12.1.11

Proof Free Markets Are Better At Stuff For Everyone


If they lived in London they could all be slinging their hook come February.


In my weak fumbling around in the economic wilderness trying to understand the meat & bones of it I do come across many interesting terms- one such term I've heard of late that sadly has entered the collective consciousness of the masses is monopsony.

I think this might be regarded as an example of such a phenomena at play - the state being the sole buyer of the firefighters services is ultimately to it's detriment.

Don't get me wrong - union strong-arming of Labour policy while in power bears a lot of the blame for the problems we are experiencing now and the firefighters, like every other public sector body, needs to feel the pinch as much as the private sector has; it just amuses me that whilst socialised call for the usurpation of private business and the means of production we have an example right here of the consequences of centralising a service then finding you don't like the terms of the agreement.

Let's hope noone tries this in the NHS eh? That'd be a shock.

11 comments:

Stuffy said...

what does monopsony mean then? that the govt is the only payer of the fire service which has a monopoly on putting out fires? the public sector monopolies need to tighten their belts but they need to stay as public sector monopolies. The reason? look at the naff railways and profiteering utilities companies!

Tomrat said...

Monopsony means "single buyer" - your summation of the word is apt though.

As for whether it needs to remain a public service I am not so sure; is it really beyond the realms of our imagination to think of better ways to provide coverage for such things such as disaster relief? Charitable aid to victims of the tsunami a few years ago dwarfed that of government, and we still all manage to have enough to eat as a result of supermarket competition.

As for your last point on the railways and utility companies well...try setting up either and you'll see why their "privatisation" doesn't really hold water; train companies (not rail companies, as will be obvious in a moment) have to barter for business on the national rail network, handing over vast swathes of cash in order to get dominion over a particular part of the network and then have their business subjected to huge numbers of caveats, price controls and regulations; to call it a "private business" is repugnant in the extreme.

Same with utility companies - energy generators have huge numbers of proscriptive regulations put on their build and alll power providers have to connect to a national grid (see a pattern yet?); couple that onto the ever growing array of green taxes, emissions ratings systems (something which forces the Drax power station here in Yorkshire to operate at <30% capacity by law) and a complete lack of investment in a decaying grid and again this can hardly he called a "private" business.

Stuffy said...

Do we really want fire engines sitting outside a burning building negotiating prices? Or local councils paying the fireman who have had to become a private company? I think that is what happened to the bin men around here - they all got "sacked" and then had to re-apply to a private contractor for their old jobs back. They are no better for being private and I wonder if their terms and conditions are better.

Tomrat said...

Why do people automatically think that is the only way business can service customers? Is it not outside the realms of possibility that they might form cooperatives or trusts to serve each other customers at a flat rate? Or your insurer barters the cost?

As for your point about the binmen yes getting a councils services outsourced does mean they would lose their job; whether their conditions are better are not is irrelevant - if we are getting value for money as the bill payer is.

As for whether or not the service is better is difficult to ascertain; only real acid test is how badly interrupted the service was through winter & how many times they strike.

Stuffy said...

I'm not sure a co-operative of firemen sounds very reassuring! I know the RNLI is manned by volunteers but they don't go to motorway pile-ups or deal with warehouse fires. I feel the idea of trusts or co-operatives is a bit 19th century (or even 18th). I think there is a lot to be said for the sort of social democracy advocated by Clement Attlee - you know, the state providing the basic, essential services and the private sector doing the rest. "Privatising" everything seems a retrograde step however it is set up.

Tomrat said...

Perhaps, perhaps not - my main contention is that there are difficulties with either method and that these difficulties change over time and I believe with a plethora of providers and the decreasing costs associated with running such things that having it monopolised provision by the state is bad for consumers and suppliers alike.

Stuffy said...

Really? I don't think privately-run monopolies work for consumers. No matter how many companies start in the race after privatisation, they end up as huge multi-nationals with myriad interests (EDF, Thames Water) or they appear no different to the consumer but are answerable to shareholders rather than councillors. I can't think of a single state monopoly that was privatised that is now better for me as a consumer can you? I don't know what the answer is because I also remember the arrogance of state run monopolies staffed by people with jobs for life and nice perks so no incentive to improve. Perhaps everything should be run by John Lewis!

Tomrat said...

There is no such thing as a natural monopoly; they require the state's unnatural influence to maintain; more so in this case considering the monopsonist power of the state in buying these provisions for their end users to the detriment of consumer and supplier alike.

Again the toss-up here is starting to favour new methods of individual provision; that doesn't necessarily mean you buying Tesco Bin Services with your bread & milk or your electricity supply from the Carphone Warehouse.

But that's a start.

Stuffy said...

The thing is, most consumers just want a good, reliable, reasonably priced service. Now that gas and electricity are run by private concerns, the consumer gets a pretty half-baked service at a high price. Years ago, if your boiler broke down, you phoned the gas board and a bloke came out that day (or night) and fixed it. Now it can take an age to even get through to the help line and a week before a man comes out to fix it. Is that progress for the consumer? What benefit to the consumer from water supplies being provided by private companies over state run monopolies? Providing these services will always be monopolistic regardless of who you pay.

Tomrat said...

Stuffy, I think your painting a rather rosy picture of unnecessarily state run services than was actually the case - it could take British Telecom a year to install a landline; more recently the only water shortages caused by the big freeze in England were felt in Northern Ireland, the only part of Britain which still has a nationalised water provider (for clarity I believe water supplies are still held in commons; it is only water cleanliness and recycling that has been privately contracted.

Incidently I believe boiler & gas coverage tends to have built in promises for quick service, suffering penalties if they fail to meet them.

And with the man from the board they told you when they were coming, rather than pick your time when you were in.

Stuffy said...

Yeah, I guess I am looking through slightly rose-tinted glasses! It's just that I think we have the worse of both worlds as things are. As a state-run monopoly there is no incentive for the workers to do a good job (they used to have TV discussions in communist Czechoslovakia about why it was that the factories turned out crap matches yet it was the workers who smoked!). As a private enterprise, its whole raison d'etre is to make a profit at any cost. Neither system really benefits the consumer but at least we knew the gasman was telling the truth when he said it'd be a week before he could call. Now we have all that crap about providing a service to suit the consumer - cloud cuckoo land stuff. I still think some form of social democracy makes sense - I believe the infrastructure in the USA is appalling because there is no profit to be made out of it and nobody wants to waste money improving/maintaining things that everyone uses but no one owns.