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Temporarily Nationalized Company

Buy it, change it, float it again
 
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Rather than taking on the worrisome task of seizing and maintaining businesses, just temporarily buy them and amend the articles of incorporation to prevent excessive profit.

The law can be changed as required so that the new articles of incorporation are watertight to ensure that the price of the service offered by a business is reduced rather than make a profit exceeding 1% above inflation.

Overseers like OfCom, would ensure management are not throwing crazy money at side projects to get rid of excess profits. All violations of the articles would result in personal penalties for management staff.

When all that is set in motion, sell the shares back on the open market.

Admittedly this type of business (not far from a charity) is not suitable for all sectors, but I'd agree with many left leaning types that things like the internet are now utilities. I'd be interested to see what aspects of a business become viable again once the axiom of "must make a disgusting profit" is removed.

(Then allow people on benefits to submit their utilities bills to the local council).

bigsleep, Nov 18 2019

Amazon's best and first customer https://stratechery...azons-new-customer/
[calum, Nov 20 2019]

Comparison of national healthcare systems https://www.nuffiel...sclaimer-update.pdf
...using "27 Health Care Quality Indicators (HCQI) to explore care in four sectors – primary care, acute (hospital) care, cancer care and mental health – across 15 countries" [Frankx, Nov 22 2019]

[link]






       is excessive profit like military intelligence?
theircompetitor, Nov 18 2019
  

       //is excessive profit like military intelligence?//   

       Well clearly some businesses have way too much power, and that is often derived from monopolies or tax incentives. Rather than open doors to abuses by big business, its time for some common sense laws to give the power back to the working class, even if its just terminating ridiculous tax cuts that enable undeserved profit.   

       There's also the case of business peer pressure where companies in the same sector all chase a new market (like 5G) even if its not in the best interest of consumers only wanting 4G. You could say 4G is a utility and 5G is a luxury. The last thing you want is for 4G users to fund 5G consumers and 5G investors. In that sense 5G profit could be excessive when and if it makes a profit.
bigsleep, Nov 18 2019
  

       there are existing laws to break up monopolies.   

       Monopolies can in no way be undeserved unless -- as in a power utility -- they are licensed by the government. In that sense, antitrust laws are purely an exercise of power by the government.
theircompetitor, Nov 18 2019
  

       .. which is itself an unregulated* and unaccountable monopoly.   

       Unhealthy taint of socialism [-]   

       *except by entropy ...
8th of 7, Nov 19 2019
  

       Who is going to buy shares in a company guaranteed not to significantly profit? Bonds would pay more and be safer.
Voice, Nov 19 2019
  

       I'm curious about the definition of a 1% profit.   

       If the capital sum on which it is calculated is independent of market capitalization, then market capitalization will simply fall until an equilibrium is reached at which the return from a shareholder's point of view is competitive with that from other investments (and probably a good deal more than 1%).   

       If not, then a death spiral is likely to result, in which any fall in market capitalization in one year reduces further the maximum profit to be allowed the next year.   

       Either way, the intent of the idea would be defeated, wouldn't it?
pertinax, Nov 20 2019
  

       Its not 1% profit, its 1% above inflation.
pocmloc, Nov 20 2019
  

       I don't think that the talk of monopolies is all that helpful. The issue is dominant positions, rather than just monopolies. It is not against the rules (of the EU) for an undertaking to be in a dominant position in a market, but it is against the rules to abuse that dominant position. Such abuse could include charging unreasonably high prices (this is not the same as making excessive profits but is correlated with it).   

       I think bigsleep's idea might work as a (heavy, temporary) sanction for abuse of a dominant position. Manifesto proposals to cap prices charged by energy companies are pretty much a flavour of this, though the assessment of a dominant position is political rather than analytical. The practical issue I have is that although profitability is forecastable, it is not predictable, so the remedy may be that the subject of the sanction is not allowed to distribute more than 1% of its profits to shareholders with the rest being directed towards better ends (e.g. charitable purposes). In terms of timing, this would be better as a retrospective punishment for wrong doing after profit was accumulated but before it was distributed to the shareholders.
calum, Nov 20 2019
  

       I must confess (this can't be a surprise) that I'm not a big fan of antitrust law in the first place, as I'm generally not a fan of government interference in markets. Though anecdotally some of today's tech leaders were helped when Microsoft was restrained, I'm hard pressed to see how exchanging one dominant browser for another did anything but slow down the evolution of a robust web UI toolkit for more than a decade.   

       Arguably the biggest innovation -- the cloud -- likely would have happened anyway, virtualization was being worked on back in the 90s -- but the cloud adoption was accelerated PRECISELY because Amazon's dominance in book selling retail and shareholder speculation allowed Amazon to invest -- under the harshest antitrust models which seek to limit a company's ability to leverage dominance in one market to lead another, it couldn't have happened -- which would actually represent harm to thousands, probably millions of startups and companies whose costs were able to be impacted by eliminating data centers.   

       Government sanctioned companies like regulated utilities are often horribly mismanaged because in fact they do not have competition. As Peter Thiel has famously observed, we have the least advances per public&investment dollar spent in the most regulated industries.   

       And as to consumer harm, I think a real point can be made that whether or not there's real harm, there's real fear, and that fear comes mostly from governments fearing their own irrelevance and impotence, as is the case with Facebook driven election propaganda or cryptocurrency efforts.   

       Regardless, existing antitrust law already has severe remedies including breakup and fines.   

       But even in the most "woke" companies in Silicon Valley, the notion that they could wake up one day and be government employees (incidentally the average compensation of a Facebook employee is 3X a US Govt. employee) -- is a dystopian fantasy.   

       The nationalization of bankrupt companies like banks and insurance companies with the government acting as a private equity holder -- did almost occur after the financial crisis, and in fact while the focus of post crisis regulation was not on minimizing profit -- thank god -- it was on heavy re- regulation, and did provide a restricted compensation regime, for instance.
theircompetitor, Nov 20 2019
  

       I must say, their, I do enjoy hearing your perspective on things. It is very bracing to read clearly expressed statements which are so perfectly at odds with the unspoken assumptions I share with my professional and social peers. That you can do this so consistently is a wonder to me and a real boon in that it allows me to test those assumptions in ways I would not have otherwise considered.
calum, Nov 20 2019
  

       //a profit exceeding 1% above inflation//   

       I% of what? the starting capital per annum? or outgoings & expenses?   

       Do they get to write up the initial capital & seed money as an expense (a debt to be paid back) for the purpose of tax or not?   

       I'll assume you mean the second option, the minimum average profit most businesses expect or aim for (& the one I'd use to try & value a company with for which I only had turnover & profit information with few or no assets, if you had an existing private business going public for instance, to work out what they might sell the initial shares offering at) is 10% per annum.   

       So try & scratch it down to below that & no one will buy shares of any company listed in your country, they (including your own nationals) will go elsewhere to invest.   

       Also, what about reinvestment? !% profit & no one will ever be able to reinvest or expand, even just replacing old equipment could also become difficult if you didn't have a competent accountant writing off adequate (& correct) amounts for wear & tear of your kit each year.   

       And then there's 'hollywood accounting', you'll probably end up with a lot of holding & parent companies charging 'management fees' etc to bring down the alleged profit to below 1% or wipe it out completely, many foreign registered & offshore, any principles getting big 'management advice & service fees' will be (registered as at least) resident abroad so you can't catch them with income tax.   

       Hammer something as stringent as this home & I'm sure you'll see an explosion in tax avoidance & evasion beyond anything you've ever dreamed of even in the face of the most draconian criminal laws possible brought in to prevent it.   

       How are you going to deal with small businesses that are really just one self employed individual or a handful of partners that pay large wages to their 'staff'' that swallow all the companies profits?   

       All that aside you have to allow businesses enough profit for some financial flexibility or they won't be able to invest in new ideas, equipment, staff or premises, meet new challenges or survive even a single 'bad year', they'll just all go bust..   

       If (as a government) you were going to do this going below 10% is a very bad idea indeed, I'd suggest 14% at least to give them 'some' elbow room.   

       I don't think you've thought this through properly in a lot of areas here.
Skewed, Nov 20 2019
  

       //I don't think you've thought this through properly in a lot of areas here//   

       Definitely not. I've watched documentaries about money and still not much the wiser. But I think its easy to see that companies fall into two camps-   

       1. Those running a business to generate dividends and play the tulip game.   

       2. Those providing a value-for-money product or service and plan on profit sufficient for a sensible level of expansion.   

       Where a business is currently run as a 1) such as the UK rail network, the idea was to forcibly and irrevocably turn it into a 2). 2)'s aren't as exciting but are a closer fit to running a utility.   

       I would argue that 2) offers greater value for money and job stability as its profitability will be less at the whim of the share price.   

       Apologies though for maybe giving Corbyn ideas.
bigsleep, Nov 20 2019
  

       Well the desire behind the idea (to convert 1 to 2) may be laudable, but I'm sure that the 1% figure is a bad idea.
Skewed, Nov 20 2019
  

       One of the constraints you have to consider with any financial legislation like that of your idea is the interplay of share price & dividends.   

       Where do new startups get their money, most often from investors, & if the return isn't going to be any higher than a good bank rate why would they risk it on a new venture rather than leaving it in the bank? they wouldn't.   

       Dividends have to be a good chunk above bank rates or people (rich people, not so rich people with a few hundred or a thousand or two quid to spare, not rich at all peoples pension funds .. etc) just won't buy shares (of either established companies or new startups).   

       They'll just leave it in the bank instead.   

       & that's liable to end in a stagnating & slowly collapsing economy with no new start ups & no new jobs.   

       Banks won't be able to save things by lending to businesses (new or old ones) at just 1% over inflation either (the maximum any business could afford to pay if their profits are constrained the way your idea suggests) because they have to pay interest to their account holders (if they don't people will just keep it under the mattress), cover their own overheads, pay wages & (unless a mutual) have shareholders who expect dividends.   

       //people will just keep it under the mattress// .. that will happen anyway, because they'll have far fewer they can lend to at rates that let them pay interest on accounts .. no one to lend to .. & no one keeping their money with them (so nothing to lend) .. most banks will go out of business.   

       On ballance, I think a cap of 1% (over inflation or not) on company profits would completely destroy any economy that tried to impose it ..
Skewed, Nov 20 2019
  

       // I must say, their, I do enjoy hearing your perspective on things// aw shucks, thx calum.   

       [bigsleep] the tulip thing is a bit unfair here. Microsoft, Apple, actually all the tech leaders -- even Amazon -- have certainly demonstrated their value beyond speculative appreciation of their stock
theircompetitor, Nov 20 2019
  

       //Microsoft, Apple//   

       Did he mention any names? no, so what makes you think he was thinking of them? nothing huh .. null point then.
Skewed, Nov 20 2019
  

       well there's an appearance of an assertion that all stock markets are speculation and nothing else.
theircompetitor, Nov 20 2019
  

       //there's an appearance of an assertion that all stock markets are speculation and nothing else//   

       No there isn't, in my words / to paraphrase : he said that in his view some companies where basically ponzi's & some where good solid enterprises that add value to society & that the desire behind the idea was to convert the ponzi's into the other type.   

       Presumably both types are traded on the stock markets, certainly he's said nothing to suggest otherwise.   

       So I see nothing approaching what you say is there.
Skewed, Nov 20 2019
  

       //such as the UK rail network//   

       Well. I do generally agree with the idea of nationally-owned services and utilities. I believe that the ability to guide the behaviour of large, nationally-important organisations on the basis of the quality of service they provide for citizens, rather than share price, is a good thing. Privatisation of many UK utilities (and rail services) has been shameful in many ways, with certain wealthy and influential individuals becoming much wealthier on the back of private companies with effective monopolies and having bought massively undervalued infrastructure.   

       That said, the behaviour of nationalised companies (and their employees, and their overall culture) is also deeply flawed - a lack of accountability, value for money, and strong leadership/direction.   

       Each of the two has advantages and disadvantages. Publically owned companies can raise capital more cheaply than private, and so invest in infrastructure. But they tend to have higher operating costs, more bureaucracy, and be less efficient.   

       I would say that characterising the UK rail network as “playing the tulip game” is unfair. The vast majority of delays are the fault of Network Rail, the nationalised part of the rail system. Overall service reliability and quality are way better than they were under BR. Not denying there are still problems to be fixed, but generally those are infrastructure problems (from long-term underinvestment) rather than operational problems (from privatisation).
Frankx, Nov 20 2019
  

       What's needed is a nationalized system, but with incentives to the management to do well. These can include:   

       (a) a decent base salary for the person at the top
(b) a potentially massive bonus calculated on the basis of something meaningful such as the proportion of train services running on time, total passenger numbers or whatever
(c) a potentially massive clawback of said bonus if the system underperforms or loses more money than seems reasonable.
MaxwellBuchanan, Nov 21 2019
  

       Sadly... (c) currently equals large exit package.
wjt, Nov 22 2019
  

       [MB] - yes, that's a good model.   

       I think we need to move away from political ideologies where "nationally-owned company" = good/bad/inefficient: all these flaws are equally true of shareholder-owned companies.   

       Ignoring political ideology, there are some services/utilities which really are better run for the benefit of the public than for shareholder benefit. In the UK, the NHS is generally accepted as an example, and most would agree things like defence and police are best not privatised.   

       We could do with, as a nation, some clarity on what the requirements are: what are the criteria for a service that should be (or might be better) publically owned.   

       I must admit, I'm not convinced that fibre broadband is one.
Frankx, Nov 22 2019
  

       // I think we need to move away from political ideologies where "nationally-owned company" = good/bad/inefficient: all these flaws are equally true of shareholder-owned companies//   

       No, it is not equally true, and when it is those companies lose in the market and get disbanded, unless they ar protected by government sanctioned monopoly (in which case they already have one foot in that hell). What's true is government mandates piled on and on can MAKE such companies less efficient then they otherwise would be (e.g. minimum wage, etc)   

       Two genuine factors that could impact this are a real repeal of scarcity, which envisions a material science far more advanced than ours, and real AI, which would be a repeal of labor/intellect scarcity.   

       //most would agree things like defence and police are best not privatised.// Well there are certainly plenty of private armies, so even that is hard to truly control except in the wealthiest nations. Do you know of many celebrities or wealthy people that don't have a security detail? Does the UK provide a nationalized house alarm service? Was it the police, or the post office, or Ring that finally gave me a video door bell?   

       As to nationalized healthcare, putting aside any debate about waiting times, doctors in the US are in the top 1%. And I think it's a safe assumption that in the competition to get immigrant doctors as our population ages, the US would beat any country with a nationalized health care system, so long as that continues. Automation and outsourcing are of course playing a role here as well.
theircompetitor, Nov 22 2019
  

       [their], starting with your last point, nationalised healthcare. Independent (Nuffield) report [link] shows US leads in only 1 health care category out of 27. However, the cost per capita is more than double that of the UK and the highest in the OECD. [fig 1.1]. Also, notably, it has the highest infant mortality rate.   

       UK's not perfect - Korea seems to top the list quite often.   

       //real repeal of scarcity, which envisions a material science far more advanced than ours, and real AI// yes, great objectives, but many years/decades off.   

       //plenty of private armies//... which is generally seen as an indicator of a failed state, not an aspiration   

       //don't have a security detail//... actually, I do know a few celebs, minor aristo's etc, and none have a private security detail. Generally they view it as unnecessary in the UK.   

       Does the UK provide a nationalized house alarm service?   

       Nope. But I leave my back door open so the neighbours can pop in if they want to.
Frankx, Nov 22 2019
  

       The health care stats are well known but are skewed by a number of factors. My point had to do with where doctors find the most value, which is not a typical way to think about it, but ultimately would be a factor in how many people, and the quality of people that are in medicine.   

       As to scarcity -- exactly, and until then govt. involvement bring inefficiency.   

       On security details, be serious. The point is that there are plenty, citizens just as you are, that find it necessary to have protection beyond the police. The reason reason the state has a monopoly on certain kinds of power, including police power, is that it wants that monopoly, not "efficiency".
theircompetitor, Nov 22 2019
  

       //but many years/decades off//   

       Sp."decades/centuries/never".
Skewed, Nov 22 2019
  

       [their]... just that there are good examples of nationalised services that work well and efficiently. It’s just not true to say that all nationalised services are bad/inefficient/a product of a megalomaniac/corrupt/socialist government.   

       I would like to see (and haven’t yet) some independent analysis of what services/utilities should/could be nationalised, for the benefit of the citizens, and what the selection criteria might be.   

       //be serious// - I really would like to understand your context here. I’m being completely serious.
Frankx, Nov 25 2019
  

       //be serious// yes I also often leave doors unlocked, but the point is there are plenty of folks who cannot rely solely on police protection. to reiterate, that monopoly is not the result of efficiency, but of power control.   

       //It’s just not true to say that all nationalised services are bad/inefficient/a product of a megalomaniac/corrupt/socialist government// no, sometimes it's a product of a megalomaniac/corrupt/ fascist government, or simply an incompetent democratic government.   

       Definitionally, if the rights of workers are protected by a union, the entity would be less efficient.
Definitionally, if the wages of workers are set to be equal and largely without regard to merit, the entity would be less efficient.
Definitionally, if there's a backstop of government funds and a built in actuarial or otherwise rise in the budget regardless of money coming in from the goods or services provided, the entity would be less efficient.
Definitionally, if a law has to be changed to meaningfully threaten the entity's existence (as opposed to competition in the market), the entity would be less efficient.
  

       Are these sufficient, or do you require more?
theircompetitor, Nov 25 2019
  

       //Are these sufficient//   

       It depends what point you’re making. Are you saying that any nationalised utility is by definition a ploy by government to manipulate and control the citizens for their own Machiavellian purposes? If so, I suggest that you have accidentally elected the wrong representatives.   

       I contend that some services can be delivered by “the state”, in the interests of the citizens, and efficiently so. That the perception of nationalised services as inefficient and money-wasting is incorrect. But I admit I am basing this on a UK perspective. My personal experience - having worked in public and private sectors - is that yes, in the public sector your job does feel more secure, and there are lazy/stupid people who take advantage because they know they can get away with doing crap-all and you still get a paycheque at the end of the month, and it’s difficult to get sacked from a public corporation. But there are also lazy/stupid people taking advantage in the private sector.   

       But at the same time rights of workers should be protected, in private or public organisations - union representation (and I’ve had some major rows with union reps) is as valid in public or private organisations.   

       However. Take healthcare as an example. If you take a “unit of healthcare” as the mean demand per-capita. A shareholder-owned company has to charge a user the cost per unit, plus an x% profit (to satisfy shareholders). A nationally-delivered service does not have to deliver that profit, so delivers that unit “at cost”.   

       I don’t deny that (in the UK at least) nationalised industries have long been badly managed, had poor performance-to-pay incentives, and had a poor structure and culture for delivering a high-quality and good-value service. But this is not an intrinsic, structural evil of public services.
Frankx, Nov 26 2019
  

       It is in fact entirely intrinsic, a function of human nature and the use of other people's money.   

       I don't understand the point of debating relative efficiency here, there can be no debate, it's simply factual. Once you bring other goals (such as job security, greater common good, etc) the conversation is no longer about efficiency.   

       Yes there are plenty of inefficient companies and waste at non government entities. The point is they are subject to competition and thus there is a force that attempts to make them more efficient, whereas there is no such force with government entities, that is again, not really subject to debate unless they are in a government sanctioned monopoly, in which case it's 6 of one, half a dozen of the other.
theircompetitor, Nov 26 2019
  
      
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