A Red State Privatization Horror Story

originally posted by: Aazadan
I see it as certain things being better to be privatized and other things should be public. The dividing line is if an industry is a social service or not. Social services shouldn't be for profit. That's things like jails, utilities, roads, and education. If companies want to offer competing services that are for profit in that area I think it's fine but they shouldn't get any competitive advantages to doing so, and they should have to meet quality tests. In a world where people are competent the for profit option can never match the not for profit option as it always has an additional layer of costs associated with it, no matter how efficiently it runs... then again, we don't live in such a world.

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That’s a legitimate argument. So let me counter or at least offer up a different take on it.
For the items you mentioned Utilities, education, jails. The government maintains a monopoly on these services.
If you want to start up a utility say a power plant. Dig in distribution cables and substations, you can’t do it. The level of regulation and government red tape that has to be overcome does not allow anyone to enter into this business to compete with the existing providers already there.
Why cant UPS deliver letters? Because the government prohibits them from doing so to limit competition with the Post office. The Post office has no limitation on package delivery however.. Why can’t I send my kid to a private school and not pay the school tax so I can afford it? Because the government schools want my money and do not want private schools in existence. The government enables the monopoly. Look at every situation where a monopoly exists and you will see a government law or regulation keeping it in place. If you offer true competition and have government as one of the players they will consistently lose money and operate in the most inefficient manner. That’s not saying that all private business is always better but its usually better than a government service.

a reply to: Dragoon01

Government entities do not have a 'monopoly' on utilities. I can't find the percentage of public (what you call governmnet) vs private utilities.

What I did find however was that, on average, private ultilites charge an average of 33% more to users then public utilities for water and 66% more for sewer service. Privatized Utilities in Texax lead the pack in ripping off citizens (68% higher on water and 154% higher on sewer.

Check it out....

documents.foodandwaterwatch.org...

and boy howdy do they have ooodles of references (48 to be exact).

originally posted by: FyreByrd
a reply to: Dragoon01

Government entities do not have a 'monopoly' on utilities. I can't find the percentage of public (what you call governmnet) vs private utilities.

What I did find however was that, on average, private ultilites charge an average of 33% more to users then public utilities for water and 66% more for sewer service. Privatized Utilities in Texax lead the pack in ripping off citizens (68% higher on water and 154% higher on sewer.

Check it out....

documents.foodandwaterwatch.org...

and boy howdy do they have ooodles of references (48 to be exact).

you are so wrong.

"In the United States of America, public utilities are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain.[5] As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission.[1][2][3] "
en.wikipedia.org...


So even when they are privately held companies, they still have to do exactly what the public commission tells them to. They can not raise the rate unless given permission. typically, in metro areas, the city or county will start a utility company as a for profit entity that is run by the same government government (government sponsored entity) i.e the post office, frannie and feddie etc. These companies usually handle the water, electricity and gas for their service area. JEA (Jacksonville Energy Authority) in florida is one (and they are a higher priced company then FPL florida power and light. When was the last time you had a choice to what company you used for water or electricity? That would mean there is a monopoly now wouldnt it? The reason there is a monopoly is because the company is either owned and operated by the local government or controlled by them through a commission

The government may not have a nation wide natural monopoly, but each service area has a company with a monopoly on that specific local market and that monoply is enforced by statute

as far as the "public, what you call government" comment..... That is the definition.....

"State ownership, also called public ownership, government ownership or state property, are property interests that are vested in the state, rather than an individual or private entity.[1]

State ownership may refer to state ownership or control of any asset, industry, or enterprise at any level, national, regional or local (municipal); or to common (full-community) non-state ownership. The process of bringing an asset into public ownership is called nationalization or municipalization.

In primarily market-based economies, government-owned assets are often managed and run like joint-stock corporations with the government owning a controlling stake of the shares. This model is often referred to as a state-owned enterprise. A government-owned corporation (sometimes state-owned enterprise, SOE) may resemble a not-for-profit corporation as it may not be required to generate a profit. Governments may also use profitable entities they own to support the general budget. SOE's may or may not be expected to operate in a broadly commercial manner and may or may not have monopolies in their areas of activity. The creation of a government-owned corporation (corporatization) from other forms of government ownership may be a precursor to privatization.

In socialist economies, state property is often the predominant form of ownership of industries and holds a monopoly on land and natural resources. There is a wide variety in forms of operation within socialist industries, ranging from centralized authority to direct workers' self-management."


en.wikipedia.org...

originally posted by: SM2

originally posted by: FyreByrd
a reply to: Dragoon01

Government entities do not have a 'monopoly' on utilities. I can't find the percentage of public (what you call governmnet) vs private utilities.

What I did find however was that, on average, private ultilites charge an average of 33% more to users then public utilities for water and 66% more for sewer service. Privatized Utilities in Texax lead the pack in ripping off citizens (68% higher on water and 154% higher on sewer.

Check it out....

documents.foodandwaterwatch.org...

and boy howdy do they have ooodles of references (48 to be exact).

you are so wrong.

"In the United States of America, public utilities are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain.[5] As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission.[1][2][3] "
en.wikipedia.org...


So even when they are privately held companies, they still have to do exactly what the public commission tells them to. They can not raise the rate unless given permission. typically, in metro areas, the city or county will start a utility company as a for profit entity that is run by the same government government (government sponsored entity) i.e the post office, frannie and feddie etc. These companies usually handle the water, electricity and gas for their service area. JEA (Jacksonville Energy Authority) in florida is one (and they are a higher priced company then FPL florida power and light. When was the last time you had a choice to what company you used for water or electricity? That would mean there is a monopoly now wouldnt it? The reason there is a monopoly is because the company is either owned and operated by the local government or controlled by them through a commission

The government may not have a nation wide natural monopoly, but each service area has a company with a monopoly on that specific local market and that monoply is enforced by statute

as far as the "public, what you call government" comment..... That is the definition.....

"State ownership, also called public ownership, government ownership or state property, are property interests that are vested in the state, rather than an individual or private entity.[1]

State ownership may refer to state ownership or control of any asset, industry, or enterprise at any level, national, regional or local (municipal); or to common (full-community) non-state ownership. The process of bringing an asset into public ownership is called nationalization or municipalization.

In primarily market-based economies, government-owned assets are often managed and run like joint-stock corporations with the government owning a controlling stake of the shares. This model is often referred to as a state-owned enterprise. A government-owned corporation (sometimes state-owned enterprise, SOE) may resemble a not-for-profit corporation as it may not be required to generate a profit. Governments may also use profitable entities they own to support the general budget. SOE's may or may not be expected to operate in a broadly commercial manner and may or may not have monopolies in their areas of activity. The creation of a government-owned corporation (corporatization) from other forms of government ownership may be a precursor to privatization.

In socialist economies, state property is often the predominant form of ownership of industries and holds a monopoly on land and natural resources. There is a wide variety in forms of operation within socialist industries, ranging from centralized authority to direct workers' self-management."


en.wikipedia.org...

Could not have said it better....

originally posted by: Dragoon01
That’s a legitimate argument. So let me counter or at least offer up a different take on it.
For the items you mentioned Utilities, education, jails. The government maintains a monopoly on these services.
If you want to start up a utility say a power plant. Dig in distribution cables and substations, you can’t do it. The level of regulation and government red tape that has to be overcome does not allow anyone to enter into this business to compete with the existing providers already there.
Why cant UPS deliver letters? Because the government prohibits them from doing so to limit competition with the Post office. The Post office has no limitation on package delivery however.. Why can’t I send my kid to a private school and not pay the school tax so I can afford it? Because the government schools want my money and do not want private schools in existence. The government enables the monopoly. Look at every situation where a monopoly exists and you will see a government law or regulation keeping it in place. If you offer true competition and have government as one of the players they will consistently lose money and operate in the most inefficient manner. That’s not saying that all private business is always better but its usually better than a government service.

Sometimes it's better to not have a competing network. Lets use the power grid. If a private company comes up, do we really want them to use the resources to create a second power grid so that they can offer their product? This is a situation where we only need and want one network. We have the same thing with our current internet network. It was built by the feds in the late 90's and then handed to private industry. It doesn't benefit everyone to create a second competing network, instead we should just improve the one that's already there to improve capacity/reliability rather than create another one which works against what is already in place. Interestingly, building a secondary network is precisely what Google has had to resort to doing in order to break the effective monopoly in place by our ISP's.

Other industries like jails shouldn't be privatized because jail isn't about cost efficiency. Private prisons force jails to care about cost efficiency which leads to things like agreements to keep prisons 90% full so that they're cost effective. I'm willing to accept less cost efficiency regarding jails in exchange for the assurance that our legislation is only putting the people in jail who really should be in jail.

Schools are an interesting issue, growing up I went to a private high school but public elementary/junior high so I'm familiar with the teaching methods in them and how the public/private schools differ from first hand experience. The biggest thing to me with education isn't who provides it but rather ensuring the same minimum quality between providers. I see it as important that a high school diploma from public rural Mississippi school is just as widely accepted as a degree from a private school in upstate New York or even the oil rich public schools in California like Santa Barbara. I also see it as being important that the schools cover similar topics.

That said, I'm fine with for profit education but I do think people should still have to pay taxes to the public school, the reason for this is that we don't make people exempt from other taxes when they take the private vs public option. I do think we can implement programs to make private schools more accessible though to offset the issue of middle class families trying to send their kids to private school. The quality difference between private/public is massive, I'm 14 years out of High School at this point and 10 years into college (out of a projected 12 that I need for what I want to do) and that HS experience still gives me a huge advantage over people I take classes with.

Basically, as long as the private school (or other entity) can still offer a product that's on par with the public option I'm fine with it however that's a high bar to clear. My biggest concern with offering wholly private options is that markets can be corrupted, which we're seeing right now with health insurance. The quality of the product is plummeting while the cost is skyrocketing. I'm not too involved with grade school education these days either other than arguing the curriculum but I think we're seeing a similar thing in education where quality is rapidly degrading while cost is increasing. A couple years ago I was working as a tutor at a local community college and one of my tutee's was a girl who was illiterate. She graduated from a private school that passed her because he parents could pay, then the college accepted her because she had funding, then her teachers would pass her so that she would continue to take classes and contribute to their program budgets.

Edit: To go back to power, just because the distribution system is public doesn't mean everything should be. The way the power grid works, electricity can be transferred all over the place, there's a good chance the electricity you're using to read this post was generated in Mexico or Canada, it's a very open system in most areas of the country. While I like having some public power plants I think it's a totally reasonable thing to make those public plants compete against some private ones too because that makes everyone run more efficiently. I'm wary of corporate negligence but that risk can be minimized. Right now I think it's ridiculous that the US hasn't built a new nuclear plant in several decades. Private industry wants to make them and we should have them but I do worry that in the event of disaster we end up with a Fukushima/TEPCO situation which we all know did not turn out well.

a reply to: Aazadan

the problem with public electricity is the fact that our infrastructure is crap. large cities have rolling blackouts, substations are in neglect and disrepair and private companies are not allowed (except in certain situations) to go in and repair /replace failing equipment for more reliable power transmission. A private company installing a second grid to deliver their product would do a few things...lower the prices because then there would be competition, increase the reliability of the grid overall, as more customers switched to the newer, more reliable grid based on technology is newer then 1960 , the current grid would have less demand which in essence would make it more reliable as well. Another thing....electricity prices would not necessarily have to skyrocket to accommodate a narcissists agenda.

When was the last time the government ever did anything efficiently ?

originally posted by: SM2

originally posted by: FyreByrd
a reply to: Dragoon01

Government entities do not have a 'monopoly' on utilities. I can't find the percentage of public (what you call governmnet) vs private utilities.

What I did find however was that, on average, private ultilites charge an average of 33% more to users then public utilities for water and 66% more for sewer service. Privatized Utilities in Texax lead the pack in ripping off citizens (68% higher on water and 154% higher on sewer.

Check it out....

documents.foodandwaterwatch.org...

and boy howdy do they have ooodles of references (48 to be exact).

you are so wrong.

"In the United States of America, public utilities are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain.[5] As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission.[1][2][3] "
en.wikipedia.org...

I think you are speaking apples when I am speaking oranges.

Yes the infrastructure was largely put in place by government (for the benefit of all). The individual 'utility' companys that USE that infrastruct can be public or private - and in some cases a combination.

In fact the private companies have externalized any cost of improvement in the systems they use onto the public.

So, first the public builds the 'means of production', they give it to private enterprise for pennies on the dollar (not in all cases (my city has public water and power utilities)); then then charge the consumers higher rates - to pay their shareholders (see chart in article refereneced above); then to make it worse - don't maintain and improve the system and place the burden of such back on the taxpayer.

Not so much a public monopoly on profits just on costs.

originally posted by: SM2
a reply to: Aazadan

When was the last time the government ever did anything efficiently ?

I suppose it depends on what you consider efficienty.

For financial efficiency (use of funds) Social Security puts more dollars into patient care (as a funtion of revenues) then any - I repeat - any - private insurance carrier.

For customer service efficiency - Social Security is not all that great, largely due to inability to hire sufficient personel to do the job well.

But I don't see any customer service efficienty in any large private businesses either. Many ucessful small and medium business do have effecient and, even, helpful and ethical, customer service policies.

a reply to: FyreByrd

As far as the public /private utility goes...i say we just agree to disagree. You have your ideas and your beliefs, and that is just fine with me, that is your right to do so, however, you lack a real world application of said ideas and beliefs and also lack a real world experience in how the utilities industry actually functions.

As far as customer service goes in large corporations, I can name numerous large businesses I have dealt with and have had a good experience with. I have never once had a good service experience with a governmental agency, nor have seen any of this financial efficiency you speak of. Just because social security spends more money that an insurance company does not mean they are better, it means they spend more money, which could be why they are broke and the private insurance companies are not. Further more, to my understanding Social Security does not pay for patient care, that would be either medicare, medicaid or tricare depending on your situation. That seems to be the benchmark for liberals, progressive, socialists, borderline socialists etc. Throw money at the problem and brag about how much we spent on it and claim that as solving the problem. If social security is so efficient, why are dead people receiving checks? Why is there so much fraud? Why is it always broke? If it is so wonderfully efficient, why does it need reformed? To me, efficiency would be providing the same or greater level of service for less cost, but I guess we have a different definition of efficiency

originally posted by: SM2
a reply to: Aazadan

the problem with public electricity is the fact that our infrastructure is crap. large cities have rolling blackouts, substations are in neglect and disrepair and private companies are not allowed (except in certain situations) to go in and repair /replace failing equipment for more reliable power transmission. A private company installing a second grid to deliver their product would do a few things...lower the prices because then there would be competition, increase the reliability of the grid overall, as more customers switched to the newer, more reliable grid based on technology is newer then 1960 , the current grid would have less demand which in essence would make it more reliable as well. Another thing....electricity prices would not necessarily have to skyrocket to accommodate a narcissists agenda.

When was the last time the government ever did anything efficiently ?

The solution to improving efficiency is to add to the infrastructure not to create a secondary grid and that's precisely what private companies do. You actually highlighted the problem with privatized electricity. We're using a 1960's grid because it's cheaper to continue to hang those wires and use electric poles, and all the rest because that's what already exists. Going through and modernizing our electric grid would cost several billion dollars as a low estimate. There is no monetary incentive for a corporation to do so as it won't save them money long term. Only a public institution which doesn't have to make a profit can go in and properly update our electric grid to something resembling other developed nations.

As far as government doing things efficiently they've done many things efficiently. They're very good at killing people, they went to the moon (and developed a ton of technologies doing so), DARPA has changed the world in how many ways? We're using one of those advances right now, the Post Office is more efficient and better than UPS and FedEx, Medicaid has lower administrative costs than any private insurer and often times strikes better deals with doctors. However we can ignore all of that because sometimes cost efficiency isn't an important metric. To go back to a previous example prisons being just is much more important than them being cost effective.

originally posted by: Aazadan

originally posted by: SM2
a reply to: Aazadan

the problem with public electricity is the fact that our infrastructure is crap. large cities have rolling blackouts, substations are in neglect and disrepair and private companies are not allowed (except in certain situations) to go in and repair /replace failing equipment for more reliable power transmission. A private company installing a second grid to deliver their product would do a few things...lower the prices because then there would be competition, increase the reliability of the grid overall, as more customers switched to the newer, more reliable grid based on technology is newer then 1960 , the current grid would have less demand which in essence would make it more reliable as well. Another thing....electricity prices would not necessarily have to skyrocket to accommodate a narcissists agenda.

When was the last time the government ever did anything efficiently ?

The solution to improving efficiency is to add to the infrastructure not to create a secondary grid and that's precisely what private companies do. You actually highlighted the problem with privatized electricity. We're using a 1960's grid because it's cheaper to continue to hang those wires and use electric poles, and all the rest because that's what already exists. Going through and modernizing our electric grid would cost several billion dollars as a low estimate. There is no monetary incentive for a corporation to do so as it won't save them money long term. Only a public institution which doesn't have to make a profit can go in and properly update our electric grid to something resembling other developed nations.

As far as government doing things efficiently they've done many things efficiently. They're very good at killing people, they went to the moon (and developed a ton of technologies doing so), DARPA has changed the world in how many ways? We're using one of those advances right now, the Post Office is more efficient and better than UPS and FedEx, Medicaid has lower administrative costs than any private insurer and often times strikes better deals with doctors. However we can ignore all of that because sometimes cost efficiency isn't an important metric. To go back to a previous example prisons being just is much more important than them being cost effective.

First off in what world is the Post office better and more efficient than UPS or FedEx?
If the Post office was not propped up by tax payer money it would be broken up and bought out by UPS and FedEx. Its just as bad as Amtrac.

I will confess something here. I work in an industry that partners with State and tribal governments. My former job was with a big telecom company, so I know a bit about how the government regulates and controls utilities and services. For example the so called “deregulation” of communications. After the ‘93 telecom bill there arose a multitude of small “CLEC’s”. These were telecom companies that didn’t actually own any facilities. Facilities are what we call phone lines. They were essentially billing companies. This was the governments idea of competition. Force the big telecom companies to lease facilities to the CLEC’s at below cost so the CLEC’s could make money. At the time DSL was an emerging technology and customers were demanding access to the service. The Public Utility commissions demanded that the baby bells lease access to the DSL lines to the CLEC’s at a lower cost than the Baby Bells had to pay to install the service into the cabinets. SO why would a Bell company install service into a new area if it had to immediately provide access to that facility to its competition? They lose money doing that! That’s not competition. Now that’s really all the result of a government sanctioned monopoly being broken up. The reason being is because they didn’t want to have 5 different telephone companies hanging wires and poles everywhere.
Your right that it would be a problem for a utility company to build its own infrastructure. The thing is however that left unregulated that would not happen. If you removed the heavy regulation they would have an incentive to alter their models. Why would a power company have to generate any power at all? Why would they not just own and lease distribution to the generating companies. So for example we have a town and XYZ owns the cables and substations servicing the town. Around this town we have 4 different power generating companies. The citizens of the town are free to choose which ever generating company they choose to buy power from and the generating company simply supplies the power to the grid owned by XYZ. XYZ charges access to all the generating companies based on the number of customers on the grid. This is how I currently purchase Natural gas. I pay less for my gas now than I did when it was all supplied by a single monopoly. Its not however how I get electricity. I currently purchase that from an EMC that is much more expensive than what I had access to at a prior home because it’s a monopoly held in place by government regulation.
A single government owned and operated utility is no solution to this problem either. Competition is what breeds innovation and efficiency. The telecom industry today is light speed compared to 1980. That’s because of competition and the government getting more distant from the process.

originally posted by: Dragoon01
First off in what world is the Post office better and more efficient than UPS or FedEx?
If the Post office was not propped up by tax payer money it would be broken up and bought out by UPS and FedEx. Its just as bad as Amtrac.

In the world we live in. The Post Office does an absolutely amazing job, there's room for improvement of course (this could be said of anything) but they vastly out perform their competition. How many businesses could handle the sort of financial penalty Congress gave to the Post Office and still come out of it? That is proof that it's solid. Oddly enough, the whole Post Office financial crisis came about because UPS/FedEx couldn't compete and instead lobbied for legislation to attempt to remove their competition.

This was the governments idea of competition. Force the big telecom companies to lease facilities to the CLEC’s at below cost so the CLEC’s could make money. At the time DSL was an emerging technology and customers were demanding access to the service.

Are you sure that was the governments idea of competition? If you're in the telecom industry you should be familiar with our creation of a fiber network in the late 90's. The major industry players said they would do it, and the government gave them money to build the network. The telecoms pocketed the money and didn't build anything. The government then stepped in and built the fiber network we're still using today. When it was built, those same telecoms said the government couldn't run anything and demanded they be given the network. The government allowed this, and the telecoms then didn't do the periodic upgrades to it that they were supposed to. The result is that we have the worst network of any developed nation.

The citizens of the town are free to choose which ever generating company they choose to buy power from and the generating company simply supplies the power to the grid owned by XYZ. XYZ charges access to all the generating companies based on the number of customers on the grid.

This is how it works today in most areas of the country. Electricity is generated at one plant but then sold in an area with higher rates. Our whole power grid is very patchwork like and frankly it's a miracle that it works, but it does. Utah can generate power and then transmit it to Ohio where it is then purchased and used. The power plants themselves are the ones who buy/sell the electricity from each other similar to the oil market. This is also why your electric bill likely mentions a generation charge, transmission charge, and distribution charge. Electricity is not created and consumed on a local basis. The only exception to this are areas with a very low generation cost, which don't allow their electricity to be sold on the market as it would increase their rates, that happens a little bit but it's not the norm.

originally posted by: SM2
a reply to: FyreByrd


As far as customer service goes in large corporations, I can name numerous large businesses I have dealt with and have had a good experience with. I have never once had a good service experience with a governmental agency, nor have seen any of this financial efficiency you speak of.

Yet you choose not to share your well done customer serice stories from big business.

I know no one who has a single good thing to say about customer service with telecons, internet retailers, cable companies and the like. Banks are truly horrendous.

I do have a good customer service story for Chase bank for you - one that was resolved within a couple of hours and fairly easily in fact. An account had be closed by 'accident' by the owner of a company that I work with - one that was needed for admini purposes. When I saw this, it interfered with my work, a representative of the bank was able to reopen the account and issue a new card on the spot. The caveat is that it was a business account we were talking about with someone who knew me and the business and it was all done in person. (I'd planned on 10 minutes in the bank doing the businesses business - it did turn into two hours and multiple trips - but the bank rep handled it well.)

Now another incident with a bank, Citi National. Another client wired money to a firm - the firm never received it. Two banks are involved in this transaction - neither will take responsibility - and the firm that we owe money to hasn't received payment for services and so is holding up our business. This wire was made on the first of the month. Our bank states that because we have a 'federal tracking number' that they sent the money (the money is gone) and they did their job. The receiving bank acknowledges receipt of the monies but cannot determine where the funds went. This isn't a little bit of money we'er talking about here.

The point of the two stories is that relationships are necessary for good customer service. Face to face or at the very least verbal relationships with, and this is key, the intent to be helpful. Big business models address customer service as an annoyance and seek to get rid of 'complaints' by wearing people down and just ignoring the problem.

Have you ever tried to reach say Amazon or another large online retailer or service provider. It's next to impossible to even find a phone number - even for services you pay for.

As to fiscal efficiency - you misunderstood by meaning. I did not say spent 'more money' then private insurers - what I said was spend "more money on patient care and services" as a percentage of revenue compared to private insurance.

I suppose once you lived a bit longer and have more experience in the world, you'll have personal knowledge of reality rather then ideas about it.

Thank you for participating.