From: sp@osf.org (Simon Patience)
Subject: Re: Free Trade (was Re: Currency Problems)
Organization: Open Software Foundation
Date: Thu, 1 Oct 1992 11:15:40 GMT

In article <JIM.92Oct1105400@hunter.cs.strath.ac.uk>, jim@cs.strath.ac.uk (Jim Reid) writes:
> British Coal produces the cheapest deep mined coal in Western Europe.
> It's too simplistic to just compare the cost of domestic coal with
> imports. 

Comparing costs of deep mined coal vs deep mined coal is even more
simplistic.

> This ignores the impact on other economic factors - balance
> of payments, GDP, unemployment, and so on - as well as environmental
> considerations and the strategic issue of a stable, long-term energy
> source. It is insane for an island built on coal to be importing the
> stuff.

Not necessarily. Having a lot of something doesn't necessarily mean that
you can get at it cost effectively.

> Another point is that the biggest power stations are right next to
> British Coal's mines. The coal comes out the ground and straight into
> the power station. With imports, millions of tons of coal will have to
> be shipped by rail or road to these power stations.

This is a good point. One that market economics should decide rather than
governments. If the generating company decides that it is cheaper to buy
its coal locally and save on transport costs then it should be free to do
so, the reverse is also true.

>    Real free trade normally requires that subsidies don't exist, at least for
>    good passing within the free trade area. My big complaint with the EC is
>    that it allows (actually condones) governments to subsidise industries
>    left, right and centre thus completely distorting trade at the expense of
>    the consumer normally.
> 
> This isn't so, save for the lunacy of the Common Agricultural Policy.
> The EC forced British Aerospace to pay back a #50M "sweetener" that
> the government added when they sold off the then nationalised British
> Leyland car company to BAe. The EC decided that this #50M was a
> government subsidy and broke EC law and/or competition policy. This
> has not been an isolated example.

True. Now tell me about the telecoms industry and the supposed
introduction of competition in 1993. I think the examples that you cite
are the exceptions rather than the rule. The EC competition commision is
pretty small and so only picks the biggest flouters and even then it takes
ages to get a resolution which burns up all its resources. In the meantime,
Credit Lyonais get a few more billion punmped into its liquidity by the
government which it then 'lends' to nationalised industry.

>    I have come to conclusion that it is extremely cost inefficient to leave
>    something as important as power generation in government hands.
> 
> Not necessarily - it all depends on how the government manages the
> job. Knee-jerk dogmas like "public sector bad, private sector
> good" - or vice versa - are invariably wrong. 

However the public sector does not have a good record to date.

> The world's strongest
> economies have a mixture of both and have governments that can plan
> for the future instead of how to win the next election.

No argument here although I am not sure how much the state owned
industries have contributed to this better than they would being in
private hands. Unfortunately the UK seems to have 
neither the political parties nor the electorate that can see beyond 
the ballot box.

> Current (excuse the pun) trends in electricity production in the UK
> lead me to conclude that putting the industry in private hands is not
> a good idea either. Long-term national interests are being ignored for
> the sake of short-term profits.

As I said before, I certainly would not subscribe the the way the
government has privatized the nationalised industries. A private monopoly
is no better and probably worse than a state owned one.

Simon.

-- 
  Simon Patience
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