Title page book Graaiers of redders?

Graaiers of redders? --- Away with nonsense

Publication: Uitgeverij Atlas (2011, Amsterdam/Antwerpen)

First insertion on Heterodox Gazette Sam de Wolff: 22 december 2014

E.A. Bakkum is a blogger for the Sociaal Consultatiekantoor. He loves to reflect on the labour movement.

The book Graaiers of redders? discusses the performance of free markets in the public sector. When your reviewer read this book three years ago, Selexyz Utrecht had piles of it between the bestsellers, and that was no coincidence. For, many people see the spread of free markets as a frustrating experience, because it does not fit in the common view of a healthy social development. Since the beginning of the nineteenth century experience has shown, that in the long run the unregulated market can not survive. Free markets for collective services are especially troublesome, because they tend to cause injust and ineffective results1. This raises many questions. Have the society and individualized man developed to such an extent, that new and functioning forms of free markets can emerge?

The authors W. Dicke, B. Steenhuisen and W. Veeneman have analyzed three branches of the (former) public sector, namely the care in hospitals, the bus service, and the energy market. That is quite a lot. At the same time this excludes other important branches, such as the markets for post, telecommunication and cable services, waste disposal, and the social security. That is a pity. But the authors have the ambition to discover general trends in the three mentioned branches. In this way they fill a lacuna, because such integral studies are rare. There is a need for rules of thumb, which can be applied in the research in other branches.

Free markets in the public sector must make a profit. The private investors and their supporters obviously try to influence the decisions. Therefore the scientific evaluation must be critical and thorough. Unfortunately, Graaiers of redders? as a project is not funded by the university, but externally. The suspicious reader may think, that the quality may suffer. Page 19 states: "This chapter aims to explain free markets from an objective perspective". And on p.196: "If this book has a single mission, then it is the elimination of the binary thinking about free markets". Because (p.9): "Where ideologies clash, a lot of nonsense is said". Your reviewer is less pessimistic2.

Unfortunately, on a closer inspection the authors do propagate free markets. This yet forces the reader to make his own judgement. For instance, on p.199 the authors believe that the retraction of free markets is "an unfeasible perspective". Followed by: "Give all parties the time to get used to their new roles". And before on p.18: "Only by a continuous correction and reaction after all criticism the free markets slowly become interwoven with the functioning of society". And p.186: "Compromising is more than a necessary evil. It is a method of continuous correction in order to extract step by step the best from the free markets". The question is not raised, whether the best of free markets is still poor. This unshaken belief in free markets is the tone of the whole book.

So the authors are ideologists themselves! Their fixation again and again confronts the unsuspecting reader with faulty arguments. For instance on p.129: "Since the eighties the Netherlands is known as a paradise for cartels ... This is a plaisant stay for entrepreneurs". The authors clearly dislike this. In another context they conclude with surprise (p.185): "For instance, enterprises merge more than they compete". Apparently the authors miss the sound logic behind the cartel and the merger, namely the benefits due to increases of scale. At least they do not mention it. They are also silent about the fact, that a cartel is better proof against market fluctuations. There is no reason to suppose, that competition guarantees efficiency, let alone stability. Not even theoretically.

The book actually does not discuss the commercial operation, but the degree of regulation by the state. And in this respect the authors seem indeed to take a moderate position. That is disappointing. Another disappointment is the lack of depth. For Graaiers of redders? is mainly based on interviews with "all principal figures and stakeholders" (p.14). People talk. The reader prefers facts, quantitative data, performance indicators, time series with a bend when the market is introduced. These do appear in the book, but they are rare. The size of 200 pages is not optimally used. Fortunately, many sources and references are given. But the layman can not judge the objectivity of this selection. In any case, your reviewer misses in Graaiers of redders? the reference to a few familiar critical studies3.

Factually, the authors are pleased with free markets, because the enterprises have saved significantly on their production process. Furthermore, the transparency has increased, notably because the state can not regulate without information. Good information is essential for truly free markets4. In the past the reports were published by the state itself, whereas nowadays the enterprises publish public annual reports. And more attention is paid to the customer, although the degree of window dressing is unclear. Incidentally, here the authors make an ideological choice. For, on p.169 they argue: "Representatives of the customers are better in defending the interests of customers than politicians did in the times of the public monopolies". This is a strong statement, which is not proved. It is notoriously difficult to organize customers, and they can easily be manipulated by enterprises.

The authors mention two other controversial points. The first point is caused by the increased choice of customers in markets, where the monopoly has been eliminated. Namely, this point is two-edged, because the customers sometimes dislike choosing. This irritates the authors. In fact the transaction costs on the market are too high for certain products. That is to say, the considerable investment of time for choosing is not compensated by savings in the expenditure. This is especially true, because in health insurance and energy supply the offers change each year. The customer must compare the offers each time.

The second controversial point is the position of the workers, who may be the losers in free markets. Namely, the authors conclude that the pressure at work has increased, without a compensating wage rise. On p.156 it is even stated: "Mechanics, now employed by contractors, earn less under worse labour conditions".

This development is somewhat played down by the authors, who on p.9 already committed themselves to the conviction "Not a single group is only hurt (or privileged) by free markets". They prefer a particular perspective: "In the three branches, which we have studied, the work has obtained more attention and challenge". Making an effort is not wrong. But there is no corresponding reward. Only the direction is financially compensated, because (p.177): "Top managers and experts are particularly greedy". It is obvious that this must change5.

The book is particularly charming, when sometimes the authors mutually disagree. This leads to funny contradictions. Concerning free markets in the energy supply (p.154): "The experts in this domain find it hard to determine the effect of free markets on the prices". Next on p.162: "On average the prices of electricity rise, but that is not caused by the market". I say! Was this not difficult to determine? Another example, on p.166: "The new hospitals, bus companies and energy suppliers are in many cases more efficient, creative and innovative in comparison with the situation before the free market". It is done. But on p.174 another picture emerges: "At work these innovative systems and procedures are often clumsy, without sense, or an extra burden". So what is it?

Interesting is the attempt to find nuances in the culture of greed on the free market (p.180): "It is less well known that the administration is also greedy. Provinces and municipalities acquire substantial sums by selling shares". But that argument looks faulty, because the selling of shares can evidently not be equated to grabbing in the company purse. And on p.178: "A director of a bus company visited a brothel and charged the costs at his public transport company". That is indeed a criminal event, but when judging the system it can not be compared with structural grabbing. One must beware of such flowers of speech, or a headage is inevitable.

It will be clear: Graaiers of redders? does not satisfy the high expectations. Unfortunately the perspective is not neutral or objective, but an unbalanced compromise of the three authors. Nevertheless, on the Dutch market it is a unique book about a highly topical theme, and for this it must be given credit. One can find a summary of the problems of free markets in the public sector. This knowledge is essential for decisions about the (de-)centralization of policy, where the costs of organizations and transactions must be compared6.

  1. Therefore there is a wealth of experience and literature available about this theme. An interesting example is the book Kommentar zu den kommunalpolitischen Richtlinien der SPD (1929, Verlag J.H.W. Dietz Nachf. GmbH) of the then authoritative social-democrat Paul Hirsch. He writes among others (p.65, somewhat abbreviated): "Now the demand was made, that at least the monopoly companies must be owned by the municipality, because during the years of experience it had become clear, that private enterprises do not function as well as was perhaps believed in the past". He also studies the various branches, and writes about the public transport (p.244): "Only municipal companies are able to offer the professional transport at lower prices and to exploit the various bus lines without restrictions because of the profitability. Contracts for concessions, which aim to coerce the private entrepreneur, remain unsatisfactory forever, because the development of the city can not be predicted in the long run". But it must be admitted, that at the time everybody (including the social-democrats) thought and argued by means of dogma's.
    The political policy was even regularly interwoven with poetry. Thus Marie Vos writes in Eigendom (volume De windharp): The expert, the sage / Does not mind the rise / And fall of the quotations, he tries / To find his gains / in mightier rooms / Than where pretence values are measured. And Herman Gorter writes in Pan (p.111): And slowly the Bastille sank, / And the Churches, Palaces and the Courts / Of Justice that is wrong, fainted, / And disappeared in the eternal light. He concludes with (p.120): And after the glowing festivities and enthusiasm / Then the first years began already / Of the organization of collective property / And equal labour for all people. / And the development of freedom started to prosper, / From behind the mist, that the poet faintly saw. (back)
  2. Here the Dutch version of the review contains an expression, which resembles "go ape". Apes are a source of jokes. Why did the first ape fall from the tree? He stumbled. Why did the second ape fall from the tree? He was tied to the first ape. Why did the third ape fall from the tree? Peer pressure. Why did the squirrel fall from the tree? He imitated an ape. Or: two apes are in a bar. A pig enters, and orders a glass of beer. One ape says: "Funny, a talking pig!" Or: the explorer tells during a lecture: "Suddenly I saw an ape in my tent. And what did I do?" Someone in the audience answers: "You probably turned the mirror". (back)
  3. It concerns notably a few studies about the privatization of the bus services, namely "Evaluatie Marktwerking in het openbaar vervoer", a study done by bureau WVM by order of FNV Bondgenoten (2005), and the SP-study "De uitverkoop van het openbaar vervoer". The SP-pamphlet is published in 2001 by the Scientific Bureau of the SP, and is based on studies by R. van Raak and N. Schouten. In the trio of authors W. Veeneman is the expert of public transport. Perhaps Veeneman has omitted these sources, because they are dogmatic and biased and assume their conclusion already in advance. Nonetheless, they contain interesting information. Incidentally, the same SP-series also contains a volume about the energy market. (back)
  4. Transparancy does not solve all problems. Thus nowadays the medical specialists charge on the basis of so-called diagnosis-treatment combinations (DBC). According to p.75 and 84 these are used in a manipulative and "creative" manner. It is curious that the authors seem to appreciate this! (back)
  5. On p.51 the book gives an interesting international comparison of the incomes of medical specialists. But otherwise the information about the grabbing is scanty. According to De economie van de eer (2007, Ambo) by Dick Pels, in 2004 the director of Schiphol Airport gave himself 663.000 euro. In 2005 the director of the Amsterdam Medical Centre cashed 287.000 euro. In the same year Boersma of energy supplier Essent took 821.000 euro, and Van Halderen of energy supplier Nuon took 815.000 euro. Despite criticism, they increased their incomes in 2006. (back)
  6. Post-script in 2019: the first concept of this review was already written seven years ago. At the time your reviewer was disturbed by the message in the book. This led to the preceding criticism of the book, which on reflection is unfair. At present your reviewer has a growing appreciation of Graaiers of redders?. (back)