To what extent does capitalism erode quality?

Parvini · Post by **Parvini** » Wed May 24, 2006 17:52

This is kind of related to MisterGreen's recent consumerism thread. First of all let me tell you a little story. Every day I catch the bus to work. There are 3 different companies that take the same route. Since I travel the same route every day and do so every week, I buy this special ticket from one of the companies that allows me x amount of journies on the same ticket. Recently one of the companies stopped accepting tickets from the other two and so now I can't use this ticket on that bus unless I buy a new ticket form them.

This made me think... why are that company not accepting tickets from other bus companies? Because they are losing money on it. The change of policy was motivated by finanical reasons. It also made me think - what is the number 1 priority for that bus company? It must then be - MAKING MONEY. What should the number 1 priority be for a bus company?? Of course, getting the public to a specific destination at a specific time. This is the SERVICE a bus provides and so it's number 1 priority should be delivering that service.

What happened when a company's number 1 priority turns from delivering the best service to making money? Decisions like the one in my story that alienate the people who use the service. I'm being FORCED to chose one company over the other despite the fact the service is the same - for me getting on the bus is not a consumer choice but a NECESSITY. As is the use of water in my taps (which I pay water rates to a water COMPANY for), electricity (ditto) and gas (ditto). Now, these companies are also hellbent on getting money at all costs.

I believe that these fundamental public services should be nationalised - run centrally. So their concern is ONLY about delivering a service. I think that in this country (UK) Thatcher's decision to privitise the buses, trains, gas, water, elecrity and EVEN the national telephone operators was a mistake. To me these things are essentials not something that should be subjected to consumer choice. And the results are there for all to see - a decline in things like health and safety standards (leaking pipes, deteriorating rail tracks etc.) because private companies' number one priority will ALWAYS be making money above all other things.

As far as I can see there is no reason to entrust such fundamental things to people who want to make a profit and it is actually a BACKWARDS step for humanity that these things happen. Where once we had public institutions run for the sole purpose of carrying out their job, now we have companies out to make a quick buck off of my neccessity and your neccessity.

Imagine if the fire service was privatized - "I'm sorry sir, you're going to have to let your house burn because you've got the wrong card".

mistergreen77 · Post by **mistergreen77** » Thu May 25, 2006 7:17

I don't think capitalism erodes quality, but I agree that essential public services should belong to the public. Public transport, telecommunications, sanitation, emergency services and health are all examples of services that should not be seen as consumables and should be owned by the public. As are prisons, police, etc. For exactly the reasons you state above. Capitalism, like evolution, is actually a very good system for ensuring quality. I see it as a sort of combination between the laws of supply and demand and the thriving of the strongest. By the first principle quality is demanded by consumers, by the second efficency by the producers. I have the same complaint though against the hawke and keating governments in Australia at the same time - and they were supposed to be the labor party! Now you understand why I say the governments are puppets of global corporations. It is also my only disagreement with our conservative parties, because our living conditions are second to economic progress. Granted, average living conditions have improved but I don't believe privatisation of essential industries is necessary for a healthy capitalist democracy. By the way, I really liked your line about the fire service: it was a really good way to highlight why essential services should not be privatised. It sort of sums up the whole argument.

Eric · Post by **Eric** » Thu May 25, 2006 13:02

I agree that public services should remain focused on providing that service... but the simple reason why many end up being private enterprises is because as government entities that run those services are not efficient - they are overseen by ministers who couldn't find their own bottom with both hands and have no idea, whereas the private sector has people whom actually know what they are doing.

(At this point, you'd think the government would actually hire people whom knew what they were doing to advise on the running of these things but then we wouldn't need ministers....

Hmm, hey, now there's an idea....

Needless to say, you see *that* ain't gonna happen and why things are the way they are

)

Of course, the side effect can be a lessening of services because they aren't considered economic, so I could agree that capitalism can erode the quality of a service.

Cheers,

Eric

Prideth · Post by **Prideth** » Thu May 25, 2006 14:18

Especially in large countries like Australia. We are seeing it now with Telstra. They are neglecting country customers due to cost cutting and their tight fisted attitude. These days companies like that have to concentrate on their shareholders, and keep them happy which means the bigger the profit margin the better. Customers come in a very poor second.

Services are adequate in the cities, but go bush and the quality of services drops like a stone. I read a story recently about a NSW country town that desperatly wants broadband because the dial up service they have at the moment is struggling (due to telephone services also being under par) to cope with demand. They have been told no by both Telstra and Optus because it wouldn't be profitable enough for them, and the cost of installing the service won't justify what they could expect to get back from customers.

Money is the only motivation, and if you live too far from the cities, where these companies are based, then they cry costs as an excuse to either provide sub standard services or no services at all. I'd like to see all the essential services back in public hands here too.

Eric · Post by **Eric** » Fri May 26, 2006 9:13

And Teltra isn't even a private company yet and they already take this attitude!

I can only imagine, with some horror, the effects of Teltra as a private company. Non service becomes what - less than nothing?

*shudder*

SGSW · Post by **SGSW** » Wed May 31, 2006 0:57

Well I could deduce from everyone's posts including Parvini that you agree with Socialism after all

(at least to a certain degree).

IMHO I don't really care who gets the public service as long as the following conditins are met:

1- There must be competetion in the sector to make sure they don't sit on their asses and do nothing.

2- The contract MUST clearly specify that the company MUST provide a good service at affordable prices for the general public. They can provide luxury services with luxury prices to luxury clients to balance the budget.

3- The contract must specify that the above condition will be met for a considerable amount of time, except in extraordinary circunstances like a cataclysm or the end of the world as we know it.

The reason I say this is because in my couyntry public companies provid a lousy service at astronmic prices, some of the private companies actually provide a better service with lower prices then the public companis

mistergreen77 · Post by **mistergreen77** » Wed May 31, 2006 2:09

Take telecommunications and Telstra (I work for Telstra MobileNet by the way) - I don't think you could fairly say there has not been real benefits in populated areas of our country as a result of competition. It was deregulation of the market that allowed companies like vodafone and hutchinson to invest large amounts of money building competing networks. The downside is that where it is not profitable to deploy new infrastructure communities fall behind the rest of the country. Regulation within the industry forces Telstra to provide services to them anyway - and other companies in fairness have to compensate Telstra for this expense (why should one public company be forced to run services at a loss - the whole industry should bear this cost). The problem is not with telstra, all the telco's don't want to spend money on services that will run at a loss - so we resist deploying the services. But if we didn't have competition we would not have invested so much money in new technologies in order to gain competitive advantage.

So competition has driven innovation and improved services where they are profitable, but reduced the quality and availability of services where they are not. But I still maintain it should have been a public company - the innovation can be manufactured by creating an industry out of research and development and promoting competition within that sector. Public services that can be run profitably should put their profits back in to the r&d industry. But how do you make sure public service is efficient without the external pressure of competition. The way I see through this is to create a culture of internal competition. Government jobs should come with performance criteria and management roles should always be on a contract basis. The executive officer for such an organisation should be elected and not appointed. Perhaps I should write a new draft of the constitution while I am at it. I don't count myself as a socialist - but I think industries that should benefit everyone regardless of how much money you have should be public.

Post by **Zyx** » Mon Jul 31, 2006 14:05

In my opinion, vital infrastructure should be operated by government to ensure the good of the public.
It is true that in the past (and in the present, too) public sector has been really unefficient and, as pointed out, has been providing inferior service compared to private companies.
Parvini, in your example, you say how the problems of privatization are in the infrastructure (you mention leaking pipes and poor rail tracks).
There's a crucial difference between your bus example and the rest (gas, electricity and water). In the bus example, there are many companies who operate on the same infrastructure, namely roads, so you are quite free to choose the bus company which has the best service. Of course there are still very few, so there might not be that much competition.
With gas, electricity and water we are also talking about service, which uses pipes and grids to get to your apartment. Unless there's only one company, you're again free to choose which company provides the service - which essentialy is the same.
Wouldn't it be silly, if all water and electricity companies were forced to build their own infrastructures? Or bus companies their own roads? Then why on earth do mobile companies put their network antennas right next to each other? Why do they feel they have to build each their own network infrastructure? (which still sucks if you don't live where most of the customers do?)
I'm quite sure that if electricity and water companies had their way, there would be quite many neighbourhoods without these utilities. But if there's a bus company that doesn't profit from some routes, anyone else is free to use the underlying infrastructure (roads) to provide the service.
So, what I think I'm after is that if there's an essential service which needs high cost investments in infrastructure, it might be good idea that the government (which naturally is always looking after the best of its tax-payers) runs the infrastructure. There's a reason why many of these water, electricity and other companies started out as public companies - because no private company could afford to build that infrastructure in the first place. Now it seems that after privatizations that they don't even afford to maintain that infra...