Thursday, 19 July 2012

Speccie on G4S, private monopolies & crony capitalism..

What events of the past few days confirm is that public-private 'partnerships', where the government cosies up to a favoured contractor, offer none of the benefits of the free market. It has been shown over and over again, from PFI deals to train operating companies, that when private companies are awarded monopolies they exploit them ruthlessly. They raise prices, lower the quality of the service to as low a level as they think they can justify and demand bailouts if things go wrong. They know they can get away with it because the ultimate consumer - the public - has no choice whatsoever.

The contracting out of public services has led to the creation of a pseudo-market dominated by a tiny number of large companies who seem to bag nearly all the contracts on terms which seem far more generous to the contractor than those in use between private firms. G4S was just about the only security company large enough to bid for the Olympic security contract, and it shows.

Contracts of this kind, therefore, bear no relation to a free market where large numbers of buyers and sellers settle prices and determine quality through competition.

This is crony capitalism, where negotiations between a single buyer and supplier could be coloured by friendships, political donations and Wimbledon tickets..