We’re told that the privatisation of water was a big mistake, we really must take it all back into public hands. Because:

Our water supply belongs to all of us. Having our water industry run by public servants who are elected and are accountable to voters means that we can reinvest money in technologies, maintenance and systems that will ensure our water supply’s viability – instead of giving huge payouts to shareholders. Nationalising the UK water industry is what works best for consumers and what will ensure the conservation of our water supply for the next 25 years – and beyond.

It’s a great theory. Society’s impartial technocrats will optimally allocate resources to all our benefit if only they were freed to do so. Like all theories this has to be tested against reality. So, what did happen when that did happen?

Investment under nationalisation was lower than after privatisation. In fact, the privatising was in part caused by that need for investment which the public couldn’t, or at least wouldn’t, deliver. That is, the problem with the theory is that reality just doesn’t work out that way.

The State has many things to spend money upon. It also faces budget constraints. What does get spent upon within those constraints often turns out to be a great deal less than is socially optimal. That technocratic allocation simply doesn’t work as assumed above.

This is thus the big question that would be nationalisers have to answer. If nationalisation would raise investment why is it that privatisation raised investment?