Wednesday, 17 October 2012

Privatisations Questionable Detromentary Effect on PSBR and Inflation

Where is all the evidence that privatisation of public services and monopoly utilities have benefited western economies ?

Well., a good point to start at is to look at the big picture. The summation of this is then actually macro economics on a national / cross member state basis.

Post the paradigm shift in the late 70s and 80s, and the economic growth created by data technology and liberalisation of markets. Reversing the power balance against the unions also helped enormously with reducing inflation.

However for most western countries public spending and PSBR have gone up as a proportion of GDP. When the crash of credibility happened in 2008, then it was governance who were left carrying the can for a money supply and wealth exagerration machine which went fiscally and morally bankrupt.

The other macro economic indicators are that inflation in utilities, transport and the privatised public sector provision has run above the consumer price index.

Also there has been a need to spend money exactly where the free-market dogmatists say it shouldn't be_: on highly costly civil servants and on the private side, consultants and a wage hungry echelon of middle and upper management. In the UK this lead quickly to the situation under Thatcher that there were more managers than beds. With watch-dogs for private utilities and transport, and the european beaurocracy emposed on top and as a standardised top down approach to managing
the systems for managing private contractors there are more layers of public spending on hot air instead of delivery of quality services.

The private sector of course has always had and will always have an important part to play in provision paid for from the public purse.

However it is not a panacea: PFI initiatives and shifting renewal of utilities to high prices and stock market vageries from being planned and paid for by central resources within limits to spend and price inflation to consumers.

One thing which is then very questionable is how privatisation managed to arrest inflation if it has actually not done the reverse on aggregate and contributed to the now unsustainable  level of public spending requirment and inflation in semi-monopolistic, price parity, high inflation utilities and transport.

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