Public and private sector efficiency(psiru.org)
psiru.org
Public and private sector efficiency
http://www.psiru.org/reports/public-and-private-sector-efficiency
10 comments
Well sure, I'd be surprised if the Cato Institute would have published that ;)
It apparently is just a publication covering the results of several meta-analytical studies, EPSU neither did studies themselves nor seemed to have been involved in those mentioned in the publication. The real content starts at page 7.
edit:typo
It apparently is just a publication covering the results of several meta-analytical studies, EPSU neither did studies themselves nor seemed to have been involved in those mentioned in the publication. The real content starts at page 7.
edit:typo
The problem is that because of their obvious bias, we can have no assurance that they are accurately surveying all of the available meta-analyses, and that they are properly representing the information and its level of certainty.
That is true, but one should still give it a read, instead of dismissing it as lies just because it was commissioned by a union.
Some pretty interesting stuff is included, from very interesting sources, pretty certainly not pro-worker biased.
And ultimately, if public-private partnerships, privatizations and the like were consistently good, it would be a struggle to find studies that do not corroborate this. Here we have a tonne of studies from various sources, none finding these fabled results.
Some pretty interesting stuff is included, from very interesting sources, pretty certainly not pro-worker biased.
And ultimately, if public-private partnerships, privatizations and the like were consistently good, it would be a struggle to find studies that do not corroborate this. Here we have a tonne of studies from various sources, none finding these fabled results.
"Moreover, many of these studies have been carried out by economists expecting to confirm a theoretical argument that privatisation is intrinsically more efficient, which makes the results more striking. The evidence contradicts the assumptions." (p. 6)
Good to see serious empirical work tearing down the tenets of neoliberal ideology. Too many things get accepted as self-evident truths.
I'm always curious about the profit in the private-public-partnership stories. The reduction in waste, even if it were real, does not just go back into the budget - a part of it must leak out as profits (a manifestation of the second law of thermodynamics in economy, maybe). So, taxes -> profits. Not a problem, I guess, if the contracts between gov and corporations are not too long-term, the competition is healthy, and the tenders are not rigged. Now, that's interesting - the government is assumed to be too corrupt and incompetent to manage these jobs itself, but when it comes to organizing an honest, competitive tender, it's doing that perfectly? :)
And, ultimately, a company on the market is driven to be efficient, that's easy to understand. But a company with a multi-year tender is not on the market.
I'm always curious about the profit in the private-public-partnership stories. The reduction in waste, even if it were real, does not just go back into the budget - a part of it must leak out as profits (a manifestation of the second law of thermodynamics in economy, maybe). So, taxes -> profits. Not a problem, I guess, if the contracts between gov and corporations are not too long-term, the competition is healthy, and the tenders are not rigged. Now, that's interesting - the government is assumed to be too corrupt and incompetent to manage these jobs itself, but when it comes to organizing an honest, competitive tender, it's doing that perfectly? :)
And, ultimately, a company on the market is driven to be efficient, that's easy to understand. But a company with a multi-year tender is not on the market.
There is a good reason the public sector operates at a loss, it's because it serves the interest of the entire country, which no company can pretend working for.
If for example some bus company operates at a loss and receives public subsidies, it's because it can allow people who can't afford gas to go to a job, which is a net gain for the country as a whole.
While it's true that the democratic process is not always working very well, it's the reason why the public sector is not always efficient. But it's much better than an autocratic system. Democracy is just the least worst system there is.
A company has only inputs and outputs for the sake of check and balances, accounting's only role is to make sure it belongs in a sound economic logic, while a government is a single monolithic machine, often interacting with companies, but for the interest of the citizens.
(I did not invent all of that I heard chomsky talk about "operating at a loss".)
If for example some bus company operates at a loss and receives public subsidies, it's because it can allow people who can't afford gas to go to a job, which is a net gain for the country as a whole.
While it's true that the democratic process is not always working very well, it's the reason why the public sector is not always efficient. But it's much better than an autocratic system. Democracy is just the least worst system there is.
A company has only inputs and outputs for the sake of check and balances, accounting's only role is to make sure it belongs in a sound economic logic, while a government is a single monolithic machine, often interacting with companies, but for the interest of the citizens.
(I did not invent all of that I heard chomsky talk about "operating at a loss".)
That seems a bit idealistic. Is the War on Drugs serving the interest of the entire country? How about the War on Terror? Of course not.
Nothing democratic is ever serving "the interest of the entire country", if such a thing even exists. If it was, then why would such a thing ever need to be voted upon?
That the government operates in the interest of citizens is only what we say the government ought to do, which is not actually what it does. On the contrary, there are greater incentives for the government to operate primarily in its own interest, to increase the scope and magnitude of its power, which as can be easily observed, is what it has been doing.
Nothing democratic is ever serving "the interest of the entire country", if such a thing even exists. If it was, then why would such a thing ever need to be voted upon?
That the government operates in the interest of citizens is only what we say the government ought to do, which is not actually what it does. On the contrary, there are greater incentives for the government to operate primarily in its own interest, to increase the scope and magnitude of its power, which as can be easily observed, is what it has been doing.
Sure, but if you're this cynical you could also make a strong argument [1] that companies work, or fail to work, to improve the life/goals of the managers of the company. Shareholders and employees get screwed on a regular basis.
No private company even pretends to be serving "the market" either. That's the beauty of it, in theory. Nobody in the private sector is working "for" the private sector. And yet (in theory) it works.
[1] http://en.wikipedia.org/wiki/Stephen_Elop
No private company even pretends to be serving "the market" either. That's the beauty of it, in theory. Nobody in the private sector is working "for" the private sector. And yet (in theory) it works.
[1] http://en.wikipedia.org/wiki/Stephen_Elop
Operating at a loss (profitability) is a different concept from efficiency. Efficiency is how much you get for every dollar spent, regardless of whether it comes from "profits" or subsidies.
That's an important point. The Nazis were probably one of the most efficient governments ever. Enough said.
Well, as the percieved public/private divide goes there is also the rampant free market ideology being a strong part of our zeitgeist which usually includes glorification of private enterprise and dismissal of the efforts of the public sector.
Usually most people doing the work in both are just regular people whose work ethic depends on the general culture and not upon private/public divide. I.e. nepotistic governments probably function as a part of an equally nepotistic economy and so on. IMO, IANE (I am not an economist ;) ).
Usually most people doing the work in both are just regular people whose work ethic depends on the general culture and not upon private/public divide. I.e. nepotistic governments probably function as a part of an equally nepotistic economy and so on. IMO, IANE (I am not an economist ;) ).
Depends where you're from, living in the UK, growing up in Republic of Ireland I can say that over here there is not the rampant free market ideology that exists in the States.
I can also say that when things become less regulated or get taken over by the private sector they are far FAR better than when under government thumb.
Case in point being privatization of Telecom Éireann and the liberalisation of fixed line phones and internet. Prior to this you'd wait 4-6 months to get a new line(now it's days/weeks). Ryanair is another one, because of them air travel in Europe (in particular Ireland) became affordable.
I personally have experienced the difference when things moved from the public to the private sector and the improvements as a result.
The latest that comes to mind is Royal Mail, since it's been privatised I get post and packages on a Sunday!
I can also say that when things become less regulated or get taken over by the private sector they are far FAR better than when under government thumb.
Case in point being privatization of Telecom Éireann and the liberalisation of fixed line phones and internet. Prior to this you'd wait 4-6 months to get a new line(now it's days/weeks). Ryanair is another one, because of them air travel in Europe (in particular Ireland) became affordable.
I personally have experienced the difference when things moved from the public to the private sector and the improvements as a result.
The latest that comes to mind is Royal Mail, since it's been privatised I get post and packages on a Sunday!
That's odd, because the UK experience is that while there's some superficial liberalisation, services stop improving after a while, contempt for customers becomes endemic, a new managerial/rentier class appears to squat on the new economic opportunities, and prices invariably skyrocket.
Privatised utilities? Yep. Energy price inflation has made a huge contribution to keeping the economy stagnant since 2008. Supposedly this is because wholesale prices have increased. But the industry has - for example - closed 'uneconomic' winter gas storage, which now guarantees that the UK has less than a third of the winter reserves of more sensible countries, which makes it more vulnerable to increases in cold weather spot pricing.
Privatised rail? Totally - with the added insult that state subsidies are higher than they were during the days when rail was nationalised, and adjusted ticket prices were less than 10% of what they are now.
Privatised dentistry? Yep. There are ragged remnants of NHS dental care in many places, but it's often impossible for anyone who isn't earning good middle class money to get any dental care at all.
Privatised universities? With a new business-driven ethic, quality and independence of research is disappearing, fees are waiting to explode, students are treated entirely as a cash crop.
Privatised property ownership? Destroying the UK's stock of council-owned rentable property has put average house prices far beyond the reach of anyone on average earnings.
Privatised communications? The US and UK and telecom sectors are legendary for miserably slow broadband roll-out outside of headlining urban areas. The mobile phone service barely works, even in cities. But customers are locked into 18 month contracts, even in areas with little or no signal quality. Broadband has stalled in 'non-economic areas'. Because no one wants to use broadband outside cities.
Airlines? Considering O'Leary's reputation, I'm not sure mentioning Ryanair is really helping your case.
Not only is privatisation irrationally wasteful, it also generates inevitable economic opportunity costs in the form of low wages, zero-hours contracts, and debt instability.
So it's nice that you get mail on Sundays. Most of the UK still doesn't and never will. And when postal prices start creeping up and services are cut the odds of further service improvement are somewhere between none and zero.
Privatised utilities? Yep. Energy price inflation has made a huge contribution to keeping the economy stagnant since 2008. Supposedly this is because wholesale prices have increased. But the industry has - for example - closed 'uneconomic' winter gas storage, which now guarantees that the UK has less than a third of the winter reserves of more sensible countries, which makes it more vulnerable to increases in cold weather spot pricing.
Privatised rail? Totally - with the added insult that state subsidies are higher than they were during the days when rail was nationalised, and adjusted ticket prices were less than 10% of what they are now.
Privatised dentistry? Yep. There are ragged remnants of NHS dental care in many places, but it's often impossible for anyone who isn't earning good middle class money to get any dental care at all.
Privatised universities? With a new business-driven ethic, quality and independence of research is disappearing, fees are waiting to explode, students are treated entirely as a cash crop.
Privatised property ownership? Destroying the UK's stock of council-owned rentable property has put average house prices far beyond the reach of anyone on average earnings.
Privatised communications? The US and UK and telecom sectors are legendary for miserably slow broadband roll-out outside of headlining urban areas. The mobile phone service barely works, even in cities. But customers are locked into 18 month contracts, even in areas with little or no signal quality. Broadband has stalled in 'non-economic areas'. Because no one wants to use broadband outside cities.
Airlines? Considering O'Leary's reputation, I'm not sure mentioning Ryanair is really helping your case.
Not only is privatisation irrationally wasteful, it also generates inevitable economic opportunity costs in the form of low wages, zero-hours contracts, and debt instability.
So it's nice that you get mail on Sundays. Most of the UK still doesn't and never will. And when postal prices start creeping up and services are cut the odds of further service improvement are somewhere between none and zero.
No offense, but personal anecdotes are not evidence. If you are sincere, and you could be for all I know, it should be easy and desirable for you to produce factual information or documented sources that supplement your story. Otherwise, we can't take this as credible evidence.
"We can't..."
UK has had a fairly strong market liberalization starting from Margaret Thatchers reign 30-something years ago.
e.g. http://en.m.wikipedia.org/wiki/Privatisation_of_British_Rail
What do you think happens when a state monopoly is suddenly privativized without serious competition in the market?
UK has had a fairly strong market liberalization starting from Margaret Thatchers reign 30-something years ago.
e.g. http://en.m.wikipedia.org/wiki/Privatisation_of_British_Rail
What do you think happens when a state monopoly is suddenly privativized without serious competition in the market?
You must be fun at parties.
I've long suspected that the efficiency of the private sector is greatly exaggerated. In the minds of the public, the huge percentage of businesses that fail, often from strategic missteps or inefficiency, don't seem to get factored in. It seems to be about comparing the Fortune 10 vs. all of government.
That is the point, I think. Inefficient private enterprises go belly up, and therefor stop being inefficient. There is no such corrective mechanism for government organizations.
This may be true for startups after the venture capital runs out, but in a lot of medium to large companies few highly profitable ventures subsidize a lot of inefficient ones.
Occasionally someone may decide to start "trimming the fat": that is not different in public or private enterprises.
Occasionally someone may decide to start "trimming the fat": that is not different in public or private enterprises.
Ontario's provincial Auditor General just produced a report on our increasing use of PPPs in areas like services and infrastructure. It's available here:
http://www.auditor.on.ca/en/reports_2014_en.htm
One conclusion is that residents of Ontario have spent up to $8 billion extra for the privilege of having private industry handle projects that could have been managed and financed publicly.
One wonders the extent to which this private industry has infiltrated government to work on the inside for its own benefit.
A Story on the auditor's report:
http://www.thestar.com/news/canada/2014/12/10/ontarios_mispl...
http://www.auditor.on.ca/en/reports_2014_en.htm
One conclusion is that residents of Ontario have spent up to $8 billion extra for the privilege of having private industry handle projects that could have been managed and financed publicly.
One wonders the extent to which this private industry has infiltrated government to work on the inside for its own benefit.
A Story on the auditor's report:
http://www.thestar.com/news/canada/2014/12/10/ontarios_mispl...
The public sector is under a lot more scrutiny than the private sector (in some countries you can track every penny spent by the government). Its inefficiencies and faults are on the media every day. That, I think, is why people usually see the private sector as better than the public sector.
Summary (from TFA): "...there is now extensive experience of all forms of privatisation [with] many studies of... comparative technical efficiency... results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient. The same results emerge consistently from sectors and services which are subject to outsourcing, such as waste management, and in sectors privatised by sale, such as telecoms."
I've always assumed that the privatisation game is so easily corrupted and rigged towards milking the taxpayers with one-sided deals, that the losses offset any potential efficiency gains. So many anecdotal stories that I've lost count. Seems I may have been right scientifically, rather than just bitter (for once).
Public sector can PRINT currency.
Private sector has to EARN money.
EPSU is the European Federation of Public Service Unions. It is the largest federation of the ETUC and comprises 8 million public service workers from over 275 trade unions; EPSU organises workers in the energy, water and waste sectors, health and social services and local and national administration, in all European countries including in the EU’s Eastern Neighbourhood.