Privatizations may not always be the solution

By Noralyn O. Dudt

Germany is all precision and punctuality, that is... until you board a Deutsche Bahn train. 

Of all the German institutions,  the Deutsche Bahn may well win first prize in  tearing down the reputable German punctuality. The Germans value punctuality and as a people, they are religiously punctual. And the Deutsche Bahn which is still very useful and a lifeline for so many,  is driving them crazy.

By Deutsche Bahn standards, a train is considered delayed when it reaches its destination at least six minutes later than planned. I remember about 30 years ago when I was visiting a friend in Freiburg, a former student. I was waiting for the train to Bonn and suddenly an announcement came on the loudspeaker. My knowledge of the Deutsche Sprache [German language] was still very elementary then so I couldn't understand exactly what was being announced. I asked another passenger who said dismally, "the train is five minutes late and they apologize."  Five minutes late! That's all? And they are apologizing? That was then. Not now… Deutsche Bahn has announced that its punctuality quota fell 65.2 percent in 2022. I do give them credit for honesty, admitting what needs to be done—that’s the German spirit as well.

German trains are clean, comfortable, reliable ( supposedly)  and fast. Between the downtown areas of most German cities, the travel time by train is as fast or faster than the travel time by plane when you factor in the time it takes to get to and from the airport. The convenience is unsurpassed. People don't have to live in the city to work there. They can easily commute on the regional trains which I found to be much more reliable than the ICE (Intercity Express), avoiding the headaches and stress caused by  heavy traffic.

So what happened? The system was privatized and as with so many privatizations, the tracks are all owned by a single corporate body, and are managed separately from the rest of the system  resulting in  underinvestment in maintenance and building new infrastructure. The government cannot sell an entity carrying the amount of debt needed to keep the infrastructure top notch. When Japan privatized its system many years ago, it bucked the trend by doing it regionally instead of nationally and the Japanese trains are still on time. [This will be discussed in the next article]

Likewise, the State of Maryland having the highest median household income whose population is highly educated, and  home to many government agencies and research labs, looks like a place of affluence... until one goes several years back when massive black-outs crippled the region and made it look like a third world entity. As with the Deutsche Bahn,  the State of Maryland allowed its electric utility PEPCO ( Potomac Electric Company) to  "privatize" and opened it to investors. PEPCO then changed its focus—instead of continuing its commitment to maintaining the wires and the poles, it used its revenues to "sweeten the pot" for its investors  The lack of maintenance such as hardening (strengthening) the poles and wires  resulted in black-outs—black-outs that were unnecessary and could have been easily avoided had the wires been hardened. A little whiff of gentle breeze easily caused a black-out... black-outs that, in many instances lasted days during storms. People were enraged. Yes we all understood what storms could do, but there have been worst storms in the past and there were no black-outs. People's rage prompted the government to act quickly; it declared that PEPCO would be fined US$25,000.00  for every day that power was not restored. PEPCO had to scramble but with such long neglect, it couldn't restore power for several days and ended up paying US$1,000,000.  The  heavy penalty prompted PEPCO to set about  hardening the wires and poles, and trimming the trees that were hanging over them. The folks we sent to represent us in  government acted. PEPCO learned a lesson but will other companies do?

When Australia privatized utilities, power stations got sold very quickly.

But poles and wires were stuck in public hands, needing subsidy from the public purse. The result? Expense, unreliable transmission and  worse service. No need to search for a  cultural explanation,  here. The answer is much more political than economic.

For all the old cliches that privatization is the answer to everything that is wrong with a government entity, just look at what happened to the Deutsche Bahn and to the utility companies, and be warned.

Privatizing government agencies  may not be the way to go. Privatizing water and sewer, toll roads and bridges, electricity and others that relate to daily life may seem at first to be the most sensible solution. But when investors are in the "picture,"  profits naturally  come first. There's nothing wrong with profits of course.  But when people's daily lives are affected, those whom we elect to serve us in government need to take note. Water and sewer, electricity, roads and bridges should always be under the proprietorship  and administration of those in whom we put our trust... those whose job is to see that the welfare of their citizens come first.

 

Noralyn Onto Dudt visits Germany often and  in her recent visit, experienced the frustration that passengers have been talking about. As a resident of the Washington DC area, she knows firsthand the devastating effects of power outages: in the dead of winter when the heater (powered by electricity) can't be turned on, and in the heat of summer when the AC can't be turned on;  cell phones can't be charged, and landlines ( push button phones) don't work either.