Quotulatiousness

July 14, 2024

When the Ontario Progressive Conservatives backed away from LCBO privatization

Filed under: Business, Cancon, Politics, Wine — Tags: , , , , , — Nicholas @ 03:00

In the National Post, Terence Corcoran posts an excerpt from last year’s The Harris Legacy: Reflections on a Transformational Premier edited by Alister Campbell:

“LCBO at Parkway Mall” by Xander Wu is licensed under CC BY-SA 4.0 .

Almost 30 years ago, in 1995, the Ontario Progressive Conservative government led by Mike Harris promised to privatize the Liquor Control Board of Ontario (LCBO). “We will sell off some assets, such as the LCBO,” said the party’s famed election document, the Common Sense Revolution (CSR). The LCBO could have been a true privatization — a full-fledged divestiture of a government monopoly into a new open and competitive market, but it never happened.

The failure to privatize the LCBO, lamentable from a consumer and economic perspective, remains a significant lost opportunity to demonstrate the benefits of privatization. If Harris had successfully de-monopolized the alcohol market, the whole concept of privatization would have been given a major boost. Instead, the government backed away from privatization of the alcohol market, preferring instead to allow the corporation to substitute modern marketing and retail razzle-dazzle to give the false impression it was offering the public the best of all worlds.

The LCBO failure is also a demonstration of the degree to which the Common Sense Revolution’s starting principles fell short in grasping the essential benefits of private versus public ownership and control. Neo-liberalism isn’t exactly a fine science. The Wikipedia entry on “Neo-liberalism” is a 30-page effort (including 400 footnote links to hundreds of warring academic papers), reflecting an economic and ideological scramble that dates back more than a century. But when the Harris government came to power, major elements of the free-market model were often overshadowed by fiscal policy objectives. With the LCBO, the Harris government veered off the neo-liberal course in pursuit of standard political objectives.

In 1995, the LCBO was a government owned and operated province-wide corporation that controlled liquor and wine wholesale and retail markets. Another private monopoly player, the Beer Store chain, while owned and operated by the brewing industry, was also essentially a government-sanctioned beer monopoly. The CSR neo-liberal objective should have been to privatize the alcohol market by selling the LCBO, deregulating the Beer Store monopoly and allowing beer sales through supermarkets and even corner stores. More importantly, dismantling the LCBO would allow other corporations to enter the alcohol retail business and provide consumers much more choice, which has been the Alberta experience. Notably, Alberta achieved a successful and deregulated approach without sacrificing provincial revenues.

The neo-liberal objective of privatization is to benefit consumers and enhance economic productivity through competition. Instead, the Harris government fell into the fiscal policy trap that routinely captures politicians, bureaucrats and corporate insiders. Instead of aiming to benefit consumers, the objective soon became how to maximize the fiscal return to government. Never mind the consumer and the market. The objective became preserving — and enhancing — government revenues.

At the time, anti-privatization advocates frantically pointed at the Alberta experience of privatization of their provincial liquor monopoly, which (briefly) generated a lot of retail horror stories that Ontario newspapers gleefully republished (and, likely, emphasized out of proportion to the actual Alberta market). You can still hear Ontarians casting aspersions on the Alberta market as if nothing at all had changed after the initial rough patch. From what I’ve heard from Albertans, they have far wider choices of alcoholic beverages in stores much more conveniently sited with better open hours than anyone in Ontario enjoys. The Alberta government still gets at least as much in tax revenues from alcohol sales without needing to be in the distribution or retail business. It doesn’t seem to be the utter disaster that Ontario media portrays it to be … rather the contrary.

April 23, 2024

Justin Trudeau’s legacy may not be something he ever wanted (or imagined)

Filed under: Cancon, Government, Health, Media, Politics — Tags: , , , , , — Nicholas @ 03:00

Tristin Hopper outlines some of the attitudinal changes among Canadian voters during Trudeau’s term in office, with opinions shifting away from things we used to consider settled once and for all. Canada’s Overton Window is moving (relatively) quickly:

Front view of Toronto General Hospital in 2005. The new wing, as shown in the photograph, was completed in 2002.
Photo via Wikimedia Commons.

It’s been among the most volatile and untouchable third rails in Canadian politics: The adoption, at any level, of a private health-care system.

In the last federal election, a Conservative statement about “public-private synergies” was all it took for Deputy Prime Minister Chrystia Freeland to brand it as a right-wing assault on the “public, universal health-care system”.

But a new Ipsos report shows that “two tier health care” is not the threat it once was.

Among respondents, 52 per cent wanted “increased access to health care provided by independent health entrepreneurs”, against just 29 per cent who didn’t.

Perhaps most shocking of all, almost everyone agreed that private health care would be more efficient. Seven in 10 respondents agreed that “private entrepreneurs can deliver health care services faster than hospitals managed by the government” – against a mere 15 per cent who disagreed.

“People understand that the endless waiting lists that characterize our government-run health systems will not be solved by yet another bureaucratic reform”, was the conclusion of the Montreal Economic Institute, which commissioned the poll.

As Canada reels from simultaneous crises of crime, affordability, productivity, health-care access and others, it’s prompting a political realignment unlike anything seen in a generation. But it’s not just a trend that can be seen in the millions of disaffected voters stampeding to a new party. As Canadians shift rightwards, they are freely discarding sacred cows that have held for decades.

If Canadians are suddenly open to health-care reform, it helps that they’ve never been more dissatisfied with the status quo. The past calendar year even brought the once-unthinkable sight of the U.S. being officially called in to bail out failures in the Canadian system.

January 22, 2024

Nationalization of British Railways: What Went Wrong?

Filed under: Britain, History, Railways — Tags: , , , , — Nicholas @ 02:00

Railways Explained
Published 22 Oct 2023

In today’s video we continue uncovering the story of railway development in Great Britain, as part of a special trilogy marking the Railways Explained’s achievement of 100,000 subscribers!

This is actually the second video in series, and it covers a period from the aftermath of World War II to the momentous era of rail privatization, which was quite challenging period for British railways, full of ups and downs, but it is mostly marked by the formidable challenges.

We talked about the pivotal moments, such as the birth of British Railways, the ambitious Modernisation Plan, the influential Beeching Report, structural reforms, and the eventual transition to rail privatization, which all defined the British railways during this transformative period.

This insightful journey through time illuminates the intricacies and milestones of a railway system that has left an indelible mark on the United Kingdom’s transportation history.
(more…)

January 15, 2024

The radical anti-state agenda of Argentina’s Javier Milei

Filed under: Americas, Economics, Liberty, Media, Politics — Tags: , , , — Nicholas @ 04:00

Jon Miltimore compares the Venezuelan experience after electing Hugo Chavez in 2007 to Argentina’s radically opposed choice to elect Javier Milei as President late in 2023:

Javier Milei, 8 October 2022.
Photo attributed to Vox España via Wikimedia Commons.

In November, the country elected libertarian Javier Milei as its new president. And whereas Hugo Chavez said, “All that was privatized, let it be nationalized”, Milei is essentially saying the opposite: All that was nationalized, let it be privatized.

Milei started by cutting in half the number of federal ministries in Argentina, reducing them from 18 to nine. This was followed by a massive currency devaluation.

Milei did not stop there. In a recent televised announcement, he said he would “repeal rules that impede the privatization of state companies”.

Those words were backed up by a 300-measure order designed to deregulate internet services, eliminate various government price controls, repeal laws that discourage foreign capital investment, abolish the Economy Ministry’s price observatory, and “prepare all state-owned companies to be privatized”.

Milei capped it off on Wednesday with a 351-page omnibus bill that takes aim at Argentina’s regulatory state and would grant Milei emergency powers “until December 31, 2025”.

Giving any president emergency powers is no small thing, even during a genuine crisis. Though Milei’s bill is designed to curb state power, not to expand it — a notable contrast to the typical crisis response paradigm — history and recent events in El Salvador show how emergency powers can be abused and used to violate human rights and liberty.

Whether Milei can get his full agenda through is unclear, but there’s reason for optimism.

His stunning election is itself evidence that Argentines are hungry for change. He’s already shown an impressive pragmatism to wed to his undeniable political flair, surrounding himself with a slew of talented policy experts. This includes Federico Sturzenegger, a former chief economist of Argentina’s central bank who two decades ago managed to turn around the failing Bank of the City of Buenos Aires. Sturzenegger’s reforms were so effective they became a Harvard case study.

Success is by no means certain, of course.

Recovering from decades of Peronism — a blend of socialism, nationalism, and fascism, which dominated Argentina’s political system for years — will not happen overnight. And Argentina’s political class has spent the last few years making a bad situation worse.

Still, the great economist Adam Smith once observed that the key to economic prosperity is surprisingly simple.

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice,” the Wealth of Nations author said.

Milei knows this. He has not just read Smith (in addition to Austrian school economists such as Friedrich Hayek and Ludwig von Mises). In a 2017 profile, he dubbed himself “Adam Smith’s heir.”

A heavy dose of Adam Smith is precisely what Argentina needs, and Milei has correctly diagnosed the affliction of Argentina’s once-prosperous economy.

“The state doesn’t create wealth; it only destroys it,” Milei said in a widely viewed 2023 interview.

October 30, 2022

QotD: Thatcher’s legacy

Filed under: Britain, Economics, History, Politics, Quotations — Tags: , , — Nicholas @ 01:00

… it was not the Labour Party’s tribunes of the masses who evicted her but the duplicitous scheming twerps of her own cabinet, who rose up against her in an act of matricide from which the Tory Party has yet to recover. In the preferred euphemism of the American press, Mrs Thatcher was a “divisive” figure, but that hardly does her justice. She was “divided” not only from the opposition party but from most of her own, and from almost the entire British establishment, including the publicly funded arts panjandrums who ran the likes of the National Theatre and cheerfully commissioned one anti-Thatcher diatribe after another at taxpayer expense. And she was profoundly “divided” from millions and millions of the British people, perhaps a majority.

Nevertheless, she won. In Britain in the Seventies, everything that could be nationalized had been nationalized, into a phalanx of lumpen government monopolies all flying the moth-eaten flag: British Steel, British Coal, British Airways, British Rail … The government owned every industry — or, if you prefer, “the British people” owned every industry. And, as a consequence, the unions owned the British people. The top income-tax rate was 83 per cent, and on investment income 98 per cent. No electorally viable politician now thinks the government should run airlines and car plants, and that workers should live their entire lives in government housing. But what seems obviously ridiculous to all in 2013 was the bipartisan consensus four decades ago, and it required extraordinary political will for one woman to drag her own party, then the nation, and subsequently much of the rest of the world back from the cliff edge.

Thatcherite denationalization was the first thing Eastern Europe did after throwing off its Communist shackles — although the fact that recovering Soviet client states found such a natural twelve-step program at Westminster testifies to how far gone Britain was. She was the most consequential woman on the world stage since Catherine the Great, and the United Kingdom’s most important peacetime prime minister. In 1979, Britain was not at war, but as much as in 1940 faced an existential threat.

Mark Steyn, “The Uncowardly Lioness”, SteynOnline.com, 2019-05-05.

June 5, 2022

Privatize the libraries?

Filed under: Books, Politics, USA — Tags: , , — Nicholas @ 05:00

In the latest SHuSH newsletter, Kenneth Whyte discovers — perhaps to his surprise — he’s not actually the most visible crank on public library issues:

I’m no longer the world’s biggest crank on public libraries. My argument, you’ll recall, is that public libraries are a good thing, but that North Americans borrowing rather than buying three out of every four books they read is a bad thing for the incomes of authors, the economics of publishers, and the welfare of just about everyone else involved in the book industry. That’s fainthearted stuff compared to this week’s tweet from Chris Freiman, a philosophy professor at William & Mary:

As you can guess from the 4,152 comments he’d generated by last night, Freiman’s was an unpopular take. Summing up the responses:

No one has been in a mood to ask if Freiman has a point, or where he’s coming from. For what it’s worth, he has a track record of criticism of government welfare spending. His usual schtick is to ask why so many Americans are poor when the poverty line for a family of three is $18,530 (annually) and welfare spending on a family of three from all three levels of government amounts to $61,830 (annually). It’s not the worst question.

His answer appears to be that directly transferring funds to the poor would be a more effective and efficient way of alleviating poverty than allowing governments to keep running expensive programs that are failing to achieve the same end. That’s not the worst answer.

But does he have a point regarding libraries?

I give him half a point. Public libraries are overwhelmingly used by people who can afford to buy books, and those people are reading primarily for pleasure. I’m all for lending books to people who can’t afford them, who have trouble accessing them, or who want to improve their minds by reading important or serious stuff. But to the extent that libraries are giving middle-class patrons free entertainment—sure, privatize them. There are better uses of public money. Apply the funds to reduce tax burdens on low-income families or improve conditions in government-run nursing homes.

Where the privatization argument fails is that libraries do a lot more than provide middle-class patrons with entertainment. They are important community hubs and for a minority of users they continue to fulfill their original purpose, which, says historian Ed D’Angelo, was to “promote and sustain the knowledge and values necessary for a democratic civilization”. Privatization would likely destroy the valuable public service aspects of public libraries.

In fact, the real problem with public libraries today is that they’re already half privatized. Starting in the middle of the last century, they stopped believing in their role as the community’s edifier-in-chief. They adopted the mindset of the marketplace, giving people what they wanted, filling their shelves with multiple copies of the hottest bestsellers, however vacuous, and measuring their success by counting foot traffic at their branches. They now manage those branches like Walmart supercentres, maximizing transactions per square foot of space. Who cares what patrons are reading, or why, so long as the turnstiles are spinning.

I’d prefer they leave private-sector thinking to the private sector, and let public libraries rebuild their lending practices around their original mission of elevating the minds of citizens. Surely we can’t yet afford to abandon the latter objective.

My solutions to the public library problem, in order of preference, are a much more robust public lending right, an exclusive new release window for the retail trade, and user fees for patrons who can afford them. More discussion here.

In any event, thanks to Professor Freiman for revealing me as a moderate.

August 29, 2020

Recreating British Railways?

Filed under: Britain, Business, Economics, Government, Railways — Tags: , , , , — Nicholas @ 05:00

Adrian Quine looks at the long-term results of the partial privatization of British Railways, and the current British government’s options to address some of the problems:

Wikimedia caption – “This is the Bring Back British Rail, a reverse image of the old BR logo, (now used by the TOC’s) to show we are heading the wrong way with Rail in the UK”

If there is one thing free marketeers and large state socialists agree on, it would be the terrible state/private hybrid ownership structure of our railways currently supported by the government. While large state socialists won’t be happy until the private sector is squeezed out of the system, market liberals view the Conservative government’s actions as creeping renationalisation.

The private-sector entrepreneurs that built many of Britain’s railways in the 19th century had – through a process of market discovery – settled on vertical integration, with the same firm owning the track and operating the trains. But, when railways were returned to private sector in the late 1990s, the government created one national infrastructure company (Railtrack), 25 train-operating companies (TOCs), 3 freight operating companies, 3 rolling-stock leasing companies, 13 infrastructure service companies and other support organisations. The Office of Passenger Rail Franchising was tasked with selling franchises to the TOCs, while the Office of the Rail Regulator (ORR) regulated the infrastructure. This artificial and fragmented structure was designed to give the impression of competition.

Despite these constraints, in the early days of John Major’s flawed privatisation some of the more enterprising private train operators managed to bring innovation to the sector, including improved marketing and very low-cost “yield managed” advance fares. Where allowed, competition between different operators brought improved customer service, additional direct trains and lower ticket prices. However, the flaws in the initial privatisation soon became apparent with failed franchises leading to increased government intervention and renationalisation by subsequent governments.

While attempts were made to downplay the significance of July’s decision by the Office of National Statistics to put train operators on the public balance sheet, it is in fact only the latest in a worrying string of signals about the direction in which the railway and Boris Johnson’s government are headed. In June, the transport secretary Grant Shapps announced to a parliamentary select committee plans to introduce concessions across the rail network. Private operators will simply be paid a set fee to provide a basic service – another nail in the coffin for commercial investment or innovation.

Attention is now turning to what the government will do when the current “Emergency Measures Agreements” – hastily put in place to ensure trains kept running when passenger numbers nosedived by 95% as lockdown began – comes to an end in September.

An InterCity 125 power car in British Rail livery at Manchester Piccadilly in October 1976.
Photo by Dave Hitchborne via Wikimedia Commons.

April 1, 2020

Getting the federal government out of the media business

Filed under: Business, Cancon, Government, Media — Tags: , , , , , , — Nicholas @ 03:00

Far from subsidizing the faltering mainstream media, the Canadian government should follow Ted Campbell’s advice here:

Direct subsidies will make many Canadians suspicious that the media has been bought and paid for and is little better than a government PR agency. Government advertising will bring charges of taxpayers’ money being used to publish propaganda. I wonder if tax breaks might help … maybe, as long as they are available, equally, to The Star and Rebel Media, and the North Renfrew Times, too I suppose. But where does it stop? Is my blog a news source? No, quite clearly not, it is almost 100% opinion, but what about blogs like Vivian Krause’s Fair Questions? It looks a lot more like reporting than what I do. In fact, some of her reporting looks a lot better than what the CBC does, doesn’t it? So where would the bureaucrats who draft the laws and regulations and then implement them draw the lines? Let’s assume that the traditional, mainstream media ~ the Globe and Mail and Global TV and so on ~ get tax breaks, and let’s assume that I don’t qualify. Who else does? Who makes that decision? Is it a politician, someone like the current Heritage Minister Steven Guilbeault? Is it another the so-called “arm’s-length” boards that act as surrogates for the ministers? Or is it a team of bureaucrats? Who do we trust? None of the above?

The better answer, it seems to me, is to do pretty much exactly the opposite of what Daniel Bernhard recommends:

  • First: defund most of the CBC. Make it a national (and international) radio network (actually, two networks: one English and one French). Sell off ALL of the CBC’s TV broadcast licences and ALL of its TV production facilities and many of its major radio production facilities, too. Keep a fair number of local studios, especially in rural and remote regions, and a handful (five or six?) larger regional news centres and two (one English, one French) national and international newsrooms that will provide both voice and text reports ~ over the air and on the internet, free for all Canadians and totally free of copyright so that any news agency can use them;
  • Second, provide no, zero, nada, zilch funding to any news organization. Watch and see how they shake out in this rapidly changing environment. Remove or reduce most foreign ownership restrictions. Encourage “bundling” ~ allow e.g. telecom companies like Bell and Rogers to own and to integrate newspapers and TV stations and radio stations and internet platforms and entertainment sources, too; and
  • Third, get the CRTC out of the business of the internet and cable. There is a legitimate role for an independent regulator to manage scarcity. Over-the-air radio and TV channels are always in limited (and often in short) supply and they need to be allocated (licensed) to individual broadcasters; that’s a useful job for the CRTC. There is no scarcity of capacity on the landlines, cables and even satellite links in Canada. The market does a first-rate job of regulating them; the CRTC does, at best, a third-rate job.

I am certain that there are useful, profitable business models for media out there. The fact that we don’t seem to have one in Canada is, in my opinion, because of the existence of the CBC, which distorts the market too much, and the constant efforts of governments (national, provincial and even local) to try to “support” commercial favourites. The right move is to stand back and remove the heavy hand of bureaucracy and let the media find its own, profitable business model. There is a very limited role for government but Canada does not need a Ministry of Truth.

February 9, 2020

Bastiat’s parking meters

Filed under: Economics, USA — Tags: , , , — Nicholas @ 03:00

At the Continental Telegraph, Esteban explains why nineteenth century French writer Frédéric Bastiat would be able to fully explain Atlanta’s parking meter woes even though Bastiat never saw an automobile in his life:

One of Frédéric Bastiat’s most famous observations was the importance of recognizing “That which is seen and that which is not seen”. A government agency builds a road, some people get jobs working on the road, voila, look at all the benefits the government has brought us. What is unseen is what would have happened if the government hadn’t taken our resources to build the road, perhaps we would have spent them on something of greater value?

That people often (perhaps usually) overlook the unseen isn’t too surprising, but the inability to see is sometimes striking. A couple of years ago the City of Atlanta decided to get rid of its parking meter enforcement staff and outsource this work to a private sector company (let’s call it NewCo). Some time after the transition there were discussions at the City Council that perhaps they should reverse this decision, or at least find another provider.

What was the source of these complaints? Was NewCo inefficient? Was the City getting less revenue from the meters? No, meter revenues were actually up as were parking ticket revenues. Some misbehavior by NewCo’s employees, bribery, favoritism, kickbacks? No, no, no and no. The problem was that NewCo was doing a better job. Seriously, the City Council was inundated with complaints such as “I was, like, 2 minutes late getting back to my car and they had already ticketed me”. People who had been ticketed as well as many businesses complained about NewCo’s efficiency.

[…]

What really stood out is that no one involved in these discussions – aggrieved parkers or Council members – seemed to think about why we have meters, time limits and tickets. If enforcement is lax, more people overstay their allotted time, one consequence of which is that you have to drive around longer to find a parking space. People notice their parking ticket or the inconvenience of having to run out and feed the meter (that which is seen) but were oblivious to the shortage of parking spaces that is exacerbated by lax enforcement (that which is not seen, or perhaps not identified as connected?).

One wonders how people who live in a City where finding a parking spot is very difficult could “not see” the value of good enforcement. The time spent circling the block, rushing to turn around and grab the space that just opened up before somebody else snagged it, then just missing out and starting the dance over – nobody thought of that? Bueller, anyone?

Emphasis added.

December 4, 2019

Defund the BBC? Well, if you can’t just sack, burn, and salt the earth it stands on, defunding might help

Filed under: Britain, Government, Media, Politics — Tags: , , — Nicholas @ 05:00

Hector Drummond wonders if the Overton Window has moved far enough that the BBC might lose its sacred status:

In a notorious talk given to Conservative Future in 2009, Sean Gabb made the following radical recommendation:

    On the first day of your government, you should close down the BBC. You should take it off air. You should disclaim its copyrights. You should throw all its staff into the street … You must shut it down – and shut it down at once.

I have for many years been torn between thinking this a good idea, and thinking that it would result in such uproar that the government would immediately fall, and be replaced by a new government who would restore the BBC. But the question was purely abstract anyway, because no Conservative government would even contemplate doing such a thing. No Conservative government was even going to contemplate taking away the licence fee.

But finally, after three years of disgraceful conduct — well, extra disgraceful conduct — the future of the BBC is finally an issue that that can be broached. It’s finally an issue that can be talked about without people throwing up their hands in horror and demanding you be thrown out of wherever you are. People will listen sympathetically if you suggest that the BBC can’t go on like it has been. People will join in enthusiastically if you say that Channel 4 is a disgrace that should no longer be state-funded. Well, not if you’re in the common room. But in the ordinary pubs around the country they will. They will at the dinner parties that are being held outside the M25. And even some inside it.

So what should be done? The conventional conservative/libertarian idea is that the BBC should be moved to a subscription model. The more radical Gabb idea is not one that has ever been talked about much. In fact, it’s an idea that until recently would have shocked most people, even most conservatives. (If you read to the end of the Gabb article, you’ll see that the young conservatives were themselves outraged by Gabb’s idea). But actually it’s a very good idea. Because here’s the thing. If you privatise the BBC, it may do very well for itself, and then it would be free to spin the news far more outrageously than it currently does.

More recently than Dr. Gabb, Richard Delingpole made a suggestion that I stole for my headline:

So the idea is no longer so alien. Particularly amongst younger people, who just don’t watch the BBC any more. They generally don’t watch much TV at all, they prefer YouTube and TikTok (which are filled with rubbish, it has to be said, but that’s another story), but they especially don’t watch the BBC (or channel 4). So most young people won’t even notice if the BBC is closed down, although about thirty sociology undergraduates will eventually tweet about it once their lecturers tell them what’s happened, and then the Guardian will have a fit and try to make it a big story, but there’ll be no BBC to amplify that, so it won’t be that effective. And the other channels are unlikely to shed too many tears over the shutdown of a subsidised rival (although I expect that the news staff will as they’re all lefties now).

April 8, 2019

Comparing the economic performance of China’s private versus state-owned companies

Filed under: Business, China, Economics, Government — Tags: , , , — Nicholas @ 03:00

If you’ve been following the blog for a while, you’ll know that I’ve long been skeptical of any official economic statistics coming out of China. The reasons for my skepticism are that vast areas of the Chinese economy were owned or controlled by the state and reporting from those entities was performed through layers of officials whose positions and personal well-being depended on those reports being as positive as possible. In a capitalist system, announcing false production or profit figures will eventually be detected (sometimes not as soon as we’d like), and the company loses the trust of customers, suppliers, and banks, making survival much more difficult. In a state-owned organization, everyone in the hierarchy has a vested interest in false information not being uncovered or reported. In a private firm, you could lose your job … in a state-run enterprise, you could be shot or sent to a “re-education camp” along with all your family. The incentive to lie is much stronger when your risks are that high.

Tim Worstall comments on a recent report that compares the performance over time of Chinese private companies, privatized state companies, and companies that are still state-run:

That China has relaxed the governmental grip upon industry in recent decades is true. That China has become very much richer in recent decades is also true. The two are not a coincidence, there’s causality there. However, we hear often enough that it’s the residual control over industry by the government that drives that success. Sure, OK, so the bureaucracy doesn’t specify prices or detailed actions but the general guidance provided by a politically driven bureaucracy explains the outperformance.

Except it doesn’t. Those former state industries still enjoying that government guidance perform worse than the free market firms sadly lacking it. State planning is keeping China poorer than it need be, not aiding its growth.

The report he’s commenting on:

Changing the tiger’s stripes: Reform of Chinese state-owned enterprises in the penumbra of the state
Ann Harrison, Marshall W. Meyer, Will Wang, Linda Zhao, Minyuan Zhao 07 April 2019

The conventional wisdom that privatisation of state-owned enterprises reduces their dependence on the state and yields positive economic benefits has not always been borne out by empirical work. Using a comprehensive dataset from China, this column shows that privatised SOEs continue to benefit from government support in the form of low-interest loans and subsidies relative to private enterprises that have never been state-owned. Although there are clear improvements in performance post-privatisation, privatised SOEs continue to significantly under-perform compared to private firms.

Much of China’s economic growth has been driven by the emergence of a vibrant private sector, today accounting for approximately 60% of GDP and 80% of employment. Conventional wisdom holds that privatisation of state-owned enterprises (SOEs) reduces their dependence on the state and yields positive economic benefits including enhanced firm performance, productivity, and innovation. The pro-privatisation argument is that the state either cannot monitor managers properly or chooses not to pursue efficiency because state interests take precedence over financial results (Boardman and Vining 1989, Vickers and Yarrow 1991, Shleifer and Vishny 1994). Empirical work, however, has produced mixed results on privatisation. For example, DeWenter and Malatesta (2001) found that, among the 500 largest firms globally in 1975, 1985, and 1995, private enterprises had significantly lower costs and higher profits than SOEs. Yet, when they examined a sub-sample of privatised firms, they found inconsistent results – performance increased post-privatisation, while leverage and employment increased mainly pre-privatisation. Market returns from privatisation also differed across countries, positive in Hungary, Poland, and the UK but insignificant elsewhere.

Our research on privatisation in China (Harrison et al. 2019) is unique in several respects. We analyse an extremely large sample of industrial firms, more than 3.5 million firm-years from 1998 to 2013, drawing on the Annual Industrial Survey conducted by the China National Bureau of Statistics. We compare privatised firms with firms that remained state-owned and firms that had never been state-owned. Most importantly, we compare both the performance and dependence on the state of privatised firms with firms having no prior state ownership. Overall, our results indicate selective performance gains from privatisation – privatised firms have greater productivity and are more likely to file patents than firms remaining state-owned even though their return on assets barely improves. The performance effects notwithstanding, privatised firms remain dependent on the state. Subsidies, concessionary interest rates, and loans granted to privatised firms remain at nearly the same levels as those to SOEs. Privatisation changes the behaviour of firms but not firms’ dependence on the state.

A graphical portrayal of the differing performance of the three types of Chinese companies from the report:

Return on assets of state-owned enterprises, privatised state-owned enterprises, and privately-owned enterprises

January 6, 2019

The demands to re-nationalize British passenger railways

Filed under: Britain, Business, Economics, Government, Railways — Tags: , , — Nicholas @ 05:00

In the Continental Telegraph, Tim Worstall points out the mutually exclusive claims about the state of British passenger rail services and the counter-productive demand to shuffle it all back into the state’s tender mercies:

Wikimedia caption – “This is the Bring Back British Rail, a reverse image of the old BR logo, (now used by the TOC’s) to show we are heading the wrong way with Rail in the UK”

A standard whinge in Britain today is that rail privatisation has failed – just look, the trains are so crowded! The thought that people flocking to use something proves failure being a most odd one of course. That more people use the train sets to travel longer distances more often should be seen as a triumph of privatisation, not a proof of its failure. And we should note that the last few decades of British Rail did show – population adjusted – falling ridership.

There’s also a certain puzzlement at the next cry of outrage – that ticket prices are too high. If people are flocking to use something etc then it’s difficult to insist that prices are too high. […] Popularity both proves that the basic system is wrong and also that prices are too high. Tough this economics stuff, isn’t it?

As to the congestion part, well, on those popular lines and routes the route itself is running at capacity. It’s just not possible to squeeze more trains onto the tracks without them running into each other. Ah, but goes the cry, government should do something! But the tracks are already run by government, that we’re not getting more track capacity is government’s fault. Giving us a good guide to how it would be if government ran it all – as history tells it was like when government did.

As to the prices, well, that overcrowding shows us that prices are too low. We need some method of rationing that access to something being over-used. Price is always the best method of rationing. Thus prices should be higher to relieve that over-crowding – while we wait a few decades for government to pull thumb out and provide more track capacity.

Thameslink Class 700 Desiro City at London Blackfriars in 2016.
Photo by Alex Nevin-Tylee via Wikimedia Commons.

October 7, 2017

Why We Should Privatize the Postal Service

Filed under: Bureaucracy, Business, Government, USA — Tags: , , — Nicholas @ 04:00

ReasonTV
Published on 6 Oct 2017

What’s the best way to make the Post Office faster and cheaper? Pull the government’s tendrils out of it and let it loose in the private sector.

May 12, 2017

“Maybe this is creeping privatization after all. It’s certainly worth a shot”

Filed under: Business, Cancon, Wine — Tags: , , , , — Nicholas @ 03:00

Chris Selley on the neither one thing nor the other state of alcohol retailing in Ontario:

On Tuesday the government enumerated 76 new Ontario supermarkets where, by Canada Day, you will be able to buy beer. That will make a total of 206 Ontario supermarkets where you can buy beer — an artificially limited selection of beer, only in six packs and singles and only during the same bankers’ hours as the LCBO and Beer Store. But still. That’s about one-third as many supermarkets selling beer as there are LCBO outlets selling beer; add in the 212 rural agency stores that sell wine, liquor and beer, and you’ve got almost two-thirds as many private enterprises selling beer as you have government bottle shops.

This could help prove several useful concepts that deserve much wider acceptance in Ontario. One is that it’s very easy for the government to make money off liquor sales without retailing liquor itself. Indeed, it’s easier; that’s why so many governments do it. The supermarkets buy the beer wholesale from the LCBO; the LCBO doesn’t have to worry about paying civil servants to sell that beer or running the stores.

Another is that the private sector can be counted on to keep liquor out of children’s hands. Indeed, with inspections and draconian fines in place, it can probably be trusted more. My observations suggest LCBO employees certainly card everyone who should be carded, but it’s nothing like it is in the U.S. I’m almost 41, not in especially good nick, and I still get asked about half the time.

Might Ontarians develop a taste for all this convenience? The hard cap on beer-in-supermarket licences is 450; having doled them all out, including agency stores, that would mean about half the liquor outlets in Ontario were privately run. And people might start to notice the bizarre inconsistencies: why can the Walmart on Bayfield Street in Barrie sell only beer, and only in six packs, while the Walmart on Hays Boulevard in Oakville can sell beer and wine, and meanwhile Hope’s Foodland in Novar, Mac’s Milk in Craigleith, Redden’s campground in Longbow Lake and Lac des Mille Lacs Bait and Tackle in Upsala can sell beer, wine and hard liquor — and smokes and fireworks and beef jerky and bread and eggs? Why can scores of convenience stores sell everything alcoholic as agency stores, but other convenience stores aren’t even eligible to apply for the new wine and beer licences?

June 26, 2016

The Micklethwait Alpha

Filed under: Business, Government, Liberty — Tags: , — Nicholas @ 02:00

Published on 3 Feb 2013

Brian Micklethwait describes a hypothesis of his regarding the overall effects of state intervention as compared to market liberalisations.

This topic is discussed in greater depth here: http://libertarianhome.co.uk/2013/02/…

(Linked yesterday, but too good not to get its own posting.)

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