[OPE] Railways

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Sat Jun 07 2008 - 17:32:44 EDT


The railways do not require such large capital expenditures as you might think, by the fact that they are already there. If large capital expenditures are required, they could be obtained in all kinds of ways by the state or by the private sector. I was curious (not being an expert on railroad economics) to find out some more about the German case, in part because it was so badly reported in the press, and thought I would post my provisional findings. Point is that the larger part of the funds which the German state obtains from issuing shares in the railways will not be invested in the railways, and, actually, the amount of railtrack and employees has been reduced as I noted. 

In reality, although Deutsche Bahn is government owned, it fairly much operates as an ordinary business concern anyway, and the controversy really centres on who should be able to extract profit income from the business - the state or the rentier class (since the rentier class buys the bulk of the shares). I am not sure about whether the figures I saw on the prospectus fees were exactly correct, but they're supposed to be around 1.75% of the issue or something like that. Rail networks are much more important in Europe than in the US - in the US, much more freight is trucked. In terms of energy use, there is not so much difference between railroading and trucking, but no doubt railroading causes less pollution. The higher the price of oil, the more cost-competitive railways are likely become vis-a-vis trucking. 

One of the motives for the privatisation of state enterprises was, that private initiative would ensure that those enterprises would operate more efficiently, better and more profitably, with more investment. In some cases that is no doubt true, but in many cases it is not. The reason is that today's capitalism is not dominated by the entrepreneur, but by the rentier class, who owns the bulk of capital funds, and directs those funds via investment companies and financial institutions searching out the best deals internationally. 

Somebody has to do the work, but the idea is to do as little work as possible for as much money as possible, and subcontract out all those activities which are less profitable and take more work to somebody else. That alone already starts to rip up the moral fabric of society, since it becomes a question of extracting income, rather than a care for work done and providing real service to society.  The division of labour is constantly redrawn with more subcontracts and outsourcing, but in the process, the gap between those who own a business, those who effectively control it, and those who actually take direct responsibility for the work widens. A critic might say, it is a system for organized irresponsibility, in which to get anything done requires all sorts of complex negotiations between different interests. This process is mimicked in the state bureaucracy, something which I witness every working day.

Unsurprisingly, all the leading-edge management training institutions today are totally focused on "how you can get groups to co-operate" (organisational cultures) to achieve certain goals, in a certain sense it becomes a "science for the manipulation of people". As a corrollary, participation in business and production becomes directly political since doing anything at all at work requires the mediation of many different interests.

In turn, however, this undermines the whole notion of "private initiative", because the entrepreneur is often no longer a truly independent operator - financially and otherwise - anymore, but effectively an employee of a rentier or a bank, caught in a web of numerous different stakeholders who have a "finger in the pie". Simply put, the entrepreneur or his employees produces a product, from which various other people take their cut. In turn, those who control a resource or control a production process, try to extract economic rents from it, in one form or another.

Thus, changes in property forms often only mean that a different set of owners can extract income from an activity, not that you get better production at a lower cost, and the tax-paying public confronts more costs than they had before, simply because there are now more intermediaries than there were before, not less, and these intermediaries imply less accountability, not more. Obviously, you cannot solve profound organisational problems simply by means of changing property relations. 

In this regard, Jan Toporowski remarks significantly:

"When the entrepreneur becomes the serf of the financier, and directs capital which is no longer his own, his inclination to expand the productive capacity in his charge comes into direct conflict with the prudent husbandry of the capital. In this way, the invigoration of finance gives rise to the enervation of industry." (The economics of the financial markets and the 1987 crash, p. 149).

That is one of the central problems of capitalism in our time - the paradox is that, while capital markets have ballooned, the total level of productive fixed investment remains rather stagnant. This is a result of a combination of causes to which I have referred before on OPE-L, but Toporowski highlights specifically the structure of modern capital finance. Large and efficient capital markets were supposed to boost economic growth, but in fact on the whole they do not, except in some newly industrialising countries. In reality, US manufacturing for example has declined in scope, rather than increased. What capital markets boost, is the trade in already existing assets of all kinds.

Nothing would be easier for a socialist than to harp about "democratic decisionmaking" as a cure for the social malaise, but in reality democratic decisionmaking might create an even more convoluted and less efficient management process, in which the majority oppresses the minority, since it does not address the structure of property relations and entitlements to assets, goods and services. To put it bluntly, you may just get a whole lot more people meddling in other people's business, rather than a society in which people are better equipped to take responsibility for their own lives and each other.

The real advantage a socialist economy has, is that in principle it is not limited to any particular property form, and therefore can flexibly adjust property forms to promote social goals, based on a clear morality about what is ultimately good for human beings. Nowadays there is no particular mystery about that. A socialist economy can indeed liberate the entrepreneur, by creating an entrepreneurial sector which allows the entrepreneur to do his own thing, within certain broad limits compatible with what is beneficial for society as a whole. I think this will happen in Cuba also, once they ditch certain Marxist-Leninist dogmas and focus more on the quality of people's lives, drop the fetish of state property, and deepen their humanistic understanding which is on the whole pretty good. Markets per se are not evil, as the Bolsheviks originally thought. They are evil only, if they obstruct human development and enrich a few, while impoverishing the many. You obviously cannot force anybody to be a socialist, but if people can see the benefits of a socialist policy for human relations, they will prefer socialist rule to the parasitic extraction of income without regard for their fellow human beings. "Regard for fellow human beings" is of course a topic full of ambiguities and niceties these days, but most people will prefer things like a good health system, a good education system, and acceptable working conditions and retirement provision to any "philosophy" world-refomers might dream up about it.



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