Thursday, November 3, 2011

Privatization and Electric Outages

A person holding a hand saw is cutting the branch he is stilling on. The branch snaps and he falls down. ‘Bad luck’ he mutters to himself.

A great deal of our misfortune we blame on luck. Sometimes it is, but often it’s lack of foresight. ‘How could we have known,’ we mutter while clearing the bruises, only to ignore the next warning signals. We blame luck as individuals; we blame it as groups; as companies and as a nation.

It’s bad luck that this year my town in Connecticut has suffered from total of 14 days without electricity. We still sit in the dark – 4 days after the snow fall – and it is likely to be two more days before electricity is restored.

We love it. We heat our house with wood. We cool our fridge with snow; we bring our flushing water from the nearby pond; we use head-torches for light, and we play board games and tell stories around the fire. In a computer age, outage days are nearly the only opportunity we’ve had for family bonding. I’m sure that the environment is happy too. This is pastoral, but this is not the way one of the most (self-proclaimed) advanced states in the world (and clearly one of the most expensive) should run.

Bad luck, they say.

I would agree that Irene, the 6 hours snow last Saturday, and the few other short occasion this year were all irregular events. But none of them was truly extreme. Only the outcome was. Canada, North Europe, Japan all suffer regularly from bigger storms. Yet, a week without electricity is unheard of in most of the developed world. The town elders say that until recently it was unheard of even here.

So is it bad luck, or have we cut the branch we were sitting on?

Having a reliable infrastructure, such as power, requires large investment, with long horizons for returns. This is unattractive for private companies. So they do not invest. Instead, they are reaping the benefits of operating a state-built infrastructure, and running it to the ground. This was to be expected when the push for privatization took place. But easy money blinded everyone. The signs of deterioration were slow to appear, but just like old age they were there all along.

Privatization is the heart of capitalism. But there are two factors that make capitalism work: competition, and good return on investment. These conditions are not fulfilled when infrastructure is involved. But for those who do not see privatization as a strategy but as a religion, logic makes no difference.

Four days later, I am still sitting in the dark, and our infrastructure keeps deterioration.

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