Parts of this Times piece on the water system are very good. But the economic analysis is entirely arse over tit. As in incorrect, entirely and wholly wrong, disastrously misleading and so on:
A prosperous country should be able to find the money for a sewerage system that can keep up with demand. So why is it not happening in Britain? Privatisation is often fingered as the principal culprit. Pretty much everywhere else in the world, the water industry is a public enterprise — for good reason. Aside from it being a natural monopoly, there is a basic mismatch between the behaviour financial markets encourage in publicly quoted companies (short-term profit maximisation) and that which the public interest demands of the water industry (long-term investment in infrastructure).
We agree that this is the current zeitgeist, the currently held fashionable view. But then it’s still wrong.
For investment in the water system *increased* following privatisation. In fact, desiring that increase in investment was one of the reasons for privatisation. Logically we’d not, therefore, expect an increase in investment if privatisation were reversed.
The reason for this being that private sector companies have a longer investment horizon than government does. Or, perhaps in a more detailedly correct manner, than politics does. Politicians, therefore politics, look(s) to the next election. Things beyond that horizon tend not to get dealt with at all and if they are then not well.
Back when there was a wall of necessary investment arriving in that water system. Partly simply because politics hadn’t invested enough in it over the preceding decades - it was more important to pay off state workforces than dig drains. Partly because new water standards - which is righteous, a richer country should indeed have higher environmental standards, Mr. Kuznetz and all that - were arriving prompted by the EU.
Politics simply wasn’t going to provide those sums. Capitalism would - because capitalists were entirely delighted to invest now in order to receive a steady flow of utility related interest, dividends and so on over the next decade or four in return.
One of those very points of privatisation was to get the water system into the longer time horizons of the private, not political, sector and thereby increase investment in it.
In fact the British water industry is the very poster child, the real world exemplar, of why this belief is wrong:
Pretty much everywhere else in the world, the water industry is a public enterprise — for good reason. Aside from it being a natural monopoly, there is a basic mismatch between the behaviour financial markets encourage in publicly quoted companies (short-term profit maximisation) and that which the public interest demands of the water industry (long-term investment in infrastructure).
When that theory is tested against the real world it fails. And, as always, when facts meet hypothesis it’s the universe that wins, not the babykissers.
Them’s the facts and no, if you don’t like them there isn’t another set to offer. Privatisation increased investment in the water system.