Andrew Adonis and the economic line to take on railways | Letters

Andrew Adonis and the economic line to take on railways | Letters
Philip G Cerny and John Airs respond to the Labour peer and former transport secretary’s article denouncing Chris Grayling’s handling of Virgin Trains East Coast

Andrew Adonis makes excellent points about rail nationalisation (Grayling’s rail bailout echoes the grave errors of New Labour, 8 February). However, this is not just about outsourcing in general. It is about the longstanding contrast in economic theory between public goods and private goods, as developed by Paul Samuelson in the 1950s, and between specific and non-specific assets, as developed by Oliver Williamson in the 1970s, both leading to Nobel prizes. Public goods and specific assets are inherently indivisible – monopolistic, non-competitive and unprofitable, characterised by structurally determining economies of scale, especially if they cannot exclude particular customers. This is particularly true of what are called “natural monopolies”. Private goods and non-specific assets can be efficiently provided by the market, but public goods cannot. Here the public interest requires regulation and state control. The problem is where to draw the boundary between the two categories, as many sectors are mixed. The answers are found in neither neoliberalism nor socialism as such, but in a well-regulated social capitalism. Privatisation has unfortunately been applied far too often in sectors characterised by public goods and specific assets. Rail is a key example.
Philip G Cerny
Professor emeritus of politics, University of Manchester

• Andrew Adonis has Momentum friends and expresses the “need to be clear whose side we are on”. Good, but why do I feel the whole tone of his otherwise excellent piece implies a reluctance to endorse Corbyn and McDonnell as legitimate leaders of a renewed Labour party? The deep-seated resistance of party comrades like Adonis makes harder the struggle to shift the ideological zeitgeist.
John Airs

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Source: Guardian Transport

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