Privatization of British railways
Privatization of British railways happened during the early
1990s and was fully completed by
1993. It was done as a part of
EU-suggested policies. However, Britain chose to privatize their railways in a different, more complex system than those that other EU countries chose to adopt.
The left-wingers have criticized the privatization as
neoliberal fuss, raising ticket prices, lessening quality and most important of all, increasing the amount of accidents. The right-wingers have counterargumented that the privatization was not done properly, not following the usual rules. The only thing everyone agrees is, that the whole project was a disaster.
Against privatization
The free market enthusiasts have criticized the facts that Railtrack, the company that was left with taking care of the railways, was heavily subsidized and regulated. It was hoped that in the end the financing could have been fully organized by private parties (which could have been possible), but the government also wanted to expand and renew the tracks even when it was not financially viable and yet skim all the profits, effectively scaring all private investors away. The problem escalated with the environmental subsidies package that tore Railtrack to the opposite direction. The funding was very lacking by then and the bureaucratic culture of the old government railroad managers couldn't adapt to the free market.
The companies taking care of the actual train traffic were split into mindlessly small companies and they were regulated and prohibited from mergering, even when it would have been more optimal. The privatizers tried to make the markets more perfect than they naturally were and they misjudged the ideal company size.
The prices and timetables were heavily regulated, making the companies only tools of the government. The subsidization and regulation was of course done in all good will. Naturally the government was afraid of windfall profits often associated with privatization.
The privatization also had a secondary purpose, the ecologically important increase in rail traffic. The privatization plan thus also included a complicated and inefficient perk system that tried to get the private investors to feed money to the railway companies even though the railway business had overexpanded during the government run days. The result was a price bubble, causing overpricing of the privatized routes and equipment as well as bankrupts.
Also an important thing to note is, that the railways weren't privatized until they were in very bad shape and already in need of renewal. The accident risks could be controlled only by prolonged government intervention. When the free markets finally forced the railtraffic companies to shape, the inefficiencies started materializing as the trains being late, and finally as accidents. Today, when measured by average timetable-keeping, accidents per kilometer or average age of train equipment, British railways are in better shape than they ever were during their low period, the 20 years before the privatization.
The political decision makers proved their policies much more short-lived than rational privatization would have required. Privatization requires belief in the free markets by the government, both in good and bad, even when political popularity is at risk. The Labour government elected shortly after the privatization returned the railway business back into semi-governmental control, just as had been expected, scaring private investors away. Investing into the railways wouldn't have been a long-time investment in rail traffic, it would more have resembled speculation with politics.
For privatization
Other countries
Privatization of the railroad traffic has generally been seen as very successful in Germany and Finland. New Zealand, on the other hand, is another example of misled privatization.
