Piles 2

Some little while ago, I blogged about the pointlessness of the upscaling of the economic models of most large companies and the fact that they brought no discernible advantage apart from a large amount of money to a small amount of people. I can't remember if I said so at the time (I'm certainly not reading all that again), but there are circumstances where upscaling is desirable. Certain industries require large infrastructure that is best managed under one corporate structure, although many fewer than are probably reckoned. In fact many 'large' companies already undermine the argument for monopolistic structures by outsourcing many of their functions. Unfortunately, many people's experience of such arrangements is not good, as the motivation for such outsourcing is rarely anything other than a reduction in costs, which leads in many cases to a commensurate reduction in service. However, a small number of companies have led the way in genuine specialisation,  with IBM being perhaps one of the most extreme and successful examples.
There is another area where upscaling is essential: in the provision of the services that the citizens of any civilized nation expect as a prerequisite: infrastructure, social security, education and healthcare. All of these things are expensive, but fortunately are all delivered to a large enough population (usually) for the economics of scale to be such that small amounts of tax from each individual will cover the costs of delivery. Obviously this doesn't always work, as the UK pension system is discovering, but largely the principle is sound: the combined value of everyone's contribution is greater than (or roughly equal to) the total cost of maintaining the service. In the case of many of the services provided, the total amounts of money involved can be staggeringly large. Large amounts of money have a habit of attracting the sort of captains of industry who believe it is their right to take charge of such large sums of money and in recompense take a (compared to the total sum) small amount of it for themselves. This was the basis of privatisation; the excuse was that the public sector was inefficient and that the efficiency of the private sector would save money. After all, only a comparatively small amount would be taken out as profit compared to the total amount of the public budget, right? Maybe we should look at a case study.
Southern Rail is the rail franchise I have used most over the last ten years and they generally run a good service (contrary to the impression you might get from my Twitter feed), however, they are a subsidised company; as taxpayers, we pay them to run the service whether we subsequently pay them additionally to use it or not. We currently pay somewhere around £40m in subsidy for this route, up from around £20m a few years ago. This is apparently because reductions in passenger numbers were threatening GoVia's profits (GoVia is Southern's parent company). It's worth noting that profit was threatened, not eliminated, and presumably after the subsidy was increased, profits returned to normal. So just to be clear, the government are paying extra so that a private company can make a profit at a time when actual public services are being cut due to lack of money. I'm fairly certain £20m a year would pay for a decent chunk of hospital. I wouldn't really object if the subsidy was paying for a service, but it's not, it's paying dividends for shareholders, and fat bonuses for people whose egos allow them to believe they make a difference. You can't have a profit if your outgoings are greater than your income, and all rail franchises have greater outgoings than their income, so why are we paying extra just to generate profit? The prevailing logic is that, as rail transport is a public service, we should pay a dividend for its loss making, a loss premium if you will. This idea comes from the people who see the amounts of money involved and are aware that if they take a comparatively little amount out it won't make much difference. In many ways they're right as well: the subsidy for Southern Rail is less than £1 a year per head of the population (although probably closer to £2 a year per taxpayer), so we wouldn't exactly miss it if it was just taken from us and paid directly to the least deserving person. However, we might still resent it if we had to hand over £10 a year to a bunch of faceless corporations who make no discernible difference to our lives. Besides this is slightly missing the point, the reasons why we pay these small amounts of money is so that when they are all added together they can make a difference for the good of society, not line the pockets of the bolshy.
Of course the people who profit from our taxes see their remuneration as reward for making the system more efficient, to which my response would be: fine, you can take your efficiency dividend when your company makes a profit. I'm all for free market economics, but if these services can't make money in the free market, then perhaps they should be looked after by the state. If we really want to save money as a nation maybe we should make sure all privatised services are truly private and withdraw any government funding. Those that manage to survive on their own, then well done them. Those that fail can be nationalised, just like the banks. That way we can save money and be sure that we know just which services can be privatised and which need to be run by the state.
Obviously for such a model to function like 'proper' capitalism (i.e. like no market in the world truly functions) we as consumers need to have somewhere else to go for our services, otherwise there is a monopoly - something that is vehemently opposed, indeed banned in the commercial world. Quite clearly certain privatised services simply don't offer any alternative and therefore are monopolies; it can only be argued that rail franchises are not a monopoly because you can theoretically get a bus, walk or drive to your destination instead. If a service fails this other rule of free market capitalism, then it think it also fails as a privatised service.
I think that there are two exceptions to the above tests: health and education. Both services have thriving private sector versions, but not everybody can afford them. Therefore, there needs to be a state provided service for those who cannot afford to pay for these very expensive services, and the only way that can be funded is through the economies of scale generated by all of us paying a little bit. If you don't think you should be paying to ensure the health and education of your countrymen, then I fear for you as a human being.