exercising the voting rights unless it's against a course of action that is clearly detrimental to public interest

This just seems like an elaborate way to privatize without actually privatizing. Again, I am generally strongly against privatization, particularly when it comes to natural monopolies such as infrastructure.