Let Me Explain Privatization and Monopolies

Let me start by saying that this is pretty controversial (please don't start mentally screaming at me). The big, ominous question: whether the government should operate stuff, or whether businesses and individuals should.

The answer is not that black and white.

So, what is privatization? Privatization is when the government takes the programs it's operating and sells a bunch of them off to businesses in the private sector (the sector not operated by the government). If the government is the one operating infrastructure services, or education, or the energy industry, we say this stuff is in the public sector. When the government takes it and sells it off to businesses or individuals not connected to the government, it moves stuff from the public to private sectors, and we call that privatization.

So why would anybody want privatization? Well the reality is that the government is usually really terrible at operating stuff. If it operates energy, for instance, it might constrain the types of energy being produced for political reasons. For example, if a political coalition opposes renewable energy, then they might prevent green energy investment from happening, whining "Aww, this doesn't match my whole schtick as a politician, so I honestly don't really care about whether it's actually good or not. Lmao." 

Another reason people might want privatization is to reduce government spending. If companies run stuff instead of the government, the government won't be the one saddled with running the entire goddamn thing.

The primary reason behind privatization, though, is creating competition in industries. What does this mean? Well, imagine if you have five companies selling you a leather jacket in a hypothetical Cool Leather Jacket Industry, versus just one (a monopoly). The one company knows it's the only supplier of awesome leather jackets, so it can hike prices as much as it wants. Five companies, on the other hand, are going to want to steal customers from each other, so they might lower prices and increase quality to get more people to buy the jackets from them. The same thing goes for the job market: if you're an Expert in Leather Jacket Creation, multiple companies are going to want to offer you higher salaries so that you go to them instead (seriously guys, start getting the biker fit. It's actually awesome).

People want privatization so that many companies can be in the industry rather than just the single government which can do literally whatever it wants with no consequences.

This actually does work most of the time. When the government sells stuff off into the private sector, we see prices drop and wages rise. The problem is that this usually doesn't last very long because the ghost of monopoly still haunts us wherever we go (it's really annoying, isn't it). 

Companies will want to do mergers to control more of their industries. They'll want to gatekeep smaller companies from joining. They'll do anything just to get there to be less competition, so when stuff gets privatized, companies will eventually form one big monopoly all over again.

So if both the government will abuse us, and the private sector will eventually start abusing us, what do we do? Monopolies are a two-sided problem: we have to make it easier for David to fight Goliath, and also make sure Goliath doesn't become too powerful in the first place.

To help David, we give smaller companies tax breaks. Big ones. That gives them more money to invest, and makes it easier for them to grow. To fight Goliath, we have to have strong antitrust legislation, make sure companies don't do these harmful mergers.

We've seen this play out in different places:

1. The ghost of monopoly's been haunting the UK since the 80s: after Thatcher privatized energy, prices fell in the short-term but rose in the long term when 6 "key players" started taking control of the entire industry and . Thatcher's privatization of BT (British Telecom) was much more successful, because of strong antitrust regulation.

2. In New Zealand, the aerospace industry got privatized, and we saw better service, lower prices, and overall just better airlines. It's really not that surprising that New Zealand had strong antitrust legislation after privatization.

Another thing to know is that government ownership or at least some government control isn't always a bad thing. In healthcare, for example, Medicare and Medicaid have made sure that a lot of people can get health insurance and coverage that companies might not have given them earlier for their profit. 

The second we start prioritizing a political philosophy over actual results, things go wrong. If we keep talking about deregulation and don't couple it with antitrust laws, then everything will go wrong. If we go the route of the government owns literally everything, then we will get government abuse.

So, the lessons from today are: don't go overboard with stuff, and get a leather jacket. See you next time!!! (You BETTER have a leather jacket on when you're reading this. Or else).