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Austerity in ruins?

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PDR
1240188.  Wed Jun 21, 2017 10:23 am Reply with quote

barbados wrote:

It is particlarly evident (in my view) with the military. People might not pay to be soldiers, however in barrack towns local business is extremely dependant on them being there, and that does generate national wealth.


I would suggest that what you are describing here is the "trickle-on" effect I mentioned above. It doesn't generate wealth, it just distributes it.

Not the same thing.

PDR

 
ConorOberstIsGo
1240189.  Wed Jun 21, 2017 10:28 am Reply with quote

Alexander Howard seems to think that the public sector generates no wealth and any local council job is riding free on the backs of good capitalists and small businesses, PDR however starts talking in megaBobs and I struggle to pin down any logic.

I tell you what here's a nice fun article that will polarise people but does talk about wealth rather than money. Maybe we can use that as a jumping off point?

http://neweconomics.org/2009/12/a-bit-rich/

P.S. privatised industries like farming and oil..... surely they are subsidised so aren't truly private either?

 
dr.bob
1240191.  Wed Jun 21, 2017 10:37 am Reply with quote

PDR wrote:
As far as I am concerned once you have kids you have obligations, and essentially the interests of the kids has first call on any spare dosh - after a roof, food and the necessities like clothes and transport to work they become the highest priority.


The problem is that, after a roof, food and the necessities like clothes and transport to work, some people really don't have anything much left, much as I'm sure they would love to be able to help out their kids. I certainly don't remember my parents having any expensive hobbies that they could have given up in order to help fund my adolescent lifestyle.

 
PDR
1240193.  Wed Jun 21, 2017 11:07 am Reply with quote

dr.bob wrote:

Weeeellllll, yes and no.

Banks and airlines, whilst being profitable industries in themselves, also help to stimulate other parts of the economy. Banks stimulate the economy by providing loans to help companies start or expand. Airlines stimulate the economy by allowing easier trade between regions or internationally. As such, I imagine it could be theoretically argued that, even if a nationalised Bank or Airline were running at a loss, it could still be a good thing if the overall effect on the economy was positive.


Yes and no! Banks certainly facilitate and stimulate economic activity in their fundamental role of collecting large numbers of small lumps of savings and making it available to small numbers of enterprises that need large lumps of capital. That role cqan be performed iby either private or public sector organisations. I would argue that the private-sector organisation's profit imperitive tends to ensure it loans to those who will use it most effectively and at rates which are mutually affordable (serving the best interests of the saver, the investee and the bank's own shareholders). I would suggest that in the public sector this objective disappears and is replaced with procedures and dogma. There is no motivation to improve, optimise or change - so (for example) the post office bank became moribund.

Railways and roads are interesting examples. They definitely facilitate and stimulate, but unlike banks they require large capital investments to create the infrustructure. There is a case for the initial creation of the system to be a public investment. For roads this is fairly simple - the state builds and maintains roads against basic safety and congestion peerformance indicators. But for rail it doesn't seem to work. The could be a case for public investment in tracks, but the state seems incapable of operating railways in a way that improves, changes and optimises cost-effectiveness.

Some of this is structural - a state-owned railway cannot base its financial planning solely on operatring needs; it must integrate with government spending policies. This inherently prevents any analog of the "profit imperitive" as an optimiser. Whenever the STate runs these things it cannot resist the temptation to use them as tools for political ends, so they become sources of employment before being sources of transportation!

So I would argue that railway operations should be in the private sector. I would put railway construction in there as well, but only because I wouldn't want to see the tax payer fund a railway and then just give it to an operator. There could be a workable solution in which the tracks are built by the state and then leased/rented to the operators, but I haven't seen a workable model for it yet. The private sector operator would be under a number of regulatory obligations to assure minimum levels of service, and there would probably be some mechanism to optimise fare costs. But what we have at the moment clearly isn't it!

Quote:
What would be a better business model for privatised rail?


Very good question. I think something in which a commercial operator dry-leased the track and was granted an exclusive franchise for operations on that track would probably work. The "network rail" as a seperate element from the train operator is the part which is the greatest problem IMHO.

A really radical alternative might be to look at how telecoms is run. Maybe a single organisation (maybe even a public sector one) owns and operates all the track and trains, but companies buy wholesale "tickets" and compete with eachother to retail 5them to travellers. The wholesale customers would be able to impose some cost pressure omn the operator and the travelling customers would do the same to the retail end of the business.

Quote:

I'm no expert in the field, but my impression is that this is comparing apples and oranges. Before it was privatised, British Rail had been suffering from decades of under-investment from both Labour and Tory governments.


I would suggest that was because of the constraints on access to capital imposed by public ownership, coupled to the confused business drivers failing to expose where the essential investment was needed, because all operations were subservient to the treasury and the political needs of the day.

Quote:

After privatisation, the levels of government money that have been pumped into the system are hugely increased. Surely a lot of the improvements on the rail network are down to the increased public funding of the system


Quite possibly, but it needed the business focus driven by the profit imperitive to (a) clearly show the cash injection was essential, and (b) precisely where and how it needed to be spent IMHO.

Quote:

...which would have happened whether or not it had been privatised, as is evidenced by the excellent service encountered on the East Coast Main Line after it was taken back into public ownership (albeit briefly).


I have to say I don't think it would. The money wasn't made a public spending priority for decades before privatisation - I would suggest it was only made available at all because the private sector wouldn't take it on unless it was a sound, sufficiently capitalised, proposition. I would suggest that the ECML was established and re-organisaed by a private-sector business which slightly under-bid it. The public-sector management which then stepped-in continued to operate it as organised by the contractor, but with the required extra cash to make it viable. I suspect (but can't prove) that if it had been left in place for (say) 10 years it would have struggled and decayed because the business drivers weren't there, the treasury would have intervened, and it would not have had free access to commercial capital for further investment when needed.

PDR

 
Alexander Howard
1240194.  Wed Jun 21, 2017 11:27 am Reply with quote

The main argument for renationalising the railways is that British Rail provided an endless supply of jokes for comedians. It was a national embarrassment: the trains filthy, late, broken down and stilled by constant strikes. Still, ministers liked to play with their train sets until John Major finally got rid of the thing.

Trains today are cleaner, better built, safer, more reliable, they serve edible food, and there are twice as many of them. New rail lines are being opened for the first time since the Beeching Axe and every few months comes a new plan to unbeech another line.

Of course passengers complain about late trains and being packed in claustrophobic carriages, about cancellations and the occasional strike, but compared with the state-owned system, it is bliss.

Under British Rail, managers just had to be time-servers, ticking a checklist, paying off the unions and waiting for retirement. Now there are entrepreneurs with an interest in making it better and drawing in more passengers, who would otherwise take to their cars. Beeching was perhaps right that rail was redundant in the face of the motor car, but the rail companies have turned that round.

Every generation someone gets ideas that if the government just did something it could be made better: they are likely to find out why the previous generation abandoned that idea in revulsion.

 
suze
1240195.  Wed Jun 21, 2017 11:38 am Reply with quote

I won't quote PDR's post 1240186 in detail. It's just up there if you haven't read it.

But I agree with it completely. As regular readers will know, my husband has a daughter from his first marriage, and while she never occupied my uterus she's as important to me as if she were my daughter as well.

Had she developed into the sort of woman that certain tabloids love to complain about, the sort of woman who has borne five children by five different men by the age of 25, and who is keen to boast about the benefits she lives on, our relationship would probably have become very strained. I'm not certain whether that caricature of a woman even exists, but Elz is certainly not it.

In fact, she's done pretty well for herself. She got a respectable degree from a respectable university, and now does a respectable job. She found herself a respectable chap with whom to share her life, and they get by reasonably comfortably. They can afford their (non- ostentatious, and pretty much job-essential) cars, they can afford one night out a week, and so on.

They were offered the chance to buy the house they'd been renting, and while they could afford the mortgage payments (they worked out lower than the rent they'd been paying hitherto) they didn't have the deposit.

Between us, Andy and I and the respectable chap's parents could, and so we did. Yes, it was Elz and her husband's good fortune that we were able to help them out in that way; I am well aware that not everyone is so fortunate.

But the sort of parent who takes the attitude that s/he could help out in that way but chooses not to, I'm afraid that I struggle with. I tend to agree with PDR that if you can, then you ought to.

 
barbados
1240197.  Wed Jun 21, 2017 11:53 am Reply with quote

I actually took it exactly as that, a parent's "job" is to provide for their children - and while not each and every one can offer such a contribution, I don't doubt that parents of those that suggested otherwise did exactly the same thing. It's kind of a reflection on society that people think that those who cant afford to fund a house purchase think they haven't done as much as they can to support their children.
Not everyone can afford that - it's called life.

 
PDR
1240199.  Wed Jun 21, 2017 11:57 am Reply with quote

dr.bob wrote:
PDR wrote:
As far as I am concerned once you have kids you have obligations, and essentially the interests of the kids has first call on any spare dosh - after a roof, food and the necessities like clothes and transport to work they become the highest priority.


The problem is that, after a roof, food and the necessities like clothes and transport to work, some people really don't have anything much left, much as I'm sure they would love to be able to help out their kids. I certainly don't remember my parents having any expensive hobbies that they could have given up in order to help fund my adolescent lifestyle.


Last week's desert-island disks castaway was Rick Wakeman (awesome keyboard man - I saved up to take myself to Lausanne to go to his gigs when I was but a teenager, but I digress). If you haven't heard the show I recommend it (it's on radio iPlyaer), but that's by the bye.

His parents were definitely poor, buy young Rick was clearly talented. He subsequently found out that when he was a child his dad spent between a third and half of his take-home wages on Rick's music lessons, and his talent blossomed to get him to the Royal College of Music on a bursery. On DIDs Rick said that when he found out what his parents had sacrificed for him it made him tear-up, but I understand why they did it.

PDR

 
ConorOberstIsGo
1240200.  Wed Jun 21, 2017 11:59 am Reply with quote

Alexander Howard wrote:
Trains today are cleaner, better built, safer, more reliable, they serve edible food, and there are twice as many of them.


Because that never could have happened across Europe where rail is generally nationalised? I'd be upset at whoever took charge and made trains dirtier, less safe, less reliable over 30 years of technological improvement. The free market here rewards European companies that run our railways. I have a question. You don't like how Southern Rail operates. Poor customer service. Unreliable. Who do you go to?

Oh, that's right. In the free market of train traffic they run a monopoly. It's the same with water; I get mine from Severn Trent. Can I switch providers if they are bastards? No. How is that a free market? Are there mom 'n pop train services I don't know about?! There are not. Some things - not all - some things make perfect sense in the hands of the public.

 
PDR
1240201.  Wed Jun 21, 2017 11:59 am Reply with quote

barbados wrote:
It's kind of a reflection on society that people think that those who cant afford to fund a house purchase think they haven't done as much as they can to support their children.


Nobody said that.

PDR

 
barbados
1240204.  Wed Jun 21, 2017 12:10 pm Reply with quote

PDR wrote:
barbados wrote:
It's kind of a reflection on society that people think that those who cant afford to fund a house purchase think they haven't done as much as they can to support their children.


Nobody said that.

PDR

Not in as many words

crissdee wrote:
With respect mate, it's what parents with the luxury of ability do. My parents could never have done it, by dint of the fact that all their income was going into keeping the roof over their own heads.


yorz' wrote:
Re helping out offspring - had I procreated, I would no doubt have followed in my parents' footsteps, ergo not forked out for their driving licences, cars, rents, mortgages, etc. If I thought I needed something, I had to earn the money to get it. The only things I recall 'getting' were swimming and piano lessons - life-saving and cultural education. From what I see around me, kids are spoilt rotten and take lots for granted.


While these may not be of the scale of assisting to buy a house, they are equal. That was all I was saying

 
Jenny
1240218.  Wed Jun 21, 2017 5:36 pm Reply with quote

There is a fine line between helping out (especially when an offspring is in trouble) and enabling. I struggle with this one - not with my daughter, who (along with her husband) is totally self-supporting and has repaid any loans I've given her, and who I've helped in a number of ways when she was a student and qualifying for her current occupation(s). My sons - the one with Aspergers and the one with dyspraxia - are a different proposition, and it's hard to know where struggle because of difficulties becomes struggles because of carelessness. Basically, I bail them out when they need it and the consequences of not bailing them out are bad. Currently my younger son - the dyspraxic one - is dealing with the consequences of a situation where he didn't tell me he needed bailing out, and he went from a situation where I could easily have rescued things to one where I would have to sell property to do so, and at that I draw the line because he and his wife are being helped in a different but very generous way by her parents. My older son doesn't have anybody but me to help him out.

 
suze
1240222.  Wed Jun 21, 2017 6:33 pm Reply with quote

Everything depends on circumstances of course, but here is how husband and I think about it.

He is one year older than me, and he is male. Accordingly, the chances are that I will outlive him - but probably only by a couple of years. What's more, my pension expectation is better than his simply because I'm a teacher and he's self employed.

We have no descendants other than Andy's daughter, who will therefore ultimately inherit the vast majority of our estates. Accordingly, if she needs money she can have it - she's going to get our money one day in any case, and provided that we have enough to get by then she may as well have it when she needs it.

There is an assumption of good faith, of course. If Elz came to us saying that either she or her husband needed urgent and expensive medical treatment, and could she have 10,000 for this, then cet par she'd get it. If she asked us for the same to spend on drugs, hookers, and casinos in Las Vegas, we'd tell her where to get off. (They are adults and they can do those things if they really really want to, but not on our money thank you very much.)

She and her husband are pretty clean-living, and so if she tells us that her urgent need is the former thing then we're going to believe her. If they had a history of the latter things, we might need more convincing.*

But OK, we're a simple case. Where there is more than one descendant to be considered, or where there is a big difference between the two partners' life expectancies, the calculations become less straightforward.


* There is also a special case. Elz and her husband don't have children as yet. swot would get really cross with us if we ever asked them how much sex they're having and when we might expect to be grandparents, and we're careful not to do it. Even so, we are given to understand that it's in the plans when they feel the time is right.

If they produce a son, there will be an expectation from certain quarters that that son will follow his father and grandfather to a particular fee-paying school. Whether it is or is not our job to help to fund that is a matter on which Andy and I are not entirely in agreement.

 
Jenny
1240233.  Wed Jun 21, 2017 8:10 pm Reply with quote

Yes it is more difficult when there are blended families. Woodsman has one daughter and one granddaughter, and I have two sons, a daughter, and three granddaughters (possibly another grandchild to come if all goes to plan). Obviously we think of the grandchildren as 'our' grandchildren, and treat them that way, but in terms of inheritance it won't work like that. Woodsman is seven and a half years older than me, but his genetics are somewhat better than mine and his family tend towards longer lives whereas mine tend to conk out earlier. So it's a total toss-up what will happen there, and we've written our wills (but not signed them yet - eek!) to reflect what seems best for both us and our offspring. In the meantime, if an offspring needs help, he or she gets it.

 
PDR
1240241.  Thu Jun 22, 2017 2:07 am Reply with quote

I didn't intend this to become a moral philosophy of parenting thing, although the contributions have been interesting. My original point was that 1st-born had told us she was intending to move out and would be beggaring herself to rent a flat. We felt/feel that (as we are in a position to do so) it was a parental obligation to help her buy instead of rent because the money she was intending to beggar herself to spend because an investment rather than just being dissipated in rent.

And yes, what Suze said comes into it as well. We have two daughters who will ultimately inherit everything* so if they need wads of capital for things like deposits then even if we DIDN'T feel obligated I think we would still simply see it as a form of inheritance tax planning.

My parents didn't help me directly with wads of cash because I was lucky and circumstances meant I never needed it (I lived in company-provided accommodation in various countries for many years, and my first actual house was paid for in cash from savings and a windfall lump sum), but I always knew that it would be available if needed. My brother and sister both started their working lives in London and both needed help with deposits and mortgages. My parents actually remortgaged their own house to do this.

What I found "interesting" was what happened after my mother died and the three of us first sat down to discuss dealing with the estate. As far as I was concerned the will** said that the estate was divi'd up equally between the three of us, but Sis and Bro both brought along calculations of the support they'd had since adulthood, and wanted that factored in because as far as they were concerned this support had been a draw-down against their inheritance (parents had never said this, and AFAIK they hadn't previously discussed it). So I ended up with the bigger share by quite a long way.

As far as I am concerned this is "family money" not "my money" and it is available if required by Bro and Sis should they need it but fundamentally it's heading for my daughters. As I said before - they will live in a different, less certain world than the one I grew up in, so the best I can do for them is help them get a decent start in it.

PDR

* It's also true that my brother and sister are childless and likely to remain so, and I suspect the bulk of their estates will ultimately head towards my daughters

** actually a complex will-trust-thingy, but the effect was the same

 

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