For the first time in Royal Mail’s long history, stretching back to the 1500s, its owner will be based overseas. Daniel Kretinsky, a Czech billionaire, has acquired ownership over Royal Mail after a £3.6bn takeover. Royal Mail has been performing badly for years now after it was “privatized” in 2013. The company has suffered heavy financial losses as mountains of customers complain that they do not regularly receive letters like important medical documents or crucial legal documents on time.
Onlookers and stakeholders can see with sublime clarity that the company is headed towards dire straits unless major change is gambled on. Individuals inclined towards the socialist worldview blame privatization, but their cause benefits from the public not wishing to dig a bit deeper to understand Royal Mail’s situation; this market is not what it seems.
For most, privatization conjures an image of fat, avaricious capitalists grabbing companies, obtaining full and unopposed control of all their resources, grinding every penny from them before moving on to the next victim. It is a picture that aids statists who seek to take control of the private economy for “the people’s” benefit. Actual details scupper much of this picture.
The government has retained what they are calling a “Golden Share.” This gives them critical veto power over decisions like relocating the headquarters outside of the United Kingdom, changing the tax residency to abroad, and the Universal Service Obligation. The Universal Service Obligation is a legal obligation to guarantee the delivery of letters and parcels six days a week across the United Kingdom at a uniform price. Included in the deal were provisions to safeguard existing employee rights like pay, working conditions, and pensions. The dog is still on a leash, and yet they would have you believe it frolics freely.
A nationalistic sentiment infests this deal as the government seeks to ensure the public that Britain will be maintaining British heritage within this widely appreciated “public good.” This translates into the government leveraging a huge say in key decisions of the company. Since most statists believe the government reflects the people, the government effectively owning the company equates to the people owning it. There is no coherent idea of ownership based on this idea and it is one of many reasons why it is more than probable that the new owners will not be able to work the miracle that the government claims.
The government’s deal with Kretinsky effectively imposes a strait jacket on the company’s owners. The government’s expectation is that the new owners will be able to rearrange resources, change how Royal Mail operates, and work some fancy business voodoo so the government can claim a political victory for the work of others. This is an utter fantasy. A normal company making significant losses akin to Royal Mail would have to fundamentally change the way it operates, but the deal takes away so much flexibility for the new owner to right the ship. Prices in a market are signals. On a basic level, the huge financial losses incurred are a signal to the owners that some of their resources are being badly misallocated. Prices and double-entry bookkeeping show where the misallocation is, but the deal renders these signals almost useless.
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