On why Nationalisation does't work

As Low Status Opinions has succinctly put it, Labour has not just hit the ground running, but gone 'full on Tonto, absolute double nut job bat shit crazy crackers looney tunes, on Week One'.

Today, we saw the King's Speech, which committed to a range of measures. The main one this post will focus on is rail nationalization. First, I'll point out how most of the UK network was built by private firms in the 19th and early 20th century and was nationalized in 1948 after being commandeered and run into the ground twice in the world wars. I'll also point out that what is usually considered to be the best rail network in the world, Japan's, is mainly private (JR is a consortium of 7 firms, each covering a specific area. Last I heard only the 3 on Honshu are private and the 3 covering Hokkaido, Kyushu, and Shikoku are still state-owned. In addition, numerous private firms compete with JR, often running parallel tracks on similar routes (where I lived there were JR and Keikyu stations nearby, the former was closer to my flat but the latter was faster and slightly cheaper, IIRC).

Being in my 40's I only vaguely remember BR and have little first-hand experience of the UK's previous era of state ownership but have read a lot about it and spoken to relatives who lived through it. That said, there are main reasons I think nationalized industries are a bad idea 

1) Excessive bureaucratisation and overmanning

As Jerry Pournelle's Iron Law states, 

"In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely."

This rule, IMO, explains a lot of the issues with the civil service and big companies. The main advantage of a private bureaucracy is eventually the costs hit the bottom line and the firm will either go bankrupt or cut overhead to remain profitable. Public sector organizations don't have this issue and so will grow and become less productive (IIRC at one point the state-owned Longdrbge had 4 times the number of employees of Nissan's UK plant, to produce roughly the same number of cars). 

2) No need to satisfy customers.

As the firm will never go bust, staff don't have any incentive to keep customers happy as the state will always pay their wages. As well as keeping productivity down their attitude to quality and customer service also suffers (as shown by the poor quality of British Leyland cars in the 70's or the wait time to get a phone line installed by BT- several weeks at one point)

3) Commerical decisions secondary to political ones

A factor is old, decrepit, and needs closing in favor of a more modern and productive one. But the firmer is in a marginal constituency MPs and Ministers veto the closure. To the politician seeking re-election, jobs are seen as a plus rather than a cost, resulting in even less pressure to keep them down (as seen in point 1). Finally, the governments limited funds are used on what is more popular, so infrastructure and investment in new products and equipment are neglected in favor of public spending on SchoolsnHospitals (this in particular affected the railways and water firms, which were seen as lower vote winners that health and education and so were starved of funds)

We have tried Nationalization before, and it didn't work. As is commonly attributed to Albert Einstein, 'the definition of insanity is doing the same thing again but expecting different results'. This is not to say privatization has been 100% successful. It saddens me that we are having the same arguments again, and some on the right are backing state ownership as well. I'd have more respect for the left it they proposed alternative models of ownership like trusts or mutuals, rather than 'warmed over Attleeism'.