On this pesky matter of Privatization

[jis]

Maybe it is time that the Conservatives in the US had a chat with their British counterparts on this matter of Privatization, and learn from their experience.

https://jacobinmag.com/2020/01/virgin-trains-uk-rail-privatization-nationalization

 

[me_little_me]

Of course, it also depends on the degree of privatization. Yes, if one turns it completely over to private companies to charge what they will, provide the level of service they feel like, treat their employees the way they wish AND possibly have a monopoly, then one gets the worst of the worst. Add to it the desire of airports and other government agencies to make big bucks off the public, and you have overpriced food and poor service with some of it going to fund the operation and much of it to fund the bloated bureaucracy of the managing agency.
On the other hand, private ownership of regulated utilities (when the regulators are not in bed with the regulees) , while not perfect, tends to be much better and even private operation ala National Park Hotels, has worked for years.

 

[Devil's Advocate]

when the regulators are not in bed with the regulees

Where is that the case?

private operation ala National Park Hotels, has worked for years

What does "work" mean in this contexts and how does it differ from airports?

 

[jiml]

The significance of @jis' post above is more about who is acknowledging the need for re-nationalization than the action itself. "Conservative" governments worldwide (insert party of choice) generally tend to view nationalization as socialism, so this is a big concession. North America, on the other hand, is likely too large a mountain to climb.

 

[sttom]

Expecting money losing private services or at least low profit quasi public services to be a profitable business venture is a fools errand. This tends lead to incredibly expensive services that may or may not go broke at some point which isn't good for anyone at any point in this program's existence.

 

[me_little_me]

On the other hand, private ownership of regulated utilities (when the regulators are not in bed with the regulees) ,

Where is that the case?

Over twenty years ago, Georgia allowed a change to the regulated natural gas utilities. The utility got to keep $25 per customer for its regulated part to provide service (even now, in NC it is just gone up to $15) and anyone was free to charge what they wanted for the actual gas. My gas bill went way down when moving to NC where both the service portion is much less and the regulated gas prices is just as cheap. The Georgia companies spend lots for advertising their natural gas, all of which comes from the regulated utility which is also an unregulated seller.

On the other hand, private ownership, while not perfect, tends to be much better and even private operation ala National Park Hotels, has worked for years.

What does "work" mean in this contexts and how does it differ from airports?
[/QUOTE]
I have always found National Parks concession hotels, convenience stores, concessions and restaurants to be reasonably priced especially considering the value of the scenery that comes with using the park. On the other hand, airport restaurants have higher prices than their corresponding places outside while excluding those places from any corporate specials and other stores in the airports are always top dollar places. The airport authorities are not interested in keeping prices low but instead try to squeeze the maximum from concessionaires (and therefore the public) both in the operations they control and the ones (like parking) that they run. In the latter case, the privatization of concessions means those that offer the most money to the airport authorities or who have the most influence with them not those that are required to offer corresponding or discounted prices as they would in a truly competitive environment.

 

[bms]

Expecting money losing private services or at least low profit quasi public services to be a profitable business venture is a fools errand. This tends lead to incredibly expensive services that may or may not go broke at some point which isn't good for anyone at any point in this program's existence.

Based on the last information I saw, for-profit bus companies are about to get 8 times as much money than Amtrak in the next Corona bailout. Now that the Government subsidizes private corporations, it's insane to expect competing public services to make a profit.

 

[Anderson]

I think the issue in Britain, at least, is that there are severe capacity constraints across the board. Ridership there is higher, in raw numbers, than it was at the peak in the 1910s (and about 40% above where it hovered between the 1920s and 1940s). A lot of the issues that the franchises kept running into was that they would have plans to expand service, only for Network Rail to not manage to give them additional capacity to work with.

There's probably room on a number of lines to argue for longer trains and the like, but the bottom line is that particularly at peak hours the trains will be absolutely slammed with riders, so price pressure on full-flex tickets becomes the only way to regulate demand so as to at least limit the number of folks who either can't board the train or can't get a seat.

(Mind you, this is a version of the running fight over the Acela we've all had for a long time...)

 

[jis]

If people are really interested in what the issues are in the UK, instead of armchairing it from the US, I would strongly recommend getting a subscription to some reputable UK Rail journal like Modern Railways. The issues are actually quite complex and involve both technical and political aspects. For starter the structure of how subsidies and dividends are done in the UK franchise or even direct operations is mindbogglingly complex compared to the simple stuff we struggle with here. The railways related publication in the UK are an order or two magnitude better than the more or less comparatively amateurish and specially technically weak stuff that is published in the US.

 

[sttom]

I'm sure they are a lot of interesting minutia in the UK's franchising system but, the headline metrics paint a picture of a system that is failing its stated mission. Privatization was promised to lower subsidies and capital costs to the British Government, it hasn't. Its gone up since Privatization, in the last 5 years of British Rail it got 1.6 billion Pounds per year on average, these days its averaging 5 billion per year. Quality was supposed to improve and it has for First Class from what I hear from the Brits I know, but the stats show a railway system that people view as not having "value for money" as the Brits put it. And that is the metric that should be the biggest concern for the diminishing number of people that actually care to keep the trains in private operation. On the government side of things, some of the franchise operators weren't doing well before COVID, I remember reading about Northern Rail being on the chopping block early in 2020, which means the government didn't have confidence in it. Not to mention the East Coast Mainline had to be brought back into public operation a couple years ago till the government realized the public operator was doing a better job. One of the reports I read through also mentioned that the number of bidders on franchises has declined over the years, which means private companies are losing confidence in the system and whatever troubles there are they don't seem to think its worth the trouble either. Which means the public at large is losing confidence in the system, the government is losing confidence in the system and the operators are losing confidence in the system and this was going on before COVID pulled the rug out from under the economy in March. Could the system be reformed? Maybe. But given everything else that is going on at the moment, renationalization is the easier answer.

 

[jis]

What amazes me is that a significant number of franchisees are really subsidiaries of national railway systems of other countries. Why would you want to franchise away your rail business to other national systems instead of to your own national system, even if you beieved ardently in franchising? Of course then you could remove one level of bureaucracy by simply running it without the overhead of going through the franchising process, which is about where the Brits have eviodently gravitated towards at this point. Sometimes the Brits make no sense at all.

 

[sttom]

I've just learned to accept that things in English speaking countries will just be a mess and/or work worse than in any other country with a comparable system. We don't have great rail networks compared to any other developed country, all of our health care systems are a mess compared to any other country that delivers it through a similar manner, our K-12 education systems don't perform as well as other developed countries on average and so on and so on. For some reason we seem to prize some other values over goal setting and efficiency. Which bugs the hell out of me, but I'm the weirdo.

 

[MARC Rider]

Sometimes the Brits make no sense at all.

Yeah, like they frittered away 13 perfectly good colonies they had on the eastern seaboard of North America. (For a summary of the sad details, check out The March of Folly by Barbara Tuchman.)

 

[jiml]

Yeah, like they frittered away 13 perfectly good colonies they had on the eastern seaboard of North America.

Not to mention a fairly large land mass to the north, except for the big chunk they gave the French in the middle.

 

[MARC Rider]

Not to mention a fairly large land mass to the north, except for the big chunk they gave the French in the middle.

They didn't fritter that part away. Even the French part. After all, in every post office, there's a picture of the Queen. And the folks in the northern land mass were ready to fight to defend the Empire/Commonwealth/whatever in 1914 and 1939. They had to do some real work to get the former 13 colonies to join in.

 

[caravanman]

When I worked for British Rail back in the 1070's, we had an integrated system... B.R. owned all rail track, everything...
The guys who worked on the tracks, the station folks, the ticket offices, the train crews, all belonged to the same big "rail family". Staff were mostly enthusiastic, proud of rail traditions, we even had "mutual improvement classes" run by volunteers with a quiz to improve knowledge of the safety rules and regulations, etc.
I hate the way our public bodies have been privatised, asset stripped, for short term treasury cash injections.
We have sold off our water, power, etc, often to foreign businesses, we have a Chinese firm building our new nuclear power plant! Even our "National Health Service" Covid track and trace is run by a profit making private business...

Still, now with Brexit just a few weeks away, we will soon be experiencing an amazing new rebirth and glory... And if you believe that, you will believe anything...

 

[dlagrua]

Some degree of privatization may work but the limiting factor may be competition. There are only six large major railroads operating in the USA........BNSF, Norfolk Southern, Kansas City Southern, Union Pacific, CSX and CP. They own most of the interstate tracks. Fact is they have zero interest in passenger rail so how do we privatize? What might work is if we had a company working with Amtrak to add more sleeper cars like Pullman once did. This may drive the sleeper revenue way up and Amtrak and the sleeper car company could share the profits. The Covid epidemic has created an opportunity today for private travel options. Now is the time to do something but with the current BOD nothing will be considered for improving LD service.

 

[20th Century Rider]

Privatization? Not fiscally possible. Why even discuss it? At this point in the evolution of governmental leadership change becomes a matter of innovative thinking. There is a glimmer of hope if the government and the private freight lines get together and encourage a hybrid contracted service. Sorry for those who are tired of hearing it... but SpaceX is an example of success... private enterprise working for the government... doing what needs to be done more efficiently.

 

[Exvalley]

I suppose it depends on your definition of "privatization." In Europe there are some encouraging examples of private operators. For example:
- Virgin Trains, UK
- NTV Italo, Italy
- RegioJet, Czech Republic

These are just a couple that come to mind.

 

[jiml]

I suppose it depends on your definition of "privatization." In Europe there are some encouraging examples of private operators. For example:
- Virgin Trains, UK
- NTV Italo, Italy
- RegioJet, Czech Republic

These are just a couple that come to mind.

What I find more interesting are the government-funded operations doing "for profit" business in other countries, as @jis pointed out earlier. In the case of the UK, looking at you DB and Trenitalia.

 

[jis]

I suppose it depends on your definition of "privatization." In Europe there are some encouraging examples of private operators. For example:
- Virgin Trains, UK
- NTV Italo, Italy
- RegioJet, Czech Republic

These are just a couple that come to mind.

Virgin Trains UK is pretty dead though, and their final year was pretty ugly. They had progressively deteriorated over the last five or six years of their existence. Before COVID I used to travel to the UK every year around Thanksgiving with a Britrail Pass in hand, and I could see the sad decline of Virgin year to year.

Privatization in UK and Europe has a subtly different meaning from what the privatization aficionados in the US mean by that term though. On that side of the Atlantic it is acceptable that there will continue to be considerable subsidy, specially for essential service, even to franchisees that also pay a dividend. Or at least no one is opposed to that possibility. In the US there is fantasy that once privatized it no longer has any impact on giovernment's transportation budget, other than taking it off its books.

The EU Essential Service Privatization Directive is a very different sort of proposal/requirement than what the mostly still born ideas that emanate from Washington DC are. And even France is now starting to franchise territorial essential service under public private partnerships.

 

[sttom]

Privatization in the US would also be unwanted on the part of the freight railways. They gave up their passenger trains because they had a low farebox recover ratio (60% on average) and this was driving them into bankruptcy. There is no way a private company would take that deal without a subsidy. And a private company would get that subsidy and probably more since private companies tend to buy really good lobbyists. And we probably won't see any improvements in service and will likely see increased ticket prices on top of it. And this is assuming that the railways will play nice with private passenger operators. Amtrak was heavily delayed back when they tried to do the express freight thing, some people thought that was partially due to the railways trying to kill Amtrak's small competition. A private company would try to do the same thing and probably end with the same results and a failing franchises.

Part of why private operators can function in Europe is because the national governments own most, if not all of the railway infrastructure and can allow open operation. The only way we could get a competitive market in the rail industry would be if the railways were brought into public ownership and were treated like a piece of public infrastructure. Then we could see competition and potentially the rise of private rail operators, but if they do rise, they will be incredibly limited. It would likely be as limited as Megabus's network instead of Greyhound's network. Which in some ways might be better than Amtrak, but if you're stuck on an 8 hour trip in a commuter seat, people are not going to be that gung-ho to ride them.

 

[Palmetto]

I suppose it depends on your definition of "privatization." In Europe there are some encouraging examples of private operators. For exampgle:
- Virgin Trains, UK
- NTV Italo, Italy
- RegioJet, Czech Republic

These are just a couple that come to mind.

UK won't be privatized much longer. The government is re-nationalizing the train system.

 

[jiml]

UK won't be privatized much longer. The government is re-nationalization the train system.

Northern is already under government management and others will follow. Some of the smaller "niche" companies that are doing a good job may survive, if they in turn are able to survive the pandemic.

 

[sttom]

That's one of the things that I found interesting when reading the public opinion survey on the British Rail Network, is that the open access operators are the ones that score well and the ones that have regular services are the ones that everyone seems to hate the most. Given how few people think the trains are worth the price of the ticket, I don't understand how the railways maintain an 80% satisfactory rating overall, unless its a "we expected nothing, and we got something" sort of situation.