Retail distribution networks are a good example. Society needs only one food distribution network from producers to consumers. Yet we've got many. Its because the balance between the required investment and the social benefits is in favour of the latter.
Now to our payments system. In addition to the issuers of cards (Visa, MasterCard, Amex, ...) who are marketing agents and provide variable levels of security checking, there are also national clearing and settlement agencies that manage the actual flows of funds between the banks who manage the accounts of the individuals and/or businesses making the transactions. Usually, these are oligopolies run by bank consortia.
The EU introduced legislation (latest piece in 2007) requiring the national infrastructures to morph into a pan European infrastructure in order to gain in efficiency and reduce costs for the end user. What's interesting about the legislation is that it calls for the creation of not ONE but a NUMBER of networks which will compete with one another. These are: STEP2, STET and TARGET2.
The EU didn't call for the nationalisation of these "utilities"... thank God. It just regulated the private sector where it felt this was necessary. And that's my point: regulation of industries deemed to be of "strategic social utility" is much more efficient and effective than having the government run them directly.
Society needs only one food distribution network from producers to consumers. Yet we've got many.
Actually, we have substantially two food distribution networks: Nestlé and Unilever (and they're both evil, but that's another story...). That's an exaggeration, of course, but not a very big one.
Now to our payments system. In addition to the issuers of cards (Visa, MasterCard, Amex, ...) who are marketing agents and provide variable levels of security checking,
... for a variety of funny fees and general scamminess. The credit card industry is not really a good example of a construct that serves the public.
In Denmark, we have one system, Dankort, which then interfaces with all these funny credit card companies. But the backbone is a single system. There is no reason - other than tradition - that this backbone couldn't be run by the state.
And in fact, there would have been substantial benefits of nationalising the Dankort: With the most dreary regularity, the banks attempt to impose onerous fees on usage that in no sane world merits those fees (mostly it's a matter of vendor lock-in, but they also make fat money on ForEx transactions over Dankort, with fees that cannot possibly be justified on the merits).
Again: It's one system. There is no technical reason to split it into four or five different operators, any more than there is any technical reason to split the power grid into four or five different operators.
there are also national clearing and settlement agencies that manage the actual flows of funds between the banks who manage the accounts of the individuals and/or businesses making the transactions. Usually, these are oligopolies run by bank consortia.
And these jobs are completely routine, standardised and heavily regulated. There is no reason that the central bank cannot perform them with equal efficiency. And the added benefit of it being easier to enforce compliance with tax authorities when you run all clearing through the central bank.
The EU also ruled that power grids must be broken into separate operators, "to enhance efficiency." And that railways must be privatised "to enhance efficiency." That was bullshit. Any time a politician says "competition" there is a better than even chance that he means "a handout to the locusts." Do you have any evidence that this is not the case here?
regulation of industries deemed to be of "strategic social utility" is much more efficient and effective than having the government run them directly.
Railways, power grids, postal service, education, health care, pensions, roads and bridges would beg to differ.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
I agree with that. But I haven't seen a compelling case to nationalise the payment system.
is generally the case. Nor, even, that it is usually the case.
As for the clearing system in particular:
Case open and shut.
As Migeru would say: you're starting to look disingenuous.
That a speculative bubble in the real estate and derivatives markets can bring deposit-taking institutions to the brink of not lending to each other demonstrates conclusively that the current clearing system does not work: It cannot withstand sharp shocks without massive public subsidies.
Also, the bulk of the costs of maintaining a clearing system are independent of usage rates, so price/transaction is not a meaningful number to judge the price of a clearing system.
These banks are deposit-taking institutions. If they stop lending to each other, the clearing system ceases to work.
I'd add that it's the same in France, with the Groupement Carte Bleue (which was imposed on reluctant banks by the government) imposing a single set of rules for cards clearing and ATMs. In the long run, we're all dead. John Maynard Keynes
Same with GSM - thanks to heavy-handed regulation at the highest level (in this case Europe), Europe got a better standard, and imposed it across the world. With 3G, industry tried again to impose incompatible standards onto weaker regulators, and the result was incompatible standards and Europe losing its leadership. In the long run, we're all dead. John Maynard Keynes
