So monopoly is another definition Spud misses then

Let’s look at this another way. First, why is nationalisation popular? Let’s not play with trivia at the edges: let’s go to fundamentals. People know that what we’re talking about, whether it be trains, power, water and maybe other utilities (BT OPenreach is an obvious example; the banking platform that guarantees that payments can take place another, the National Grid a third, and healthcare an obvious fourth) are natural monopolies. There really is no room for a second serious supplier in any of these markets. Competition is not then ever going tio be a reality in practice.

Water pipes may well be a natural monopoly, the national grid too. But other than that where’s the natural monopoly in these things? Banking? Health care? Seriously? Hasn’t he even had the most modest look around the world to see that health care is near nowhere organised as a monopoly? Nor, actually, is water.

And they also know that the state can fund such businesses more cheaply than anyone else: if PFI has served any purpose then it has been to prove that the state’s cost of capital is vastly lower than the private sector’s, in which case using private sector funding for state activity rather than government borrowing now very obviously makes no sense at all to anyone but the most hardened of dogmatists.

How odd of an accountant to think that cost of capital is the only important thing either way. Did prices after privatisation rise or fall? And which way did profits go at the same time – even given that higher cost of capital?

Hmm, if cost of capital is the only important thing then what did happen, falling prices and rising profits just couldn’t have happened, could they?

So they now know the government can make money out of thin air for the sake of the economy when it is appropriate to do so. Using QE created funds to pay for nationalised assets would make sense.

Make the gilts in question very long dated, if they need be dated at all (after all, they’re replacing equity and equity is not dated) would be very wise.

Then make them very low coupon i.e. Set the interest rate very low. So low in fact they are very unlikely to exceed current inflation, but will still beat rates available from banks at present.

Substitute low coupon bonds for higher dividend equity? Err, how can that be paying full market value?

This is not rocket science. It just requires clear thinking.

Err, yes, yes…..

16 thoughts on “So monopoly is another definition Spud misses then”

  1. Openreach, ie the consumer connection, is not the natural monopoly. That does not have to be copper or even fibre cable delivered along one set of ducts. It could be microwave or even delivered along separate ducts, as by Virgin or Kingston, or those city fibre companies, for example. It is the trunk network that is possibly a natural monopoly and which could be a JV between competing suppliers.

    Now that mobile companies have stopped trying to create their own backhaul networks and are even sharing the air interface networks, there is no real monopoly point anywhere

  2. Bloke in North Dorset

    Outside the major cities the barrier to entry for the last and even middle mile is cost because of the low tele-density. The answer isn’t nationalising Openreach, because those costs remain the same, it is something like a universal service obligation.

    Spinning Openreach off is a good start.

  3. The health monopoly? I have a choice of GPs in my area, I use two local hospitals (one does not offer the exact services I require but is closer for basic services) and my wife uses the local non state hospice.

    Banking? I use a nice company, think its the 5th bank I’ve had in the past 15 years. No monopoly there.

  4. It is quite possible to have two electricity suppliers in the same town and to have two separate ‘phone connections to one house. For years I used to have my business ‘phone/fax on a different line using a different cable from a different supplier to the household ‘phone. Murphy is just talking nonsense.
    Railways are not a natural monopoly there were numerous towns served by two competing railway companies. Maybe Murphy has never heard of Clapham Junction?

  5. “the banking platform that guarantees that payments can take place another”

    Having just spent the last couple of months listening to banks talking about transaction settlement using blockchain in order to disintermediate clearing houses, I would say he is wrong there.

    In fact, there is a whole new subject on which Spud can pontificate, unrestrained by the shackles of knowledge and understanding.

  6. “if PFI has served any purpose then it has been to prove that the state”

    Was utterly useless at budgeting for opex.

  7. Spud’s definition of “monopoly” is simply “things Spud would like to be a state-run monopoly”, which is totally unrestrained by the…erm… generally-accepted definition of the term.

  8. @DuckyMcDuckface, October 1, 2017 at 4:36 pm

    “if PFI has served any purpose then it has been to prove that the state”

    As usual Was utterly useless including at budgeting for opex.

    +1 & FTFY

  9. Bloke in North Dorset

    The idea that railways are a monopoly is bollocks. The market is transport and they are just one service provider.

    If I want to go to London my alternatives are drive, drive to a coach station or drive to a railway station. Plenty of people round here choose the coach because the train service is expensive and decrepit.

    When I was working in London my preferred mode of transport was, in order of preference, Shank’s Pony, Boris Bike, bus, taxi (pre Uber) and finally the underground.

  10. Bloke in Costa Rica

    “[…]why is nationalisation popular?” Petitio pincipii. Is it popular? Among thieving cunts like Spud and McDonnell, maybe. Among the greater population, not so much. If the Conservatives could just stop the fucking backbiting for ten seconds and tell people that Labour want to raid their pension funds at less than market value they might start to regain a bit of support.

  11. BiCR +1

    Plus for the love of god stop trying to fight (if you can call the pathetic resistance May puts up fighting) them on their own turf.

  12. God, I just love the comments on Richie’s blog. I just adore the fact that this one was probably written using an Apple or Microsoft product;

    “For example, why should a firm be allowed to make profits in excess of what is required to pay decent wages, reinvest in the business, accrue a contingency reserve and pay a modest return to shareholders?”

  13. It would appear that the Utopia offered by private sector operators has been given its chance and failed.People seem to prefer the affordable housing and full employment that governments of all persuasions provided before Keith Joseph and co knifed Heath in the back in 1974 with the aim of reducing the number of people without independent means i.e. the majority, by birth control. (see Edgbaston 74 speech). Margaret Thatcher, his slavish follower,subsequently created a majority by letting house price inflation run wild but, poor lamb,
    didn’t have the education to realise that house prices would inflate beyond what younger people could afford, as now.Hence popular disillusionment.

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