It's social to make a profit, but only up to a point

Maria Ludvigsson has written a leader for one of Sweden’s leading newspapers, Svenska Dagbladet, also known as the right-wing party newsletter.  The title is “Socialt att gå med vinst” [It’s social to make a profit – my translation].  In it, she begins:  “It is the left wing’s pathological fascination of the top percentile which makes it [the left wing] unable to see anything other than misanthropy and greed behind profitable companies.” [my translation].  The left wing, she goes on wants what it calls ‘social business’, a concept which the left wing has as much of a problem to define as the right wing which Ms Ludvigsson represents.  The best we can come upon is that ‘social business’ is done somehow altruistically, not with the purpose of making a profit.  Ms Ludvigsson refers to an article in another newspaper, left-wing Aftonbladet, by Rozze Baleng, who runs a maternity clinic, and who would love to meet the leader of the leftist Vänster party, and explain what running a company is all about.  (I have to say I have not read Mr Baleng’s article.)

I sympathise with Ms Ludvigsson’s viewpoint, and can only agree – up to a point.  She takes a small entrepreneur as her example for all company business, and it is here that her article falls down.  Yes, small businessmen and women are often driven by an element of idealism – to provide a needed service perhaps where there is none, or at a reasonable price, but they need to make a profit.  So far Ms Ludvigsson and so far I agree with her.

However, what Jonas Sjöstedt, the leader of Vänster, knows, and what I know, and if she is honest, Ms Ludvigsson also knows is that the small businessman is not the villain.  It is the big businessman who is, usually aided and abetted by the right wing parties who want to privatise everything that moves, but don’t want to regulate it.  In so doing they generate a licence to print money for big businesses.

Let us take a simple example:  the railways.  Once upon a time the Swedish railways were run by a government company called SJ.  SJ owned the rolling stock, they owned the tracks, they were responsible for maintenance and repair, and for timetables and services – for the whole country.  They were not only responsible for the three main routes, Stockholm-Malmö, Stockholm-Gothenburg and Gothenburg-Malmö, routes with thousands of travellers every day, but also for small loss-making lines, for example in the far north of the country, where villages were served by a few trains a day, for a few travellers.  If track was bad, SJ had only themselves to blame for not having maintained the track.  If trains were late, SJ could only look inwards, for they had not maintained their rolling stock.  Everything worked, and the rail service was looked up to.

Someone decided that there should be competition.  Competition would reduce costs, as it always did – at another cost, of course, which one might call quality of service.  But it would not do for SJ to own the track and maybe take excessive charges of competitors, so the tracks were hived off and given to a new authority which would maintain the track and charge all users a fair rate.

Suddenly there was no-one responsible for the whole system.  If a train didn’t run on time, SJ could blame the track authority and the track authority could bounce it back to SJ.  And trains did not always run on time.

Next the service was opened to competition, and there were many competitors for the three big routes, but none for the low-traffic routes.  Is anyone surprised?  When they were alone in running services, SJ could add, say, a 20 crown surcharge to tickets on high-traffic routes and use the money to fund the loss-makers.  No-one would notice the 20 crowns extra, but the heavy traffic would mean a sizeable income for SJ to cover their losses on the low-traffic routes.

One would have expected that a company intending to compete on the high-traffic routes would have been required to take a fair share of the loss-makers also, but no.  They weren’t interested, and nobody insisted.

What happened next can be guessed by a twelve year-old.  The high-traffic routes were easy prey for discounted prices, and SJ had to follow suit or lose market share.  So not only did they lose the 20 crowns surcharge, but they had to reduce their prices, and thus had none of this income to fund their loss-making routes.  Is it any wonder that SJ, instead of contributing to the state coffers is now running at a loss?

The problem gets worse.  The track maintenance was also privatised.   But every time you make a repair, it costs money, and reduces the company profit.  But big companies are not there to reduce their profit.  So the longer one can let needed maintenance go unattended, the greater the profit.

And finally, the people who are supposed to control all of these things, especially the maintenance of track, do not have the power to do more than point out that something needs to be fixed.  No fining powers, no cancellation of contract, nothing.

This was the situation which has now established itself over the Swedish train service.  Severe train stoppages are a weekly item in the news programs, and now the minister of transport does not use the trains to take her from A to B unless it is unavoidable, in which case she allows a considerably longer time for the journey than that in the train timetables.

There are only three things one can say about the people who constructed this arrangement.  Either they are idiots; or they are corrupt; or they are corrupt idiots.

And this is where Ms Ludvigsson’s comparison of Rozze Balengs maternity clinic and what, for want of a better phrase I will call big business falls down.  Rozze Baleng would not be able to afford the rolling stock for a train service on only one of the high-traffic routes.  It’s out of his class.  But Ms Ludvigsson’s top percentile has the means, and it is them and their sociopathic ways against whom the Vänster leader riles, and so do I, although I am not a follower of Vänster, nor even the left wing of politics.

Think how easily this could be altered.  At the next negotiation for trafficking the railways, if all parties had to take a certain percentage of loss-making lines for the privilege of trafficking the high-profile routes, many would scream in pain, and some might stop.  If the parties responsible for track maintenance were told that they had x days to fix the problem or it would be fixed for them by the track authority with a 10% mark-up. one would see a move towards what Vänster calls ‘social business’.

And if the idea is to use small businesses as examples, why not take a leaf out of the books of Kim Stanley Robinson.  Robinson wrote three books about the first settlers of Mars, and describes amongst other things their determination not to copy the mistakes of the planet they had left behind them, neither in politics nor in business.  They decided that no business could have more than 50 employees, and no-one could own more than one business.  For large projects, two or more companies could reach agreement on taking shares in the project.

That way maybe all business would be ‘social’.

© James Wilde 2015