Tuesday, Aug 04, 2009
Busted flush
Forbes: Crispin Odey's Apocalyptic World-View
At some point things will come to a head. Although this article mentions as usual horrific cuts in state spending, our state workers are a bit unusual compared with those in usual failed states. Namely, some failed nation has a huge government debt and the IMF say OK slash spending and then presumably the governments financial position improves. In the case of the UK though state workers themselves carry a lot of debt, saving money by slashing the state will save 25K each in the first year(or whatever) but those state workers will then default on a 100K debt. So initially cutting the size of the state will worsen the UK's finances...
Posted by stillthinking @ 03:04 PM (1443 views) Add Comment
81 Comments
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1. stillthinking said...
...So initially cutting the size of the state will worsen the UK's finances until that time that those state workers can become absorbed into the private sector, which isn't going to be any time soon.
It is difficult to see that the advice of the IMF holds good in the case of the UK, if we do hit a funding crisis.
2. 51ck-6-51x said...
A worker costs a lot more than their salary, especially for the state - especially those with a final salary pension. What is the average debt of a public worker? What would the expected default rate be? I don't know if your logic holds ST..
Note the bullishness on financials - people here seem to forget that UK PLC could still do well out of it's recent 'acquisitions'.
3. down wave said...
Any employed worker costs between 3 to 6 times what they receives in pay. Therefore reducing the number of state workers will substantially reduce the public tax burden. By and lage the state worker's only benefit to the private sector is expensive interference -red tape-procrastination-complacency-etc., therefore sacking these ssuckers would save the public even more money. Please, anyone, explain exactly what use they are other than for socialist votes?
4. stillthinking said...
Won't be the first time my logic is heavily flawed, none the less, I think state workers probably carry the same debt as the private sector employees. Why not? Also their positions are redundant, they can't move to equivalent positions privately.
5. shipbuilder said...
3. down wave said...
"Any employed worker costs between 3 to 6 times what they receives in pay. Therefore reducing the number of state workers will substantially reduce the public tax burden. By and lage the state worker's only benefit to the private sector is expensive interference -red tape-procrastination-complacency-etc., therefore sacking these ssuckers would save the public even more money. Please, anyone, explain exactly what use they are other than for socialist votes?"
[yawn]
6. 51ck-6-51x said...
ST - you are right that if their positions are redundant they will not find the same work ( or more precisely if there is a net redundancy of positions [ some may be partly redundant ] there will be a net unemployment given an efficient labour market ). On the flip side, they are not necessarily vacuous entities but their time /is/ being used, and it only takes a few entrepreneurial types to create the necessary spark - their 'easy job' ( or rather their relatively risk-free income ) may be the only thing stopping them ( OK, so the ones who end up having to default may still find this tricky, but it's still a factor. )
7. drewster said...
You could argue that public-sector workers carry larger debts, because they believe their jobs are secure.
Conversely you could argue that they are risk-averse people, therefore they won't have taken out much debt.
Without data, it's all mere speculation.
8. 51ck-6-51x said...
shipy,
- why do you yawn? The public sector will tend towards being inefficient - it is a natural process resulting from human behaviour. I don't like the language ( e.g: "sacking these ssuckers" ) but agree with the undertone. Please explain why this logic is not correct.
9. drewster said...
666 / ST -
By definition, anybody* who loses their job is unlikely to find a better-paid job. If there were better-paid jobs out there then they would have jumped ship ages ago.
I don't have exact figures, but I know that when the Rover factory in Longbridge closed, those people who found new jobs were on significantly less pay (up to 50% less).
(*Caveats apply, e.g. there may be social / family / non-financial reasons for not having already jumped to the better job.)
10. 51ck-6-51x said...
I would assume roughly the same debt as the average, but drewster is correct.
drewster - what is your point about reduced wages? I think that, if anything, is a good thing - efficient labour markets will give fairer wages all round, and the price discovery is made at the margins, so a fat public sector decreases labour market efficiency ( as do other things such as stamp duty ).
11. shipbuilder said...
8. 51ck-6-51x said...
"shipy,
- why do you yawn? The public sector will tend towards being inefficient - it is a natural process resulting from human behaviour. I don't like the language ( e.g: "sacking these ssuckers" ) but agree with the undertone. Please explain why this logic is not correct."
These cheap attacks are tiresome and without thought.
While the public sector can be inefficient, I don't see how it tends towards inefficiency at all. Efficiency is achieved by the correct processes and the correct goals - profit can be a result of this, but it is not necessary for efficiency.
12. This comment has been removed as it was found to be in breach of our Blog Policies.
13. shipbuilder said...
51ck-6-51x,
I am assuming (apologies if I'm wrong) that you believe that humans are essentially self-serving, motivated by greed and therefore the carrot of profit will drive efficiency. I don't believe that there's much evidence for this, as far as I know the evidence points towards humans being naturally altruistic. Funnily enough, no-one who argues that humans are primarily self-interested ever admits to being such themselves, as it would essentially be admitting to sociopathy. Also, surely any private company existing for a few decades would be highly efficient, following that logic? In fact, many are as inefficient and lumbering as the public sector. The public sector's biggest problem in my view is political interference.
14. goweresque said...
Of course the public sector tends to inefficiency - there is no competition. Where there is no competition the organisation tends to run for its own benefit, above the consumer. If my business provides bad service or is uncompetitive on price, my customers go elsewhere. I go bust. How does this occur in the public sector?
I will admit that there are private sector companies that are inefficient because they have insufficient competition. But there are NO competitiors in the public sector whatsoever. Can I choose my local council, or get my car taxed anywhere else than the DVLA, or get my passport elsewhere? Or use Sky TV without paying the BBC dane geld? No I can't. If I want those things I have to go there, and they can charge me what they like, and be as unhelpful and slow as they like. And they know it.
15. mander said...
Restructuring the public sector means more unemployment and lower house prices because the private sector is too weak to absorb the new work force. More property porn seems easier
16. stillthinking said...
From the article,
"A fiscal crisis is likely to be the trigger to lead the United Kingdom from its deflationary course, which it is on currently, to an inflationary path."
There was another thread just probably dropped off the bottom, I was arguing that I don't see that the banks can be rescued and we have set off on completely the wrong road. The point I make here is that currently the majority ( uk media )view is that the conservatives will have some room to manoeuvre by cutting spending, but if that worsens the short term position then how can they? If our main hope is that in 10 months time the Tories do something that there is a reasonable argument for being impossible, then what on earth are we doing?
My view of the escape route, when you transfer money abroad, you don't really transfer money... your UK bank flogs the foreign bank a debt and the foreign bank credits your account with foreign currency. Should the underlying debt collapse then either the foreign bank accepts that they got ripped or they confiscate your money. I think this is what was meant when the UK confiscated Icelandic assets under the anti-terrorism laws, the balance transfers from Iceland being based on a defaulted debt.
We are in complete denial in the UK and we should perhaps consider our position.
17. shipbuilder said...
51ck-6-51x,
One more point! Regarding the cost of workers - as you know, the private sector in a mixed economy relies heavily on subsidy from the public sector, in the form of healthcare, infrastructure and other 'externalities'. If it were not so, then real wages would probably be higher. The reality is that the private sector have never been willing to take on such costs as there would be in a completely free market - this is driven by the very nature that seeks profit. How would you get round this?
18. 51ck-6-51x said...
Shipbuilder
- The comment you refer to as a cheap attack may have been written in that way, but it starts with valid points.
You, however, have show no logical argument. "Efficiency is achieved by the correct processes and the correct goals" - yes this is correct, but you have shown nothing from that premise.
- My point: The majority of humans prefer to do less than they need to, given a relatively risk-free job they will tend towards adding to the process they carry out to appear to be busy - I have seen this first hand in private enterprise too! ( given: some will actually search for true efficiency [ the real keepers ], but most are lazier than that, and the average certainly is ). Without the drive for efficiency caused by the competitive market there is less incentive for the employer to trim the fat, especially if they do not actually take any pain from increased costs. I think that is pretty simple logic.
19. shipbuilder said...
13. goweresque said...
"Where there is no competition the organisation tends to run for its own benefit, above the consumer."
This is a result of bad management, not natural tendency. A company can be structured to be efficient regardless of whether it is private or not, that is obvious. The question is one of motivation. Are you saying that public service is not motivation enough for people? It appears to work for doctors, nurses, teachers, the ultimate example being those in the army.
20. 51ck-6-51x said...
shp
- I believe some are totally self-serving, others are completely altruistic, however when put into a corner survival will out. I certainly will arbitrage any opportunity I feel I can, I don't, however believe that makes me a sociopath ( an undefined term, but generally used to mean one who cannot relate to emotion or social interaction ).
No an established company would not neccessarily be uber-efficient, it still comes down to the management of the company and their margins. Yes there are inefficient private companies, that is besides the point.
You make a good point about interference, but I think it applies to public, private, charities, not-for-profits, the lot.
Regarding the cost of workers and the subsidies of public services such as the NHS, transport subsidies, state schools, farming subsidies... they are paid for by the production of the private sector. In my opinion - the public sector may provide a fairer distribution at the outset and it is therefore worth the extra cost of the financial friction and bureaucratic process, but given time this ceases to be the case due to ( even if they are a minority ) the self-serving with power. You are in effect comparing nominal cost to real cost.
21. drewster said...
shippy,
Of course public service isn't motivation enough. Teachers, firemen, nurses, tube drivers, bin men - all have been known to strike for higher pay. The army and police are exceptions because legally they aren't allowed to strike.
Frankly you're naïve if you think people choose public-sector work because they are civic-minded.
22. bellwether said...
Shipbuilder the examples you give all have a vocational element meaning that the quality of people who chose these areas are naturally motivated and driven.
The difficulty is when you expand the public sector into non vocational/ nonessential areas eg most local authority departments, tax collection, a lot of the civil service then you get jobsworths who have no real ambition except an easy life, short hours, reliable money and job security.
23. shipbuilder said...
17. 51ck-6-51x said...
"- My point: The majority of humans prefer to do less than they need to, given a relatively risk-free job they will tend towards adding to the process they carry out to appear to be busy"
Then the company simply needs to be structured to get around that, as in 'lean' companies, which was my point. As you say, the question is motivation, but I don't take the rather dim view of humanity that we are only motivated by potentially losing our jobs. Undoubtedly you would not see yourself as tending towards doing less and neither would I so are you and I special cases?
I would tend towards doing less if I was in an unrewarding, boring drone-job that uses none of my talents, but that's a different kettle of fish altogether. Is the best we can manage to dumb-down the majority of jobs and motivation by threat of the sack? That's a recipe for stress and mental illness, in my book.
24. 51ck-6-51x said...
*down wave lights the fire and steps back to warm hands*
25. shipbuilder said...
20. drewster said...
"Frankly you're naïve if you think people choose public-sector work because they are civic-minded."
Really? What about people who volunteer for charities, for example? Would you choose the army for pay? I'd rather be naive as you say than take your view of humanity.
26. Shipbuilder said...
21. bellwether said...
"Shipbuilder the examples you give all have a vocational element meaning that the quality of people who chose these areas are naturally motivated and driven.
The difficulty is when you expand the public sector into non vocational/ nonessential areas eg most local authority departments, tax collection, a lot of the civil service then you get jobsworths who have no real ambition except an easy life, short hours, reliable money and job security."
I completely agree that the public sector should be restricted to certain services and professions, but not that it should be abandoned altogether.
27. novice pete said...
What should we privatise, the army, the police, the NHS, teaching, libraries, social care or all?
28. 51ck-6-51x said...
shipbuilder
- You are wrong, if I were in a position of a job that paid enough for my means and I was not judged on my performance beyond an easily attainable threshold I would certainly tend towards doing less! I am, however, not. I am instead exposed to my performance in a meaningful way and hence do the opposite.
29. flashman said...
This public versus private debate is pretty worthless. I have seen staggering levels of inefficiency and waste in the private sector and I have seen some pretty slick outfits. I do not have as much experience of the public sector but from what I've seen, there is no difference. It is ludicrous to suggest that public sector workers are generally of a lower standard. Workers are rarely intrinsically bad and it is therefore unfair to suggest sacking large swathes of people based on the sector that employs them. In the end it all comes down to management and it always amazes me how little stick management gets for poor performance. Northern Rock was a victim of bad management. It's employees were almost certainly perfectly good. I'm sure that this is also the case in poorly performing parts of the public sector. We should strive to maintain our public services because cutting them to the bone will badly impact the quality of life in this country (and the situation may not be reversible). We should however replace poor managers with higher quality mangers. That way we could almost certainly improve services and cut costs. It's amazing what good management can achieve
30. quiet guy said...
@shipbuilder
I know what you're getting at - I have worked with some terrific public servants - but I've met some horror stories too. Here's an extreme caricature, yet I think we will all recognise the type.
http://bastardoldholborn.blogspot.com/2009/06/tfl-interview-with-bob-crow-exclusive.html
The bottom line is that the private sector produce goods and services by competing. The public sector provide centrally planned services which may or may not be effective. The public sector need a successful private sector to pay their wages and (often very generous) pensions. I've worked in the public sector and private companies.
31. shipbuilder said...
21. bellwether said...
"Shipbuilder the examples you give all have a vocational element meaning that the quality of people who chose these areas are naturally motivated and driven.
The difficulty is when you expand the public sector into non vocational/ nonessential areas eg most local authority departments, tax collection, a lot of the civil service then you get jobsworths who have no real ambition except an easy life, short hours, reliable money and job security."
Absolutely agree that the the public sector should be restricted to the services/professions that 'fit' there, but not with abandoning it altogether. I have no axe to grind here - I've never worked in the public sector and am a pragmatist my nature. I simply disagree about what works and what does not and prefer to look behind the 'accepted' arguments on such matters - I'm willing to change my mind if convinced and have done so in the past.
32. shipbuilder said...
27. flashman said...
"This public versus private debate is pretty worthless. I have seen staggering levels of inefficiency and waste in the private sector and I have seen some pretty slick outfits. I do not have as much experience of the public sector but from what I've seen, there is no difference. It is ludicrous to suggest that public sector workers are generally of a lower standard. Workers are rarely intrinsically bad and it is therefore unfair to suggest sacking large swathes of people based on the sector that employs them. In the end it all comes down to management and it always amazes me how little stick management gets for poor performance. Northern Rock was a victim of bad management. It's employees were almost certainly perfectly good. I'm sure that this is also the case in poorly performing parts of the public sector. We should strive to maintain our public services because cutting them to the bone will badly impact the quality of life in this country (and the situation may not be reversible). We should however replace poor managers with higher quality mangers. That way we could almost certainly improve services and cut costs. It's amazing what good management can achieve"
Agree completely.
33. shipbuilder said...
26. 51ck-6-51x said...
"shipbuilder
- You are wrong, if I were in a position of a job that paid enough for my means and I was not judged on my performance beyond an easily attainable threshold I would certainly tend towards doing less! I am, however, not. I am instead exposed to my performance in a meaningful way and hence do the opposite."
So is being exposed to your performance in a meaningful way only achievable by competition/loss of money/threat of the sack, or would there be other factors?
34. cyril said...
I'm really fed up with this private-sector-good-public-sector-bad debate.
See if you can spot the pattern (I can't): Bad investment banks are private sector. Good nurse are public sector. Nice bin men are private sector (usually) = good. Bad management consultants are private sector. Bungling bureaucrats can be in private or public sector.
35. 51ck-6-51x said...
Flash said, "It is ludicrous to suggest that public sector workers are generally of a lower standard."
- Indeed, who suggested that? It seems pretty much agreed that it is the processes and what drives change within the entity that lie at the heart of any difference in steady-state efficiency.
36. 51ck-6-51x said...
shp - performance measurement should be based on whatever value I am adding to those employing me!
I am paid for my services in currency, but would accept those things, material or otherwise, which I value. This is off the point, however, it's a debate over the alienation of labour.
37. flashman said...
PS: Many people seem to be under the impression that the private sector pays for the public sector. This is not entirely true. The state has many streams of revenue that are derived from the country's assets and resources. There are also many parts of the private sector that owe their existence to the patronage and protection of the state.
38. shipbuilder said...
51ck-6-51x -
The point I was making is that you are ignoring the many people who work for the love of what they do, for the greater good and so on and in many cases receive less pay than if their talents were employed elsewhere. Competition does not motivate these people and so to say that these people would work better in such an environment I believe is incorrect and therefore privatisation in a free market of their job is not necessary to achieve results.
39. shipbuilder said...
Sorry cut my post off -
In fact, competition has been shown to be detrimental to some of these people's work. Jobs and people's roles in society should be tailored, where possible, to what gets the best out of them. For many this would be the public or non-profit sector.
40. devo said...
Jobs and people's roles in society should be tailored, where possible, to what gets the best out of them.
How on earth does that work, shipbuilder?
My 'Careers Guidance Officer' at school (who also taught Latin IIRC) was worse than useless.
After all, if she was any good I wouldn't be here now.
41. down wave said...
24. 51ck-6-51x said...*down wave lights the fire and steps back to warm hands*
Warm hands and a cold heart. One thing that I do know and am personaly experiencing is: From plumbers to electricians, to accountants & solicitors, firemen, nurses, doctors, farmers, vetinaries, police, military personel, fariers, it does not matter what the profession, we all spend gigantic amounts of time dealing with the red-tape from white collar workers. If by some miracle, they all turned up for work at the same time on the same day, then their office building would collapse under their weight.
42. 51ck-6-51x said...
Shipbuilder
- We do not need a state to have people who work for the love of what they do or for altruistic reasons, or, indeed, any other reason besides profit. I think that is a misconception to propose otherwise - you said yourself that you believe research has shown people are generally altruistic, think about the logical conclusion of that result. I for one do not see incompatibility between competitive business and moral standards ( no causation or correlation ). Furthermore if you are arguing that the state caters for the greater good I would beg to differ, indeed some individuals do I am sure, but as a whole? No. I postulate that many embark their public service sector careers with the best of intentions but soon realise it's not that easy to carry out those intentions; I know a few. My sister for example, one of the most kind hearted people you could hope to meet, wanted to teach in the most deprived of inner city schools, but the other staff were the biggest problem and she left the sector feeling totally disillusioned. Please consider your position.
43. down wave said...
42. 51ck-6-51x said...
Perhaps your sister is an introvert emotional feeling type, if so , then she can easily fall prey - become a victim to manipulative covert hostile personality types - the very nice person on the outside that is nasty inside ei. negative - 3 on the scale of my last book: See Chapter 4 of the book entitled: Naked Spirit. I am not trying to sell my book here, look, she can get the information free and learn how to handle such people, by downloading the free E-book by Ruth Minshull entitled: How To Chose Your People. 1972: www.goldcenturypress.com/authors.php?id=5 Perhaps she would like to read the chapter therein titled 1:1 level. I wish her well and good luck.
44. james stephenson said...
I hardly know where to start with Shipbuilders views of both humanity and the public sector.
I am a manager at a water utility. Back before it was privatised it was a shocking mess of inefficiency - there was no incentive to reduce costs or improve processes. Even now it is way behind the curve and is still hampered by red tape that would put any competetive company out of business.
I know people who work for the council. Inefficient doesn't even sum it up. Obstinate jobsworths - horrific people management.
My Mother works for the NHS - just as bad.
The whole point about the Private Sector is the State's use of it to try to fix society. It uses it to intrude ever further into our lives and as we know public sector jobs have increased by 25% under New Labour. At the moment Ed Balls is discussing putting CCTV cameras into the homes of 20,000 problem families - to check that children are going to bed on time, eating properly etc. Who pays for all of the infrastructure around this project? And what will it actually achieve? It is such a terrible misdiagnosis of the problem and how to deal with it.
Every IT project the government has initiated has been a massive and costly failure.
We have a glut of jobs in the Equality field. Same for Health & Safety (helping this Country grind to a halt and stopping simple activities form taking place). We have 'Street Football Coordination Officers' on £30K+. We have a welfare system that is a laughing stock and 'hundreds of thousands of immigrants are taking advantage of it'.
How can anyone say that the Public Sector is efficient? I can't believe what I am hearing. Naïve is too kind - ignorant is more accurate. Sorry, but this goverment is dostroying this country by spending madly on all of its little PC social projects and can't even run basic services well. People should wake up.
45. down wave said...
44. james stephenson said...How can anyone say that the Public Sector is efficient?
My company's solicitor said to me earlier this year: 'The Public Sector is diabolically in-efficient and beyound contempt' A chartered accountant advised me only last week that: It is no good whatsoever that you or anyone else in this country trying to be creative or developing anything to manufacture, you might just as well jump on the bandwagon and screw money out of everyone when and where ever you can.
46. 51ck-6-51x said...
Thanks down wave, I'll pass on the info ( funnily enough she took a bachelor's in psychology about 20 years ago ).
47. shipbuilder said...
44. james stephenson said...
"I hardly know where to start with Shipbuilders views of both humanity and the public sector."
Reading my posts would have been a start.
Firstly, nowhere did I say that the public sector was efficient. I simply argued that there was nothing about it being 'public' that fundamentally led to inefficiency. I did not go beyond that because I'm perfectly aware of the issues with it currently and in fact offered the reason as political interference, which you seem to agree with. I also specifically said that I think that the sector should be restricted to jobs and services that fit into it - essential services and those where competition is not possible. In fact I believe that any publically owned services should simply be standalone, not for profit organization, structured so as to be free from government interference.
Your post appears more as another rant than addressing any issues raised on this thread.
48. flashman said...
downwave: Self help books. Now there's an example of private enterprise displaying a level of pomposity, presumption and charlatanism that even the worst run state department could only dream of
49. flashman said...
james stephenson: From the many debates I've had with shipbuilder I can assure you that he is far from ignorant. He did not claim that the state sector is efficient. What he did say is that we shouldn't necessarily use the same criteria to judge the state sector. A moment of kindness from a nurse or an out of hours visit from a social worker is hard to quantify in terms of money or efficiency. Of course many state workers are despicable cun*s but so are many private workers. The appalling antics of British tradesmen are the stuff of legend and salesman, lawyers, estate agents, bankers etc etc are held in a similar low regard.
Perhaps the problem is modern Britain and not just the state sector?
50. shipbuilder said...
42. 51ck-6-51x said...
"Shipbuilder
- We do not need a state to have people who work for the love of what they do or for altruistic reasons, or, indeed, any other reason besides profit. I think that is a misconception to propose otherwise - you said yourself that you believe research has shown people are generally altruistic, think about the logical conclusion of that result. I for one do not see incompatibility between competitive business and moral standards ( no causation or correlation ). Furthermore if you are arguing that the state caters for the greater good I would beg to differ, indeed some individuals do I am sure, but as a whole? No."
I actually wasn't arguing any of those things. My main point is that working as privately owned companies in a free market are in many cases not the ideal for organizations or individuals to be efficient.
Obviously the 'state' in its current form is not the only alternative - your post appears to be relying on this false assumption.
You use the word 'state' in an interesting way - I would prefer simply 'public ownership', as it does not come with the all the baggage (perceived and real inefficiency, political interference, snooping, political correctness), of the current system that you are attaching to it in order to make your argument.
My point was that none of these things are fundamental to public ownership. To suggest that they are, which is the popular 'argument' that initially raised my heckles, simply ignores successful systems in other countries and the fact that many of the issues did not exist in the past.
If we separate public vs private ownership from the various issues that currently surround them, I'm simply saying that there is no reason to believe that one should be any better than the other, given the appropriate structures and management. Then the argument simply comes down to what works and what is fair. Some people, particularly in creative and caring professions do not need or want competition - it does not work to motivate them. 'Competitive business' therefore will not work (there is no moral argument, just functional). Where there is a moral or argument of fairness is exploitation of the resources of a country - land, oil etc that clearly everyone in that country has a right to by birth. That is another argument, however.
51. Shipbuilder said...
49. flashman said...
"Perhaps the problem is modern Britain and not just the state sector?"
I think that's it, isn't it? In particular the Nordic countries seem to have much better regard for their public sector.
52. 51ck-6-51x said...
I agree that there is political interference ( of course! ) - as I stated earlier there is political interference in private, NPOs and even charities ( just think of land subsidies! )
The simple observation is that without competition ( which does not have to be over profits by the way ) entities become inefficient ( it matters not the fact that they are public ). Non-profit organisations often have to compete, but usually public utilities, public services and especially public operations either do not, or have been provided with sponsored advantage; the lack of domestic competition then shows itself at the border, in the FX markets and in further policy.
I know you are not saying that the public sector is necessarily inefficient. I do not think James implied that you do either, but rather gave specific observations, which I would not call a rant, but useful input. You do, however, seem to deny and have no logical argument against the logic leading to the conclusion that it tends to such. I will soon give up on this argument for this very reason - there is little point in a debate where one side does not provide context and does not take up points from the other but rather deduces inaccurate meanings from the other party from which he derives further questions.
53. 51ck-6-51x said...
^^ Oh didn't see your further reply before that post, let me read it...
54. shipbuilder said...
20. 51ck-6-51x said...
"Regarding the cost of workers and the subsidies of public services such as the NHS, transport subsidies, state schools, farming subsidies... they are paid for by the production of the private sector. In my opinion - the public sector may provide a fairer distribution at the outset and it is therefore worth the extra cost of the financial friction and bureaucratic process, but given time this ceases to be the case due to ( even if they are a minority ) the self-serving with power. You are in effect comparing nominal cost to real cost."
I missed this point earlier, but it is at the hub of our disagreement, I think. If I am right, you believe that the public sector tends towards being ruled by the self-serving. I agree that this issue of a self-serving elite gaining control is probably the ultimate root cause of many problems, but this is clearly also a problem in the private sector, is it not? We can argue about what economic theory says and so on, but the evidence is that neither is better in this regard and therefore perhaps the solution is more in the curbing of this tendency withing each sector than simply dumping one or the other?
55. 51ck-6-51x said...
shipbuilder
- your latest post is far more balanced. Thank you.
I do not agree with your main point still, however, and see nothing to actually back it up - there are huge amounts of data to back up the claim that liberalisation generally increases productivity and decreases poverty - please point me to some counter evidence.
To my mind there is actually no such thing as "public ownership". I pay tax but cannot take profits from any public utilities, only those benefits assigned to me by someone in City Hall ( [ sic ] - generic ), which I may not need or want - that is inefficient for a start, and it's certainly not ownership!
You say, "Some people, particularly in creative and caring professions do not need or want competition "
- If there is truly no need for competition in a specific sector it will not take place in a free market as the margins will dictate. As for wanting competition I don't think that has anything to do with the question under discussion - Microsoft don't want competition for example, does that mean it should be quashed by the public purse?!
56. shipbuilder said...
51. 51ck-6-51x said...
"I know you are not saying that the public sector is necessarily inefficient. I do not think James implied that you do either, but rather gave specific observations, which I would not call a rant, but useful input. You do, however, seem to deny and have no logical argument against the logic leading to the conclusion that it tends to such. I will soon give up on this argument for this very reason - there is little point in a debate where one side does not provide context and does not take up points from the other but rather deduces inaccurate meanings from the other party from which he derives further questions."
I take it that your logical argument is that lack of competition tends to inefficiency. Actually this is what I am questioning. Given a situation where both sectors contain organisations suited to them, then in the private sector, orgainizations will be motivated by the possibility of going bust. Organizations in the public sector will be motivated by altruism. Therefore the motivation exists for both organizations to put in place the management and processes to be efficient.
Therefore, given specific motivation in both cases, there can be no tendency to inefficiency.
Perhaps I did not make this point clearly in previous replies.
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58. 51ck-6-51x said...
shipbuilder said, "I missed this point earlier, but it is at the hub of our disagreement, I think. ...clearly also a problem in the private sector... "
- This is indeed the question under debate.
No wonder I thought you were being very stubborn and was ready to leave this post!
The problem does indeed exist regardless of competition, but I think that the competition drives most of it out, the only places where it may survive in the private sector are where regulations, subsidies, tax structures and economic greenbelts allow it to. Liberalisation addresses these murky caves.
Once again it appear we are pretty much on the same page, but with slightly different conclusions.
59. 51ck-6-51x said...
^^ No wonder I thought you were being very stubborn and * I * was ready to leave this post!
60. 51ck-6-51x said...
shipbuilder said, "Organizations in the public sector will be motivated by altruism."
- well ideally, yes! But we don't often see this in practice, do we?
61. 51ck-6-51x said...
[ well ideally, yes! But we don't often see this in practice, do we? ]
... so what is broken?
If we can create a competitive and free market within the public sector ( and again it does not have to be about
profit, but may be about other quantitative measures - probably to do with the quality of service ) it should serve to fix this in my opinion. The problem is that it is an extremely difficult task to choose such measures such that they change with the market and are not subject to slight of hand and the like - hence why profit based competition works so well where it does.
62. shipbuilder said...
51ck-6-51x
Yes there is amount of evidence of liberalisation increasing productivity, but I believe that the majority is in sectors, such as manufacturing, obviously suited to competition. Terms such as 'productivity' take on different meanings in, say, the health sector, where productivity may be high, but at the cost of a proportion of the population having no care whatsoever.
I think that you take a narrow view of what public ownership is, regarding tax - there is nothing to say that a public organization cannot be paid for directly. Water, for example, could be paid for directly from a citizen's income, itself paid for by LVT.
In your last point, I phrased my point badly - when I say they do not 'want' competition, I mean that competition is detrimental to their performance because, not being their motivating factor, will cause distraction or stress. I really mean in terms of individuals rather than companies.
63. shipbuilder said...
51ck-6-51x
I think that we are both tending towards the same point! I do remember that you think that the toxic combination is big business + big government. Probably my main gripe is competition with the element of profit attached, which I believe tends to draw attention away from the real purpose of an organisation, which is to serve the customer. Clearly it is more of a stretch to imagine a worker in a water board being motivated by altruism than a doctor, so perhaps more of a competition-based structure could be suitable in such cases. In other words, I think that there are instances where competition is not suitable, where it is but in a publically-owned context and of course others where a free-market approach is best.
64. Shipbuilder said...
59. 51ck-6-51x said...
"[ well ideally, yes! But we don't often see this in practice, do we? ]
... so what is broken?
If we can create a competitive and free market within the public sector ( and again it does not have to be about
profit, but may be about other quantitative measures - probably to do with the quality of service ) it should serve to fix this in my opinion. The problem is that it is an extremely difficult task to choose such measures such that they change with the market and are not subject to slight of hand and the like - hence why profit based competition works so well where it does."
That's a fair point, however in the case of, say a water company or school, do the targets really change? I can remember a quote from a Blair-hating relative regarding education, it went something like "When it comes to schools, I don't want a bloody choice, I just want one near me that's good" I don't think that 'good' has really changed much.
65. shipbuilder said...
59. 51ck-6-51x said...
"[ well ideally, yes! But we don't often see this in practice, do we? ]
... so what is broken?
If we can create a competitive and free market within the public sector ( and again it does not have to be about
profit, but may be about other quantitative measures - probably to do with the quality of service ) it should serve to fix this in my opinion. The problem is that it is an extremely difficult task to choose such measures such that they change with the market and are not subject to slight of hand and the like - hence why profit based competition works so well where it does."
Fair point, but in the case of a water provider or school, do the targets really change?
66. James Stephenson said...
Shipbuilder.
I disagree that the Public Sector does not tend towards waste and inefficiency.
Look at British Rail. It was a shocking, backwards thinking, muddle of an organisation. At one point it hired some excellent engineers who developed a tilting mechanism. They were frustrated by BR's management and eventually threw the towel in. We would have been the first country to have tilting high speed trains, but a dinosaur of an organisation prevented it.
Look at BT as well. How much more efficient are they now?
Now look at the NHS. Incredible waste and incompetence (depending upon your post code).
I recently had Viral Mengitis. I was taken to Heartlands hospital by a very rude paramedic. Left for hours in a corridor. A blood test and nothing else. Left in a room that smelt strongly of urine. Disgnosed with stress. Turned into the street unable to walk. Went to another hospital the next day to be told I was lucky as my brain was starting to swell and I could have suffered brain damage.
What private company could get away with operating like that?
I am not saying privatisation is necessarily the answer for all services. Some services must be public - a health service that is predicated on profit will not best serve us. But we shouldn't deny that public ownership will incur waste.
You said there are examples of Public Sector organisations in other countries that are run efficiently.
Can you give some examples?
67. James Stephenson said...
Shipbuilder,
I forgot to use my password on my last comment so it may take a while.
One of my questions was, 'you mentioned other countries having public services that were efficient. Can you give some examples?'
68. james stephenson said...
Shipbuilder said -
'Probably my main gripe is competition with the element of profit attached, which I believe tends to draw attention away from the real purpose of an organisation, which is to serve the customer.'
More and more companies (not including banks probably) have realised that the best way to make profit is by improving their 'Brand Image'.
This is done primarily by ensuring that customers think well of the company. Word of mouth is seen by even very large companies to be extremely important in their strategy.
This is only going to insinuate itself further into management thinking as the Net / Social Networking / Complaints Community etc. become more developed.
Profit is a perfectly adequate mechanism for ensuring the customer will be first.
What mechanism takes its place in the Public Sector?
69. flashman said...
"Liberalisation addresses these murky caves"
There are many academic studies that would argue with this statement. Google the words liberalisation, neo liberalisation and efficiency.
There is even a paper “"Public vs. private sector: an examination of neo-liberal ideology" which is relevant to SOME aspects of this particular debate.
An abstract from this paper suggests the futility of some of the todays arguments:
"The paper reviews the theoretical underpinnings of the debate on the superiority of the public or private sector, and supports theoretical perspectives with help from empirical literature on the subject. The theoretical part covers issues relating to public choice, property rights and principal-agents relationship, while the empirical evidence includes review of literature on macroeconomic, microeconomic and welfare impacts of privatisation. The paper finds that despite numerous studies and unending discussions, the debate on the superiority of the public or private sector has remained inconclusive and is likely to remain so in the future. Notwithstanding the practical difficulties of making this assessment, the paper concludes that this debate is more ideological rather than empirical, since it is not possible to determine the superiority of one over the other through case studies, which can only be selective in nature".
70. 51ck-6-51x said...
Shipbuilder
- Yes you recall correctly. Furthermore I believe that big government sponsors big business and vice-versa! As I said, "If there is truly no need for competition in a specific sector it will not take place in a [ truly ] free market" - I think you miss this point... a free market does not imply that every entity is after profit, there is still room for charity, justice NPO and even things very similar to public services in an anarcho-capitalist system. I think people's idea of a free market is what we see today, but it is not, it is merely a poor approximation due to the interactivity with the discretely sampled term democracy in which we live - I do also believe there would be problems with a fully anarcho-capitalist system - mostly the very poor ( I, like you, would hope that the natural altruistic human nature would take care of it, but I do not know for sure ), and also in the realm of armies & warfare; these two things alone underscore the need for some kind of state and some kind of taxation ( I would advocate continuous scrips for that purpose, which we could have with current technology, albeit with a friction due to fraudulent activity ).
"but in the case of a water provider or school, do the targets really change?"
- sure, when the govt gives in to pressures, usually due to a change in other markets or variables that are not under public control: water may become scarcer at times or teaching may become more or less attractive to potential employees. This cannot happen with profits - there is no one to lobby. Both are subject to number fudging, but profit may only be fudged temporarily unless the entity is willing to go bust.
71. flashman said...
"Profit is a perfectly adequate mechanism for ensuring the customer will be first".
Way to simplistic and certainly not always true. I have seen many conflicts between corporate accountants and corporate product departments. When accountants hold too much sway, the end product is often compromised. Of course when the product department holds too much sway, the customer often gets a great product but the company doesn't make enough profit. There are some useful parallels here, to this debate
72. 51ck-6-51x said...
Flash
- Thanks, will take a look. However, I do believe that neither shipbuilder nor I actually think one is superior to the other ( he missed a point I made, and we fell into our own flames )... I believe the state has bloated and that this is not a good thing.
James
- My 2c regarding, "Profit is a perfectly adequate mechanism for ensuring the customer will be first.": In a truly free market I would agree that the competition over profit will lead to a drive for customer satisfaction. The problems are generally in scenario's where internal management is misaligned, of course these misalignments should be minimised by the two competing market drivers - consumer choice and producer profit margin. It is my opinion that such problems continue to exist when there are market distortions generally created by government policy.
73. 51ck-6-51x said...
Ah I see flash gives examples of misaligned management :)
74. flashman said...
Anyway, my private sector team is off now, for a twilight round of golf. Fortunately, due to our efficiency we managed to put in at least 30 minutes work this morning. It's this sort of frantic pace that earns us our bonuses
Good debate
75. shipbuilder said...
63. james stephenson said...
"More and more companies (not including banks probably) have realised that the best way to make profit is by improving their 'Brand Image'.
This is done primarily by ensuring that customers think well of the company. Word of mouth is seen by even very large companies to be extremely important in their strategy.
This is only going to insinuate itself further into management thinking as the Net / Social Networking / Complaints Community etc. become more developed.
Profit is a perfectly adequate mechanism for ensuring the customer will be first.
What mechanism takes its place in the Public Sector?"
I think that you answer your own question here. Companies realise that they make profit by serving the customer well, not that making profit serves the customer well. Therefore profit is not a necessary element, but a result. In a 'lean' company, the customer is the focus and profit is a result of giving the customer what they want. In a public sector company, a survey of customer satisfaction could be the measure to ensure that this is happening.
In some cases, though, I would argue that is beside the point and moral considerations and indeed wider implications upon society (of, for example, not having the NHS) are more important than 'productivity'. In these cases as I have argued, altruism and a sense of duty and consequences is what ensures that a good job is being done.
I get the impression that you think I am arguing for nationalisation of everything. I have made it clear that is not the case. In the case of production of consumer goods, these are clearly (to me) better in the private sector.
76. shipbuilder said...
51ck-6-51x
I certainly agree that neither private nor public is superior. I think though that when a number of factors are taken into account, both are applicable. My idea of some services in public ownership (insulated from government) as I stated in a previous post is probably closer to the anarcho-capitalist system that you describe than it is to the current system. I think that the situation that we currently are in suggests that a self-serving elite will gain control of whatever system is in place and distort it to their means, so perhaps the important discussion is how this might be prevented. Anyway, I'd best go now, but this has been a good debate.
77. shipbuilder said...
67. James Stephenson said...
"Shipbuilder,
I forgot to use my password on my last comment so it may take a while.
One of my questions was, 'you mentioned other countries having public services that were efficient. Can you give some examples?'"
I forgot to use my password on the post (51) where I mentioned the countries! I'm not sure about efficiency, but certainly in the Nordic countries I believe that the public sector is well regarded and seen as a good thing. Perhaps I'm wrong.
On the other point about efficient companies, I read something recently (I think a link on here about lean production) that presents the case that in terms of creative personnel within an organization, a certain amount of 'slack' is better for innovation and ideas. My personal feeling is that this fits well with our human nature and illustrates that perhaps efficiency and productivity are not everything - perhaps our happiness and satisfaction as humans should not be secondary to economic 'progress'? Just a thought.
78. down wave said...
48. flashman said...downwave: Self help books. Now there's an example of private enterprise displaying a level of pomposity, presumption and charlatanism that even the worst run state department could only dream of
Naturally, no one should educate themselves with any type of knowledge other than that which comes from you. Download the free E-book by Ruth Minshull entitled: How To Chose Your People. 1972: www.goldcenturypress.com/authors.php?id=5 Read the chapter therein titled 1:1 level and look in its mirror and see yourself. Your comment above has exposed you for what you are.
79. flashman said...
down wave: It's a scientology website. Nutter
80. 51ck-6-51x said...
Down Wave
- I read the whole chapter and it strikes me like cold reading. Some features are such that they could apply to anyone. Others say "A 1.1 may be X or they may be not X" or "A 1.1 may display these characteristics, or may not", and so on. I did not carefully classify all instances, but these things struck me enough whilst reading it to think it sounded like cold reading. So I went to chapter 3 and what was the first characteristic description? It was:
"If every person in this emotion [apathy, 0.5] were curled up in a ball on the floor of a mental institution and labeled "catatonic," you could identify him easily. But you are just as likely to find him lecturing in a large university and labeled a "brilliant intellectual."
At that point I decided to post. Maybe I'll read the whole book, but so far my opinion is not all that high I'm afraid.
I also looked at your website. Well done, it is fantastic. Of course I don't agree with everything there, I am generally a sceptic, but I do like to keep an open mind and digest available information.
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