11

In Europe in the last 10–30 years, many public transportation companies have been split up in parts, with some parts corporatised and some parts privatised. This has partly been motivated by an expected increased in quality, whereas opponents have argued that it would actually reduce quality, but the debate has also been ideologically loaded. Different countries have implemented different things ways, but almost everywhere the trend has been to introduce some form of corporatisation in at least some components of formerly government-run public transportation, most notably state railways.

Is there any evidence that splitting up, corporatisation or privatisation of public transportation affects the quality for travellers in a positive or negative way? By splitting I mean distributing the tasks of a formerly unitary organisation over several organisations; for example, one organisation for the tracks, one for the stations, one for the vehicles, one for the operations, etc. By corporatisation I mean the transformation of a government-run public transportation organisation (for example, a ministry of railways) to a for-profit but government-owned corporation. By privatisation I mean the partial or complete transfer of ownership from the government to private actors.

By quality, I mean:

  • Reliability with regard to delays and cancellations, specifically the rate of delay, rate of cancellations,
  • Frequency of service: number of trains, buses, etc. per day
  • Speed/duration: some appropriate statistic of the time it takes to go from A to B
  • Price for the traveller, for individual journeys or for subscriptions
  • Service to the traveller: easiness and speed in getting delay compensations, help with lost&found, answers to queries from travellers, easiness of making reservations, etc.

One relevant aspect that I will not consider for now relates to the working conditions for the employees of the company. I might take that in another question; I think it's a different thing.

Of course, this is not an easy question, because there is no trial we can re-run to see what would have happened if a different policy had been applied. Correlation does not imply causation, and a reduction in quality since the start of corporatisation may very well be due to simultaneous cuts on maintenance. However, this problem in analysis applies to any policy, so all we can do is investigate examples of corporatisation (Sweden, Netherlands), privatisation (United Kingdom), or a maintaining of the status-quo (France).

Have there been any studies specifically into this question? What were the results of those studies?

11

There are numerous and almost overwhelming evidence that privatization of public run services typically cause:

  • An enormous decrease in quality

  • An enormous increase in price to those who utilize or benefit from the service

  • Corruption and profiteering

Privatization of Prisons in the US, Failed Promises:

https://www.prisonlegalnews.org/%28S%28403tz1ng3oz0k355yuvexj45%29%29/displayArticle.aspx?articleid=23838&AspxAutoDetectCookieSupport=1

Here is an example of extreme corruption in a case that happened in my backyard:

http://www.npr.org/blogs/thetwo-way/2011/08/11/139536686/pa-judge-sentenced-to-28-years-in-massive-juvenile-justice-bribery-scandal

Here is a paper written on the reality of privatization of public infrastructure:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1776350

At best it becomes a short term solution for cash strapped governments, but then they slowly find that various provisions protect the private organizations from inherent risk in such a project, it doesn't end up being as good a deal anymore for the government.

A small example of what I am talking about is how a sports league has a crumbling stadium in a city. The free market would demand that the league or the league team invest in a new stadium for their fans or they will take their business elsewhere. This is not what happens. They exploit the local municipality to purchase and take the risk of building them a new stadium, then giving them the exclusive lease for it the lifetime of the building. They typically blackmail the municipality by threatening to leave the city, which in turn brings the citizens against the city for not meeting the demands.

Rail systems will have the same problem, the privatization portion of it typically just takes the recurring annual managing expenses off of government books, but when rail infrastructure needs to be built or replaced then the enormous investment is typically more than a private enterprise wants to take on so a government will end up floating bonds to pay for it in the end anyway.

Other reasons for privatization can be as simple as union busting tactics:

https://www.commondreams.org/headline/2012/10/02-4

Privatization of Social Security is another thing that is a thinly veiled power play to grab an enormous pot of money into the hands of fund managers and Wall Street banks for them to gamble with. We see how well the pensions are doing, and we also see that when a pension fails the government is often forced to pick up the tab while the people who mismanaged that money (gambled it) are heralded as free market Ubermenchen and model citizens to which we should all aspire to be some day by working hard.

Here is an example of the Right-Wing Cato Institute heralding the success of measures to privatize Chile's social security system (the Right Wing's breeding ground for ideas)

http://www.cato.org/pubs/policy_report/pr-ja-jp.html

Then there are a number of articles in the news recently that show they are facing the same problems as many pensions do today. Where did the money go?

http://economistsview.typepad.com/economistsview/2006/01/chile_confronts.html

http://worldfocus.org/blog/2009/12/10/chiles-privatized-social-security-may-risk-bankruptcy/8842/

I believe the evidence is overwhelming that there exist a number of public services that cannot be efficiently or privatized without governments picking up the cost or without inherent risk of corruption. It is a no-brainer for a business man who has a captive consumer base, a governments shoulders to fall back on and guaranteed profit. The temptation for corruption is insatiable for members of the government as well when this occurs.

  • 2
    Thanks for the answer, but I deliberately narrowed down my question to public transportation, as otherwise the question becomes quite huge! Not every service is the same, and some might oppose privatisation of prisons but support privatisation of steel works. – gerrit Dec 10 '12 at 8:43
  • 3
    @gerrit Good point, but then not everybody needs a steel mill. Collectively all people collectively have a need for prisons, police forces, fire departments, healthcare, transportation and a social safety net which is why I decided to address those specifically. I am just making the case that privatization tends to be highly susceptible to corruption, profiteering and abuse. – user117 Dec 10 '12 at 12:15
  • 1
    @maple_shaft - Not everyone needs public transportation either. – user4012 Dec 11 '12 at 6:03
  • 1
    ... Privatizing social security is not aimed at benefitting fund managers. You are confusing correllation and causation. It's aimed at letting people like me NOT pay for retirement of lazy people who don't have kids (Baby Boomers). – user4012 Dec 11 '12 at 6:08
  • 2
    @TRiG - "not everybody" != "nobody" – user4012 Jan 13 '13 at 14:15

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.