How Privatisation Fails: Railways

hello everyone today I'd like to talk about privatization but more particularly about the difficulty of implementing the idea of privatization in a tightly controlled and regulated system now fair warning here this video is going to be relatively simple most of my regular viewers I imagine will already know most of this stuff but this video is going to be the first I hope of a larger semi-regular series in which I'll be giving a basic overview of various problems with capitalist economies so I think it's best if we start off with some simpler concepts with clear real-world examples we can point to so we're going to be talking about privatization and nationalization today and so we should explain what those are and very quickly here it's a privatize a national system means to take a system that is owned and operated nationally and transfer that ownership and operation to private organizations and nationalization is of course the reverse of that to bring privately owned and operated services under state control and so what are the benefits of privatizing a service well the on-paper best-case scenario pitch for privatization is as follows nationalized services are bloated and slow the lack of competition means that there's no direct incentive to cut costs or deliver better services since they have a monopoly a privatized services on the other hand have a need to compete and therefore will offer the best service they can at the best price they can in order to maintain their share of the market privatization drives down operating costs and results in a blossoming of innovation and healthy profit driven competition that's what they say anyway this ideal runs into not insignificant problems when being brought into reality however and that's what we're going to talk about today now I could just list all of the negative results of the privatization of British Rail right here but that wouldn't be enough really yeah we'll get to those later on for now with an eye towards the benefits of eva's Asian that I just mentioned how would you go about privatizing a rail network so first off let's think about the trains themselves it's a good place to start as any I suppose the trains in the UK are not owned by the companies that run the trains you might be surprised to hear they're owned by what are called rolling stock companies and these companies lease the trains to the train operating companies and what's the problem with that you might be thinking that's just yet another wonderful level of free-market choice if the operating companies have different competing leasing companies vying to be the ones to lease the trains to them that will drive down costs and increase innovation and all the other things that are so great about privatisation in theory right well it's a nice idea or only that unfortunately the main problem here is that certain trains only work on certain parts of the rail network there's no point in leasing high-speed trains if you only operate a small part of the network where those trains could never get up to full speed if you own a high-speed track there's no point running slow trains down it as they'll block the whole system there's no point leasing big freight trains if you operates a passenger line certain electric trains use a third rail there others use overhead power lines and obviously you don't want to be leasing electric trains if your company operates an unknow atrophied section of track and even the various faired rail and overhead lines in the country have different power configurations all this means that the train operating companies don't really have much of a choice it would be pointless for them to lease trains that do not work on the sections of track that they control you know they pretty much have to lease the one type of train that they can use on their tracks so welcome to the free markets but by the way you're only able to buy one specific thing next up let's consider the tracks so how would you go about running competing services on a freshly privatized rail network now I don't like to do this but I'm going to make an assumption here I'm going to assume that everyone watching this even the most libertarian minded among us understand why running competing train services down the same tracks with no oversight would be a bad idea and I'll probably include some footage of trains running into each other here just to make the point a little more emphatically but yes trains are big heavy metal objects that carry soft squishy unsecured humans around very fast you can't just have some company decide to start operating a train between two points and slip one onto the rail network you know so how do we get around this problem well the system in place in the UK is that various train operating companies bid to operate services on certain routes and then once that service has been claimed for a certain period the operating company runs it exclusively now the big problem with this method of running things is that it makes local competition virtually impossible and since competition is supposed to be a main feature of this free market privatization thing that's kind of a major bug there but what about innovation now that's supposed to be the other main feature of course the profit motive will drive innovation the private companies will take one look at all the inherent problems in running a privatized rail network and they'll just innovate their way around it you know these Randy and Superman will find whole new ways to operate rail lines ways impossible to think of in a sluggish lazy nationalized system now the big problem here if you can call it a problem is regulation the rail network is very heavily regulated the railway rulebook is thick and eighths and controls and for a very good reason without them lots of people die you know this isn't mere red tape anyone thinking about getting into the train operating game will have to comply with these rules exactly so what's the result here well we have a system where operating companies are locked into providing a very specific service in a specific area for a specific time with no possibility for local competition or innovation we've created a local monopoly here a series of local monopolies in fact which besides being counter to the free market ideas behind the privatization in the first place create a few of the wider problems as well so let's talk about those first of all slow down now slow down I hear you cry in shock I thought it was the bloated nationalized system with no profit motive to cut costs and times that was subject to slowdown you know instead of making money they only had the weak pathetic motive of operating a good service that benefits society and well regardless of the validity of that sentiment and when talking about railways specifically the privatized system is no better and I'll throw you a couple of scenarios here let's say a country with the nationalized rail service funded by taxes needs to make some change to the system this can be in terms of maintenance replacing and upgrading tracks closing or moving stations implementing new regulations you know whatever now since the system is controlled by the government they can relatively simply just go ahead and make the changes in a privatized system however making changes is much more complex because of the fragmented nature of the privatized network implementing a change means the government interfacing with potentially dozens of different private companies all responsible for different parts of the system and all motivated not by making the process go smoothly or quickly but by profit this unnecessary level of complexity makes what should be relatively simple changes cost far more and run for far longer than they need to and this problem doesn't stop with the railways either trains are just one part of a national transport system and they factor into decisions made regarding airports cars buses and so on a new track construction between two cities could affect the road network for instance new train stops need to be integrated with bus and tram systems you know when deciding upon long-term developments and allocating funds for them all these different systems need to be considered together cost and time overruns in the rail network ripple out and affect the transport network at large so it's not looking too good therefore our hypothetical rail network but let's turn now to our real-world example British Rail what have been the effects of the British government privatizing British Rail yeah well firstly as it stands the UK's rail network is incredibly expensive this is both on the consumer end where we're subjected to constantly increasing fare Rises a book I read while writing this video called the Transport debate by John Shaw and Ian Doherty notes that a Glasgow to edinburgh season ticket costs as much as buying an equivalent pass in germany for the entire rail network but this costliness is also on the state end where we now spend much more money subsidizing the private rail network than it ever costs a run British Rail in its entirety which is pretty amazing isn't it you know all this free market competition was supposed to drive down costs and instead we have rising fares and subsidies where the Transport debates also notes that it's very telling that our method of privatizing our rail network has not been adopted by any other EU country that studied it you know as you'd imagine it would be if it led to a better service or decreased costs now a big part of the current costs that the taxpayer is the budget for Network Rail and I should briefly explain just what Network Rail is after the UK rail system was privatized the infrastructure of Britain's railways that is the tracks the signalling system tunnels bridges NOLA it was all owned by rail track which was a group of private companies created to oversee and maintain the rail infrastructure I'm talking about rail track in the past tense here because to make a long story short they were rubbish at their jobs they kept crashing the trains maintaining a rail network is a difficult and expensive undertaking and rail track failed spectacularly most publicly in the wake of the Hatfield rail crash on 17th of October of the year 2000 there which killed four people and injured more than 70 at the subsequent nationwide speed restrictions safety inspections rail replacements not to mention the over 700 million pound bill for the costs and compensation associated with the Hatfield crash was the end of rail track and it was replaced by Network Rail now Network Rail is a nationalized company owned by the government responsible for doing all the jobs that rail track was rubbish at so less than a decade after handing over the reins of railway management to private companies the British government had to take them back in shame the British taxpayer now pays through government subsidies to maintain the system on which the private companies run overpriced trains all for their own profit it's a pretty good swindle they have going on to be honest and perhaps the most shameful aspect to all this is that several of these companies running overpriced British trains in the UK are foreign state-owned train companies for example the trains that I regularly take from the station near my house are run by Mersey rail which is a company owned by Dutch state-owned rail transport company nederlandse pure Wigan yes I butchered that elsewhere Arriva Trains are owned by german deutsche bahn the french owned a large part of southern rail south western railway is partly owned by the MTR cooperation also known as Hong Kong railway cooperation limited there's no prizes for guessing where they're from on to this system millions of pounds are flowing out of our country via these foreign companies understandably exploiting our totally ridiculous decision to privatize the rail network so I have a question the problems with privatization seem obvious railways are inherently uncompetitive and there is no way to prevent local monopolies farming so why was the system privatized in the first place now I could just say money here and the video that would be pretty funny but it's a little deeper than that actually the privatization of British Rail was just one part of an ideological push towards an idea of free markets individualism typical of the era of Ronald Reagan and Margaret Thatcher which is why she got on jens wonderful thumbnail for this video even though British Rail was actually privatized a few years later under John Major it was privatisation as ideology whether the changes actually made sense to implement or not didn't really matter that the individual is everything and society well society doesn't even exist actually Margaret Thatcher once said there is no such thing as society there are individual men and women and there are families now the problem with this line of thinking obviously is that it's a load of old but it's not hard to see why people who think like that would be against public transportation and instead favor heavily the car there which is very individualistic indeed so that's my relatively obvious conclusion they're privatizing the rail network was an ideologically driven attempt to enforce market conditions where they cannot exist I'm hesitant to lay the blame at any one individuals feet however though there is a lot of blame to go around you know the Conservatives deserve blame for actually you know doing it at New Labour deserve blame for not undoing it at the rolling stock and train operating companies deserve their share of the blame as well but there exists a larger problem than any one greedy CEO or corrupt politician and it's a systemic problem I've mentioned the profit motive a few times today and that will probably factor into my next video in this face the need for private companies to profit and grow and the need for the whole capitalist system to grow in turn that deserves the closer look because as you run out of growth elsewhere the privatization of public services starts to look more and more viable so tune in next time where we'll be talking about capitalism's growth problem thanks a lot for watching everyone and thanks for listening to me waffle about trains for a while another possible group for continuing the line of thought in this video apart from talking about profit and growth is to talk about the current state of the NHS or the UK's universal health care provider which the current government is not so sneakily attempting to privatize at one slice at a time so let me know what you think that if you want more videos like this shorter more politics oriented videos let me know if thanks as always to my supporters over on patreon who are all very nice look at all those amazing names there so hop over and check out my patreon if you like also you can send me a question on curious cat or you could follow me on Twitter and retweet everything I ever say that's it for me today folks see you next time

Channel: Shaun

Views: 639,167

Rating: 4.8138065 out of 5

Keywords: privatisation, british rail

Id: nP95Frc0v4k

Length: 16min 50sec (1010 seconds)

Published: Wed Jan 31 2018

Reddit Comments

[u/zethien]

I think he did a pretty thorough job with the exception of his point on regulation. He should have made it more clear that regulation doesn't exist because some law maker is sitting in a dark room trying to come up with new ways to make business more difficult and less profitable. It exists because someone somewhere literally did a thing, and it was bad enough that people forced them to make regulation to prevent it from happening again. Government is rarely forward looking, it is always reactionary.

This is what we are learning from the world of cryptocurrency. We realize that all those financial regulations that libertarians "throw out because it holds back their innovation" are there for a reason. Because people figured out ways to cheat and screwed a bunch of innocent people, and that becomes the norm unless something (the government) curbs the behavior.

[u/flobbertigibbet]

I really like Shaun. Him, Contra & to a lesser extent, Homberguy, are actually really encouraging IMO. It's nice to see some lefty youtubers turn up in what has become a pretty right-wing (/alt-right/new-right/whatever) dominated space.

I'm also a serious fan of the way they've largely abandoned some of the more self-sabotaging aspects of progressive discourse (namely constant moral-highground-taking rather than actually presenting a reasoned point).

Also, Jen's art is consistently 10/10.

[u/kl0]

It's too bad because while I enjoyed this video, there are unfortunately pretty easily refutable points. I can bring them up not to suggest one side is right or wrong, but rather just that any opposition to this way of thinking can easily find them too.

The most obvious one to me is that his main and repetitive counter argument against the private model suggests that [specifically with trains] the costs went up after privatizing. I think he brought up some good reasons for why that is. But the problem here, somewhat ironically given the topic, is that just because something has become more expensive doesn't mean that privately funding it did a bad thing. To the contrary, what it can surely be used to illustrate just as clearly is that perhaps rail isn't quite as viable of a solution as we'd like to think it is. And since this is Reddit, I want to pad again that I'm not making the argument for or against, just pointing it out in criticism/analysis of the video.

There are many who would fight for privatization on the grounds that after all, if it IS such a great, useful, flexible commodity that is so beneficial, then there should be ways to make it more efficient, cheaper, and ultimately desirable by all. But as he illustrates, the reality of moving rail lines, changing car technology, traincrashes, and on and on make it a very, very difficult endeavor to keep up with. So I think it's equally reasonable for a person to say "I don't want money taken from my pocket (aka: taxes) to fund something that the open market clearly shows can't sustain itself". And of course if you read about even the most successful of public lines (at least around America), they all operate in the red and only are "sustainable" through subsidies.

Additionally, there are many [I believe good] arguments that suggest if we didn't force one particular technology to be propped up (eg: modern railways) that perhaps we would be forced to innovate in different ways and create ideas far superior, cleaner, cheaper, and faster in this case. Elon Musk comes to mind as one of the driver's behind such ideas. To appease the other side in this argument, consider how much faster renewable energies would have been forced to come around in the United States if we hadn't hugely subsidized big oil over the past 7 decades (through taxes, wars, and other such acts). But since we DO subsidize those things and keep oil so cheap, what has been the real incentive to move away from it? The average person is forced to think with their wallet, unfortunately. Altruism is a convenience.

But on that previous point, there IS a demand to move large amounts of people and products across a country. People DO want some kind of device for this. But if railways are perpetually cheaper because they don't have to compete, then how can / why will others try to innovate further if they stand nothing to gain?

For the third time, this is all just for argument's sake in critical analysis against the video. In all, I think it explains some good pieces about how this stuff works (particularly if you consider the regulations that go into the train markets). But it's also the case that there are some pretty big counter points that can be easily factored and I think the author needs to address would benefit from addressing those in a standard English 101 format (eg: cite one of these counter arguments and then argue why it doesn't apply or needn't be focused on) before this type of thesis really carries any weight to a larger audience.

In short, and as the video stands, it's really only useful for people who already agree with that particular government ideology - like most echo chambers of the internet - and it would be interesting [to me] to hear the other sides more thoroughly rebutted.

[u/TheSilasm8]

Many of the issues described are limited to natural monopolies such as Internet Service Providers. These would not exist for something such as mail delivery.