Private roads not so marginal

Suddenly the case for private roadshas been ripped away from the tables at the Rose and Crown and thrust firmly into the mainstream thanks to David Cameron and Tim Wallace’s amazing headline this morning. This, for me, is a stand out quote:

The National Association of Pension Funds is already working with the government to find a suitable model to tempt its members to invest some of their £800bn of assets in infrastructure – the long-term nature of such investment could provide a steady income stream matching pension funds’ liabilities.

Here we have a group of people invited to act in their own self interest and in the congruent interests of the voting and tax paying public. I am sure there will be tax payer subsidies and regulations to stuff up the works but the idea that greedy capitialists might want to build a road is being talked about on the third paragraph of a daily newspaper’s front page. Even if City AM is a bit special, this is very happy news indeed.

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March 19, 2012

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18 responses to “Private roads not so marginal”

Paul Marks

March 19, 2012 at 10:13 am

We must be careful that this is about true toll roads (like the TurnPike trusts that transformed England and Welsh roads in the 18th and early 19th centuries), NOT the government borrowing money from companies or overseas governments (GW Funds) – PFIs and so on have been a total mess.

However, YES this statement from Mr Cameron means that private roads are no longer a “fringe” activity.

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1. Simon Gibbs
  
  March 19, 2012 at 10:26 am
  
  Paul, I nominate the above for Samizdata QOTD.
  
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Richard Carey

March 19, 2012 at 11:18 am

Rather than a step in the right direction, I reckon this is more like the government finding another way, on top of all the others, to rip us off.

The money paid for vehicle tax and fuel tax would be enough to cover the nation under tarmac and give everyone their own set of traffic lights.

The business model of choice of this government, and the last, is closer to fascism than free trade capitalism. Now they want all the pension fund money to be invested with the government, rather than in private enterprise, they’re doing what they always do – hoovering up all the available capital. This is a measure from a government which has no intention of reducing its size or its gargantuan expenditure. If it frees itself of the burden of taking care of the roads and motorways, it will still keep all the money we’re paying now for this task, and we’ll be paying on top for the privilege of using the roads we have already paid to construct.

I think libertarians should keep their distance from this policy. Although in principle there is certainly nothing wrong with private roads and much to commend them, that’s not how it will be implemented, and we gain nothing from volunteering as the government’s cannon fodder by going into battle for it.

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1. Rob Waller
  
  March 19, 2012 at 4:24 pm
  
  I completely agree, toll roads are a great idea so long as they reduce the tax burden. My feeling however is we’ll keep the taxes and road tolls will be an extra burden.
  
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  1. Andy Janes
    
    March 19, 2012 at 10:12 pm
    
    Seconded
    
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Mises

March 19, 2012 at 11:17 pm

Why is it that the Tories’ privatisation agenda is always boldest when it comes to monopoly industries? Answers on a postcard.

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1. Paul Marks
  
  March 20, 2012 at 9:52 am
  
  Actually all non monopoly state owned companies (such as the steel company and the government owned car company) were sold under Mrs Thatcher – so there is only monopoly state owned stuff left to be sold.
  
  By the way roads are NOT a monopoly. This is the mistaken thinking that led to the breakup of the railways under John Major – “we can not sell it is a monopoly…..”
  
  Railways compete with ROADS, and roads (guess what….) compete with RAILWAYS.
  
  And both compete with the airlines (and with water transport).
  
  One does not need two road (or two railways – or different people owning the track and running the trains) for their to be competition.
  
  The Conservatives (under John Major and co) totally failed to understand this – and tried to break up things that should not have been broken, such as the ownership of railway lines and the ownership of trains.
  
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  1. Mises
    
    March 20, 2012 at 12:16 pm
    
    I was being flippant and shouldn’t have used the word monopoly, I meant to say they like privatisation but aren’t so keen on competition. Whether something is a monopoly or not is a question of degrees and yes railways and roads compete, but ultimately there’s a virtually fixed supply and increasing demand so there’s very little hope for price restraint. I don’t agree with the breaking up of tracks and trains, nor do I think it was sensible to try to artificially create competition in train operators.
    
    But here’s the beef: In health they are trying to draw private companies into the state system rather than get patients OUT of it; in education they are trying to ensure that new private schools take the state’s buck and also attempting to entice existing private schools to become (state-supported) “free” schools. The emphasis is not on liberalisation it’s towards having everything happen under license from the state. It seems like the last thing they want to do is to enable competition (despite what public sector unions say). Tories like privatisation provided it means big profits for lobbyists operating within government-granted fiefdoms and as little competition as possible, that’s the point I was trying to make.
    
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  2. Paul Marks
    
    March 20, 2012 at 12:41 pm
    
    I agree that the “free school” concept will suck in independent schools.
    
    If something is government fianced it is not independent – a simple point, but one the establishment seem totally unable to grasp.
    
    And it is “unable” – it is not a great plot. For example, when the new “Arts Council” took over funding the arts after World War II, the traveling Opera company celebrated – even going back to the 19th century varous people there had dreamed of state funding to “safeguard their independence” (yes I have a problem getting my head round that one).
    
    Almost needless to say, under the new regime of arts funding (i.e. the money from the taxpayer sytem), the traveling opera company (the old = Karl Rosa if I do not misremember the name) was soon closed down.
    
    However, I think you are mistaken in thinking the government does not like competition – indeed it likes it rather too much.
    
    Its own FALSE conception of what “competition” is.
    
    That is what the various regulatory agencies (and the “competition authorities”) are about.
    
    The govenmnent thinks that competition is something the government creates and maintains……
    
    Hang on while I wrap some ducktape round my head – this head-exploads thing can be a problem.
    
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  3. Richard Carey
    
    March 20, 2012 at 5:25 pm
    
    Monopolies and cartels per se are not contrary to the free market. It is only when they are created and maintained by state power that a problem arises.
    
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Ken Ferguson

March 22, 2012 at 6:50 pm

Monopolies and cartels per se are not contrary to the free market.

Disagree entirely. Monopolies and cartels are anathema to free markets and, furthermore, there is a natural tendency, in a capitalist system, for them to develop.

This might seem a strange thing for a libertarian to say, but the state sponsored corporatism we see now is a direct result of government failing to support competition legislation in the seventies and eighties.

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1. Andy Janes
  
  March 22, 2012 at 7:59 pm
  
  ‘there is a natural tendency, in a capitalist system, for them to develop.’
  
  Not really, absent barriers to entry (usual due to state activity) if a firm is making money competitors will soon appear. Also cartels don’t last any longer than the point where one member sees is to their advantage to break it
  
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2. Paul Marks
  
  March 22, 2012 at 10:46 pm
  
  There is no natural trend to monopoly, if there was then things like the ICC would not have been needed to ENFORCE cartels in the United States railroad industry (or do people not know that is what the ICC was really for?).
  
  As for “fair trading” and “competition policy” – a bigger government scam would be hard to think up.
  
  Constomers are ripped off – and in the name of “protecting customers”.
  
  Perhaps my favourate example is when brewers were forced to give up a lot of their pubs.
  
  This just meant that the pubs were taken over by pub management companies – not longer got cheap beer from the brewers (who no longer owned them) and so shut down.
  
  Great stuff – competition policy in a nutshell.
  
  With railways – they compete with roads.
  
  And roads compete with railways.
  
  And both compete with air and water transport.
  
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3. Mises
  
  March 23, 2012 at 1:26 am
  
  “Monopolies and cartels are anathema to free markets and, furthermore, there is a natural tendency, in a capitalist system, for them to develop.”
  
  Or put another way monopolies and cartels are an absence of the free market, an absense of choice/competition, and choice and competition are in most peoples’ interest in just every situation I can think of. I don’t think anybody knows what would be likely to happen in a government-free situation, cartels and monopolies can naturally occur, but the question is – if they do occur and we all think we’re losing out because of it what would be the correct response? Force? The flipside to cartels are the unions and most people would say that if they don’t use force we shouldn’t use force against them. There would be non-violent ways to deal with businesses which conspire to squeeze more cash out of consumers, an extreme example might be for consumers to band together and go into business against a cartel themselves.
  
  I think the important thing is to understand how the current system actively enforces cartelisation. Corporatism is all about government ENFORCED cartels, it’s beyond basic support and favours. The original fascist governments forced competitive companies into cartels and so do ours. But remember we musn’t call our compulsory cartels by their real name, now they are “regulators”… And people wonder why regulators don’t seem to do the jobs we’re told they’re there for.
  
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4. Richard Carey
  
  March 23, 2012 at 2:31 am
  
  “Disagree entirely. Monopolies and cartels are anathema to free markets and, furthermore, there is a natural tendency, in a capitalist system, for them to develop.”
  
  Firstly, I smell a massive contradiction in that statement. If they are anathema, and there is a natural tendency towards them, then you are saying that free market capitalism has a natural tendency to destroy itself, absent the government stepping in to save us from the natural tendency, are you not?
  
  Furthermore, what about my monopoly in myself? What about Thierry Henry’s monopoly in himself? Or Shakespeare’s Globe Theatre? In reality, if monopoly is taken literally, then everyone and every business has a monopoly in some way or other.
  
  Leaving aside the literal definition, the only meaningful definition is where the state (or some other entity using violence)is enforcing a monopoly.
  
  The same applies to cartels, which are no different, economically speaking as mergers.
  
  What is competition legislation? State intervention in the market to prevent businesses organising themselves as they see fit.
  
  If Rupert Murdoch bought up every British newspaper, so what? As long as someone, anyone has the liberty to set up another newspaper – in other words, as long as the state or another entity employing violence does not prevent market entry, then no one’s liberty is harmed.
  
  What if there are two pubs in a village, and one is going to close down? Should the state step in to subsidise the failing pub, or to close down the other one too, to prevent monopoly?
  
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  1. Ken Ferguson
    
    March 23, 2012 at 8:05 am
    
    The reason market capitalism tends towards creating monopolies is because economies of scale favour mergers and barriers to entry (not just those raised by government) prevent new market entrants from providing competition.
    
    The reason you have suffered terrible adverts for washing powder all these years is because they were not really trying to get you to buy Surf rather than Daz. They just wanted to ensure “Better Cheaper Soap Powder” never got into the supermarkets.
    
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  2. Paul Marks
    
    March 23, 2012 at 9:24 am
    
    “Capitalism” (if this term means anything) does not “tend towards monopolies”.
    
    And government interventionism does not aid customers – rather the reverse.
    
    As for “economies of scale” – they do exist, but so do diseconomies of scale.
    
    Further – the market often changes, what was an established product one year may be replaced by something very different.
    
    Washing powder did not always exist – and will not always exist.
    
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  3. Richard Carey
    
    March 23, 2012 at 1:04 pm
    
    Even if market capitalism did tend towards monopolies, what would be wrong with that? What is the rationale for opposing monopoly?
    
    We can (presimably) agree that all monopolies established or maintained by government intervention are bad, as the intervention signifies something which would not happen by free, mutually agreed exchange.
    
    But it doesn’t follow that monopolies are bad in themselves, or big business for that matter.
    
    The most significant barrier to entry, assuming there is no government prohibition to doing so, is a lack of capital, which is usually exacerbated by government regulation, which adds to costs. I might have the best formula for washing powder, but unless I can persuade somebody to invest in the idea, I’m screwed. That’s life, unfortunately. Nobody, in a free market, can be forced to invest in my idea.
    
    This same scarcity of capital affects everything – economics being concerned only with scarcity. There are always technological advances to be implemented, but capital is lacking. Most companies do not have state-of-the-art equipment. They use what they have until it breaks down or until they judge the cost of replacement to be less than the cost of non-replacement.
    
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