Posts Tagged ‘privatization

20
May
08

Mises

Mises is a brand more than anything, a brand spread through http://www.mises.org. Like all good brands, those that are familiar with Mises (or the austrian school of economics as it is sometimes known) have certain associations with the name… most of us just think they are wack jobs. Basically, Mises is the school of thought that if you just completely remove government intervention from society everything will be magically better. They like to say things like “Taxation is force”. They are, in a word, idiots.

The theory falls apart under even the most casual scrutiny. Even the Mises folks mostly agree that providing police and defense is the job of the government, but they don’t want to pay taxes. They also want to have private roads that you pay a toll to drive (or not, at the owners discretion), private fire services, private healthcare, private education, private everything. It has even taken me some effort to get a few of them to agree to publicly funded police forces. In short, they believe in the power of the “Invisible Hand” of market forces and when anyone refutes them they claim ideal conditions weren’t achieved (for instance: if you claim that privatization of power infrastructure didnt work, they claim it’s because the government was still invovled and if true de-regulation had happened it would have worked, and besides, that’s not the point… it’s my goddamned money and no good for nothing lazy immigrant welfare case is going to get any benefit from it).

They fail to realize that almost universally the privatization of large scale utilities has failed, no matter how you try to do it. The one example everyone on the right likes to trot out is water privatization, a dismal failure by any regards. Oddly enough, big utility projects tend not to turn a profit, and don’t have any chance of turning a profit for a very, very long time after the intial infrastructure investment. Of course, the mises people I have talked to have an answer for that, force the utilities who built the infrastructure to lease their infrastructure to other companies via regulation…

The closest to home example I have of this is power. When I was a child, winters in Nova Scotia were pretty harsh. Lots of storms and snow, very few power outages. The power lines were maintained stringently. Since then Nova Scotia Power was privatized. The first thing they did was to cut back on maintenance crews, since crews are an expense. Last year several thousand people were without power due to heavy fog. Heavy fog! This is Nova Scotia, where there is fog almost every morning. At the same time, Nova Scotia Power is losing money hand over fist. They just aren’t that efficient and costs are going up. Of course, there has been talk about opening up the market, but the problem is that you would have to use Nova Scotia Powers infrastructure, and they make more money without leasing it out, after all, right now they are using all of the capacity and making money off all of it. In a free market situation, NSP becomes a natural monopoly because no-one else can make money in the same arena. This applies to roads (to have an even moderately efficient roadway you need central planning, and that means that for it to scale you need to have the kind of money that only government has), air travel (I know, there is a myth that air travel is a success of privatization, but all airlines are subsidized and airports tend to be government projects), power, water, telephone (again, a hell of a lot of government money went into developing the infrastructure… and privatization has just been so good for all of us right?), police, military, firefighting, space travel, scientific research (name a single innovation that came out of private industry… not a drug that treats a symptom, a real innovation). Private industry has its place, but to think it is the ultimate example of human achievment is simply naive.

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