When consumers start to use electricity smarter and these electricity efficiencies start to affect the companies’ profits, what will they do, they will demand another increase in prices. Competition in the electricity supply is nothing more than a sham to satisfy bureaucrats in Europe. The companies only satisfy a paper exercise in creating the illusion there is competition between them. In reality they all buy their core product (electricity) from the only manufacturer i.e. the ESB.
As a fully owned state company the ESB made good profits and as such could keep price increases to a minimum. The energy regulator had to tell them to increase their prices because the intending competitors could not make a profit selling electricity at the same price as the ESB, hence the ESB had to increase it’s price to allow competition into the market. There is no way consumers’ could benefit in any way from this situation.
The logical notion of the EU insisting that competition exists in every country and in every industry is based on the notion that ultimately consumers benefit from real competition. Any economics expert will tell you that competition is good for companies and consumers. It drives investment in innovation and efficiencies, encourages economies of scale in industries that eventually benefit consumers and punishes companies that are lazy by forcing them out of business.
As a socialist I differ from most left thinkers in believing that globalisation could be a good thing, (I believe we can take the best of capitalism and the best of socialism and design a system that will serve people efficiently and of a high quality). In essence this is being shown in the telecommunications industry today. Companies like Telefonica and Vodafone are investing outside their home bases to provide telecommunications services. The upshot of their existence is that new means of communicating have been invented, i.e. wireless broadband services that allows voice communications over the same system. It appears as consumers we are resisting using these technologies but they do exist and they can be much cheaper than the services we currently pay for. Almost every person in Europe has a personal mobile phone and smarter use of this would allow for the demise of landline based phone systems.
How did this happen? The answer is quite simple really. The big players Vodafone and Telefonica etc are so large that nobody could afford to take them on and so a new technology was invented to take them on. Why has the market worked now and not in the past is also answered simply. EU regulations were passed opening the telecommunications industry to open competition. This allowed entrepreneurs and investors to take over the monopolies. This resulted in a very real change in attitude by these companies which now had to become customer orientated. In the main the change brought rewards to almost everybody.
The monopolies only existed because individual governments wanted to control telecommunications for its own reasons (usually in the name of national security), but in reality using the state owned monopoly as an informal source of taxes for the exchequer. When the monopolies were broken, the market came alive and we all now use phone communications in a very different and much cheaper way. When the really big companies have satisfied our demands they will then invest in developing countries. As happened in Ireland where the mobile phone industry almost died until the companies started to give consumers free handsets and texting was invented and made using the handsets affordable, (prior to texting making an actual call was very expensive). These companies will then have to create the same situation in developing markets where the consumers can afford to use the new systems. This will benefit people in developing countries by ensuring that private industry will have to invest in various ways to ensure their customers can afford to use the services. This means they have to make sure people in these countries have access to jobs that allow them to earn money to pay for the services. I know phones are not a priority for people that need access to water and food etc but this just an example of how markets can benefit people. On the other hand mobile phones would allow people to communicate with the outside world when rogue governments do things that they shouldn’t.
Globalisation would allow lesser developed countries to acquire skills to provide goods and services that they are efficient at. In the west we should not be afraid to lose these jobs to those countries, we should use it as an opportunity to be retrained and re-educated to provide the higher value products and services. Our governments should ensure economic processes exist to allow this to happen on an ongoing basis and should also never decrease the standard of living of a person that decides to retrain or and re-educate themselves. The financial mechanisms to allow this are for another day.
Back to the suppliers of energy.
Those companies that actually make electricity should be forced to supply at a rate commensurate with their market size and density. When this results in a monopoly the price should be tightly regulated to ensure these companies do not abuse their positions. The market should be opened only to other companies that will actually make electricity (not just distribute the monopolies electricity). The same thing applies to gas companies. The current companies should be de-licenced unless they can sell their own gas or electricity. In Ireland’s case we should take the ESB back into public ownership and allow entrepreneurs and investors to explore ways to compete to supply alternative sources of energy.
I’m not saying all big companies are good, but then again I’m not saying they are all bad, I am saying that a lot of big companies are good employers and providers of goods and services. Big companies can invest newer more efficient ways of supplying goods and services and by virtue of their economy of scale allows smaller more efficient ways to exist, which in turn provides the bigger companies with aggressive competition.
One philosophical ideal that should not be forgotten by those of us in the so called developed west, the first world countries should remember, our constant demands for cheaper goods and services can mean people in other less developed countries can be exploited to satisfy our demands. That is not something I agree with, I would like every worker to have a fair days pay for a fair days work. Also vital public services should only be provided by private industry when the state systems are so inefficient that they only exist to keep public or civil servants in a job. Civil and public servants should always provide high quality efficient services to the public. They should not be allowed to permit governments to protect them for political reasons and the trade unions should buy into a system that allows for constant change and retraining for civil and public servants to serve the public.
Demarcation is a tool that should be demolished by trade unions as a means to protect inefficiencies. This also means managers can not abuse worker flexibility and they should be measured in the same productivity rates that production workers would be measured with.
All of the above is predicated on very strong regulations in areas of anti cartels etc. No company should be allowed to dominate an industry so as to create a private monopoly. No company should be so dominant, that, its demise could, adversely affect people. Today’s situation in the USA where two extremely large mortgage providers have in essence, been bailed out by the US taxpayers should not be permitted. These companies are so large, they are, in effect adversely affecting global financial markets. Banking systems that fail should result in the managers of that failure being imprisoned. Banks should not be allowed to increase interest rates in the interest of shareholders. If there is adequate competition in the banking sector and an easy way for people to move there accounts, there will always be shareholders that are prepared to take a smaller percentage rate and hope they can increase the number of customers they serve. In essence what we have today is a legal cartel dressed up to look like competition. The Irish banking system is currently licensed by the state, like all the other European states. However the licensing system (while in theory allows anybody to enter the market) in reality only allows those with access to vast sums of money to become licensed, therefore its almost impossible for a small player to enter the market to provide the much needed hungry competition required in a modern open market economy. Ultimately if large companies go to the wall because of bad management etc, then so be it, they should never be bailed out under any circumstances, the market should decide which companies survive and which companies don’t survive.
As I said earlier vital public services should be provided by the state only when the market can’t or won’t provide such services. There should never be a conflict to people regarding vital public services. For instance today’s health services providers in Ireland are currently served by both public and private concerns. The duplicity and overlaps are so confusing for people that both sides are involved in a propaganda war. This situation only exists because the relationship between the two has been maintained by successive governments. The easiest solution to this to separate the two systems completely. The services should be regulated to provide the best quality health care that is available allowing for technological advances etc, after that, they should both compete for the consumer. Then people with enough money that want to opt for private treatment can do so and those that have to opt for the public system can do so (or borrow money etc). On the other hand if the quality of service is the same in both systems then those with money may also opt for the public system.
I firmly believe that where private industry thinks it can make money it will be innovative enough to find a way to do so. When restrictive government rules are applied to the provision of goods and services, those who want to operate a private service with a public subsidy must be ignored.
An example of this is in the area of public bus transport provision. The private operators want to access public bus routes. However as private companies they think they should only access the most profitable routes. Okay from their perspective that’s not unreasonable, however the public owns and maintains the roads. My solution to this is, we allow them to pick the routes they want to use, and then we regulate the price and quality of the service with serious consequences for failing. These routes will be open to all companies that want to work them, no restrictions on the number of service providers, and voila now we have competition and the consumer availing of a high quality bus service at a reasonable price. Then the public system can serve the routes that will not make money and this will be subsidised by the state. Or, maybe they could compete against the public service on these routes and let the consumer decide which service they want to use. Will the private operators agree to this, no they won’t because what they really want is to replace the public subsidised system with a private system subsidised from the public purse. What is interesting about private bus operators is this, where there are no public services or limited provision of a public service, these same bus operators have been very innovative providing services and ultimately making money.
In Europe today we need to create a situation where every citizen can enjoy the same standards of living all over Europe. The equality we need is not only required for citizens it is also needed by companies to ensure more or less the same operating costs apply in EU member states. Higher or lower taxes may ultimately be the companies deciding factor as to where the company is actually located, but in essence the cost of doing business should be the same in all EU states. We can see today where factories in Ireland are closing down and relocating to other EU member states, not because they are losing money or customers, it’s because they can pay lower wages in these countries, and thus when the final calculations are made they can pay higher taxes because they have higher profits because the salaries bill is reduced very significantly. Therefore it’s the ultimate equality in the cost of living for ordinary workers that are benefitting people in other EU states, while it’s making Irish people unemployed which will ultimately reduce their standards of living while their European counterparts enjoy an enhanced standard of living. This is an inequality that must addressed immediately by the EU. You could say (and some will) this is exploitation, maybe it is, but in my mind its exploitation of the current political and economic systems that today’s businesses exist in. I suspect this issue played a big part in the Lisbon referendum and will play a big issue in the development of the EU project as a whole.
It's been a month.
15 years ago
