24 July 2003 Edition
Off the rails
The Dublin government's agenda of deregulation, competition and privatisation is a profiteer's charter, doomed to failure, writes PAUL O'CONNOR
It's been another crazy week in the ever-crazier world of PDnomics. Last week, we had Mary Harney blaming consumers for the retailers who rip us off. This week, we learned that the right to strike no longer exists.
You would have thought the CIE "no fares day" would be commended as an example of "smart" industrial action. The workers got to make their point, the public got a free ride, and the only ones to suffer were the government who caused this mess. But that cut no ice with the friends of PDnomics - whose numbers extend far beyond the ranks of the PDs and their junior partners in coalition, Fianna Fáil. Fine Gael's Olivia Mitchell called for the cost of the action to be deducted from workers' pay. And commentators, from Eamon Dunphy to the Sunday Independent, railed at the unions for challenging the government's "right to govern".
Govern? This coalition is no more able to govern than I am to interpret the mumblings of Bertie Ahern. Whenever they face a problem, they turn to their patron saints - St Enterprise of the Fat Wallet, St Deregulation of the Happy Profiteers, and the Blessed Free Market - to fix it. Repeating the mantra "competition, competition, competition" with the fervour of a medieval peasant over his rosary beads, they wait for their idols to produce a miracle - lower prices, a public transport system that works, housing for all - without any effort or intervention from them. Or they turn to Ryanair Boss Michael O'Leary to write their transport policy. When a corporate boss pays for page-length newspaper advertisements and TV broadcasts telling the government what to do, shouldn't some commentator get exercised over this challenge to the government's right to govern?
The "free market" is an ideologist's pipe-dream, found only in the fantasy land of PDnomics. It is a profiteer's paradise, the nirvana of rip-off merchants, where prices spiral and the hapless consumer is at the mercy of cartels and private-sector monopolies
Michael O'Leary is the Mother Theresa of PDnomics - canonised while still alive. He too repeats the sacred mantra "competition, competition, competition".
Competition among air terminals will bring us miraculously lower airfares. It will produce millions of new tourists. Competition on the bus lanes will produce a fast, efficient public transport service out of thin air, at no cost to the taxpayer. That is the gospel according to Seamus. It's the gospel according to Michael. It's the gospel according to Mary Harney, and you'd better believe it. If you don't, you'll be cast down to whatever hell is reserved for socialists and striking transport workers.
There is a problem, however. Last week, Mary Harney told us that competition in the private sector isn't working. Ok, it's all the fault of those lazy consumers who won't shop around. It's the fault of those working women who, after a hard day at the office, won't trail around five different supermarkets to see which has the best value in sliced pans this week. It's the fault of those people without cars who can't drive to the Lidl ten miles out of town (why don't they buy cars, for God's sake?). But the fact remains: in the private sector, the only "competition" is in charging the highest prices. So how will more competition magically solve our transport woes?
The model of the free market sold by devotees of PDnomics goes something like this: I want a cigarette lighter, so I take a stroll down Moore Street. There I meet three traders. The first offers me three cigarette lighters for my Euro, the second offers me four, and the third offers me five "extra large", long-life lighters for a Euro. Naturally, I purchase off the third trader, and if the other traders want to stay in business they will have to offer better value in future. The consumer wins every time; and since the traders in turn will shop around for the best wholesale prices, production of cigarette lighters will keep getting cheaper and more efficient. Occasionally, traders will go bust or workers in a lighter factory lose their jobs; but in the long run, everybody will be a winner.
Worshippers of "the market" assume the consumer has equal knowledge of, and equal access to, all products on the market. The three traders are within a minute's walk of each other - and there isn't another guy hidden around the corner selling lighters at even better value. The model also assumes businesses will always try to undersell each other, rather than charge high prices and cut up the market between them (which for an established business is the more profitable route). In this example, the three traders haven't made an agreement to fix lighter prices at three for a Euro.
In real life, it just doesn't work like that. We don't often have a line of shops in front of us, all selling the same goods or services, so we can just hop from one to the other and pick the best value. The market is riddled with distortions caused by price-fixing, cartels, and difficulties of access and information. The corner shop may be twice as expensive as the discount store down the road, but am I going to drive half an hour for a pint of milk? The TV shop in the next town may be holding a closing down sale with bargains at half price, but what good is that if I don' know it's on? There may be three banks within walking distance of my home, but how can I "shop around" if they all have the same bank charges and interest rates?
And the poorer you are, the less likely you are to have access to the information and transport that would allow you look for bargains. Without a car, you must buy your groceries at the nearest shop, let it charge what it likes. A letter in Ireland on Sunday this week urged people to beat profiteers by shopping on the internet. Tough if you don't own a computer. The Liam Lawlors can bank in the Cayman Islands and Liechtenstein; the rest of us are stuck with AIB.
The "free market" doesn't exist. It is an ideologist's pipe-dream, a beast as mythical as the unicorn, found only in the fantasy land of PDnomics. What passes for a "free market" - an economy with minimal government intervention - is a profiteer's paradise, the nirvana of rip-off merchants, where prices spiral and the hapless consumer is at the mercy of cartels and private-sector monopolies. Only when the government intervenes - by enforcing standards, breaking up monopolies, and, where necessary, imposing price controls - does the consumer stand a chance of getting a fair deal.
And so we come back to the issue of airports, bus routes, and Minister Brennan. If "the market" is an imperfect method of delivering things like groceries, haircuts, meals in restaurants and pints of lager at low prices and with quality service, it will be even worse at delivering public transport. It's fairly easy to open up a shop or restaurant, and there are usually several of them in a given area. Airports and bus and rail links on the other hand, like most public utilities, are natural monopolies. You'll never have a choice of flying out of ten airports, each an equal distance from your home, at the same time to the same destination. You'll never walk into a railway station and see ten trains lined up on adjacent tracks, each waiting to take you from Dublin to Cork, so you can shop around for the most comfort at the best price.
Seamus Brennan wants to break up Aer Rianta so that Dublin, Cork, and Shannon airports will "compete" against each other for passengers. Perhaps somebody in the Midlands might weigh up the advantages of Dublin against Shannon, but is a traveller from Drogheda going to fly out of Cork airport because it's §10 cheaper than Dublin? Each airport has its natural catchment area, which is not going to change; to talk of airports on opposite sides of the country "competing" for passengers is nonsense
Seamus Brennan wants to break up CIE as part of a plan to allow private operators compete with public transport, beginning on certain bus routes in Dublin. But let the minister tender for the bus route from Erris to Castlebar and see how many responses he'll get. CIE will continue to bear the burden of unprofitable - but socially valuable - bus and rail routes, while foreign predators cherry-pick profitable urban lines. The result will be to weaken the company, leaving it with less money for investment in public transport - and to fill the pockets of private operators.
Public transport is a public service. It cannot be run according to the logic of the marketplace. Undoubtedly, there are major shortcoming in our transport system. But these stem from lack of government investment, and only government investment will solve them. The government's agenda of deregulation, competition and privatisation is a profiteer's charter. It has failed elsewhere. It will fail in Ireland too.
It's been another crazy week in the ever-crazier world of PDnomics. Last week, we had Mary Harney blaming consumers for the retailers who rip us off. This week, we learned that the right to strike no longer exists.
You would have thought the CIE "no fares day" would be commended as an example of "smart" industrial action. The workers got to make their point, the public got a free ride, and the only ones to suffer were the government who caused this mess. But that cut no ice with the friends of PDnomics - whose numbers extend far beyond the ranks of the PDs and their junior partners in coalition, Fianna Fáil. Fine Gael's Olivia Mitchell called for the cost of the action to be deducted from workers' pay. And commentators, from Eamon Dunphy to the Sunday Independent, railed at the unions for challenging the government's "right to govern".
Govern? This coalition is no more able to govern than I am to interpret the mumblings of Bertie Ahern. Whenever they face a problem, they turn to their patron saints - St Enterprise of the Fat Wallet, St Deregulation of the Happy Profiteers, and the Blessed Free Market - to fix it. Repeating the mantra "competition, competition, competition" with the fervour of a medieval peasant over his rosary beads, they wait for their idols to produce a miracle - lower prices, a public transport system that works, housing for all - without any effort or intervention from them. Or they turn to Ryanair Boss Michael O'Leary to write their transport policy. When a corporate boss pays for page-length newspaper advertisements and TV broadcasts telling the government what to do, shouldn't some commentator get exercised over this challenge to the government's right to govern?
The "free market" is an ideologist's pipe-dream, found only in the fantasy land of PDnomics. It is a profiteer's paradise, the nirvana of rip-off merchants, where prices spiral and the hapless consumer is at the mercy of cartels and private-sector monopolies
Michael O'Leary is the Mother Theresa of PDnomics - canonised while still alive. He too repeats the sacred mantra "competition, competition, competition".
Competition among air terminals will bring us miraculously lower airfares. It will produce millions of new tourists. Competition on the bus lanes will produce a fast, efficient public transport service out of thin air, at no cost to the taxpayer. That is the gospel according to Seamus. It's the gospel according to Michael. It's the gospel according to Mary Harney, and you'd better believe it. If you don't, you'll be cast down to whatever hell is reserved for socialists and striking transport workers.
There is a problem, however. Last week, Mary Harney told us that competition in the private sector isn't working. Ok, it's all the fault of those lazy consumers who won't shop around. It's the fault of those working women who, after a hard day at the office, won't trail around five different supermarkets to see which has the best value in sliced pans this week. It's the fault of those people without cars who can't drive to the Lidl ten miles out of town (why don't they buy cars, for God's sake?). But the fact remains: in the private sector, the only "competition" is in charging the highest prices. So how will more competition magically solve our transport woes?
The model of the free market sold by devotees of PDnomics goes something like this: I want a cigarette lighter, so I take a stroll down Moore Street. There I meet three traders. The first offers me three cigarette lighters for my Euro, the second offers me four, and the third offers me five "extra large", long-life lighters for a Euro. Naturally, I purchase off the third trader, and if the other traders want to stay in business they will have to offer better value in future. The consumer wins every time; and since the traders in turn will shop around for the best wholesale prices, production of cigarette lighters will keep getting cheaper and more efficient. Occasionally, traders will go bust or workers in a lighter factory lose their jobs; but in the long run, everybody will be a winner.
Worshippers of "the market" assume the consumer has equal knowledge of, and equal access to, all products on the market. The three traders are within a minute's walk of each other - and there isn't another guy hidden around the corner selling lighters at even better value. The model also assumes businesses will always try to undersell each other, rather than charge high prices and cut up the market between them (which for an established business is the more profitable route). In this example, the three traders haven't made an agreement to fix lighter prices at three for a Euro.
In real life, it just doesn't work like that. We don't often have a line of shops in front of us, all selling the same goods or services, so we can just hop from one to the other and pick the best value. The market is riddled with distortions caused by price-fixing, cartels, and difficulties of access and information. The corner shop may be twice as expensive as the discount store down the road, but am I going to drive half an hour for a pint of milk? The TV shop in the next town may be holding a closing down sale with bargains at half price, but what good is that if I don' know it's on? There may be three banks within walking distance of my home, but how can I "shop around" if they all have the same bank charges and interest rates?
And the poorer you are, the less likely you are to have access to the information and transport that would allow you look for bargains. Without a car, you must buy your groceries at the nearest shop, let it charge what it likes. A letter in Ireland on Sunday this week urged people to beat profiteers by shopping on the internet. Tough if you don't own a computer. The Liam Lawlors can bank in the Cayman Islands and Liechtenstein; the rest of us are stuck with AIB.
The "free market" doesn't exist. It is an ideologist's pipe-dream, a beast as mythical as the unicorn, found only in the fantasy land of PDnomics. What passes for a "free market" - an economy with minimal government intervention - is a profiteer's paradise, the nirvana of rip-off merchants, where prices spiral and the hapless consumer is at the mercy of cartels and private-sector monopolies. Only when the government intervenes - by enforcing standards, breaking up monopolies, and, where necessary, imposing price controls - does the consumer stand a chance of getting a fair deal.
And so we come back to the issue of airports, bus routes, and Minister Brennan. If "the market" is an imperfect method of delivering things like groceries, haircuts, meals in restaurants and pints of lager at low prices and with quality service, it will be even worse at delivering public transport. It's fairly easy to open up a shop or restaurant, and there are usually several of them in a given area. Airports and bus and rail links on the other hand, like most public utilities, are natural monopolies. You'll never have a choice of flying out of ten airports, each an equal distance from your home, at the same time to the same destination. You'll never walk into a railway station and see ten trains lined up on adjacent tracks, each waiting to take you from Dublin to Cork, so you can shop around for the most comfort at the best price.
Seamus Brennan wants to break up Aer Rianta so that Dublin, Cork, and Shannon airports will "compete" against each other for passengers. Perhaps somebody in the Midlands might weigh up the advantages of Dublin against Shannon, but is a traveller from Drogheda going to fly out of Cork airport because it's §10 cheaper than Dublin? Each airport has its natural catchment area, which is not going to change; to talk of airports on opposite sides of the country "competing" for passengers is nonsense
Seamus Brennan wants to break up CIE as part of a plan to allow private operators compete with public transport, beginning on certain bus routes in Dublin. But let the minister tender for the bus route from Erris to Castlebar and see how many responses he'll get. CIE will continue to bear the burden of unprofitable - but socially valuable - bus and rail routes, while foreign predators cherry-pick profitable urban lines. The result will be to weaken the company, leaving it with less money for investment in public transport - and to fill the pockets of private operators.
Public transport is a public service. It cannot be run according to the logic of the marketplace. Undoubtedly, there are major shortcoming in our transport system. But these stem from lack of government investment, and only government investment will solve them. The government's agenda of deregulation, competition and privatisation is a profiteer's charter. It has failed elsewhere. It will fail in Ireland too.
