Who's more Consumer friendly - Government or Private sector?

Two different countries, two different experiences, a common thread! Let me narrate...

1. Transportation between Bangalore and Chennai

Many months ago, I was having a discussion with a colleague (now former colleague and a good friend). It was our daily luncheon conversation. This colleague had ideas that seemed socialist to others. The topic of discussion was the travel options between Bangalore and Chennai. Bangalore, being the Information Technology capital of India, attracts Indian talents from far and wide. Naturally there are a scores of people that have relocated to Bangalore and travel to their hometowns quite frequently. Among those, quite a many are from Chennai. These Chennai travelers use various modes of transport from and to Bangalore - a few drive their cars, many travel by trains, many by Karnataka State Road Transport Corporation (KSRTC, a state government enterprise) buses, a few by private buses and fewer by Tamilnadu government(TNSTC) buses. This colleague pointed me to some facts.

1. The train fares on Bangalore - Chennai route were not increased for over 5 years by the Central Government (Indian Railways is a central subject) and there was no deterioration in the quality of service; absolutely no impact of economy inflation on the consumers.
2. KSRTC buses were plying at fares at least thirty percent lower than the corresponding classes in private buses. KSRTC is a success story and has been making enormous profits in every of recent years.
   
3. TNSTC buses were probably a little cheaper than KSRTC buses (owing to lower diesel price in the state of Tamil Nadu, whose capital is Chennai), but were less frequent and of a little lower quality compared to corresponding class of KSRTC buses.
4. KSRTC allowed online booking probably a little earlier than many private operators did; officials call out names of online-booked passengers on the public addressing system at the Bangalore Central bus terminus, if they have not boarded the buses before departure! No-smoking policy is strictly implemented. The level of service and freebies somewhat increase with the class of service.
   
5. Private buses do not have good terminus facilities, often a confusing exercise to board; so is seat allocation. As I have traveled on this route many times on private buses, I have found buses unsafely overloaded with cargo on top, frequent flat tyres / tires, no back-up, not even a spare tyre / tire for replacement. No-smoking policy is not uniformly enforced.

Overall, for a consumer, the government bus and train services (remember different governments - of the states and of the union) are far better than private transport.

2. The Louvre Museum, Paris and Paris Disneyland

A few months ago (end of 2010), my wife, our little daughter and I made a trip to Europe. Being first-time visitors to Europe, we made it a point to visit The Louvre Museum in Paris. It is said that this museum alone attracts more visitors in a year more than entire India does in the same period! We also included Paris Disneyland (was Euro Disney earlier, don't know why the name was changed), so that our little one could see her favourite cartoon characters and enjoy a few rides. The experiences in these two tourist points were starkly different and diametrically opposite.

The Louvre:

1. The entrance tickets were not very expensive (comparison soon below).
2. The loos were abundant, upkeep needed improvement
   
3. Visitors could deposit their bags / luggage and even coats, free of cost. The staff there were greatly courteous and even maintained a register for valuables deposited in the visitor bags. I did register my laptop that I had carried in my bag; while retrieving, the staff checked to ensure it was safe.
4. The ticket included entry to all sections of the museum

Compare these to Paris Disneyland:

1. The tickets were priced heavily - adults paid almost twice the price as compared to the Louvre's tickets.
2. We were there on a Sunday, waited for more than forty five minutes per ride / show. There's a queuing / booking system, but that's almost totally impractical to use, especially while visiting with kids. It was drizzling a bit and so we were told we were very lucky; the crowd was less due to the drizzle! Though the ticket covers every ride / show, the Disneyland, by low capacity of rides, ensures that a visitor cannot have more than 6-7 rides / shows of over thirty available on any day.
3. What about luggage / belongings? This is a service provider's dream! Every bag / luggage could be stored at the entrance for six Euros. Individual items could be stored at three Euros a piece. Needless to say, there as a queue for availing this service too! For visitors like us from India, the entire luggage and the contents could only cost a little over the cost of safe-keeping!
   
4. What about the amusement park? Lousier than one could imagine. There were more Disney merchandise stores than the eateries and those eateries far outnumbered the rides and shows! So it was a big sale / shandy more than a amusement park.
5. The loos were crowded, but were clean.

Summary: we came out happily after visiting the Louvre while we felt cheated by Paris Disneyland. To validate our Disneyland experience I spoke with two of my friends from the US. They told me that rides / shows in the US Disneyland parks had longer wait times (than in Europe) and weekends were worst. If Disneyland could provide such abysmal customer experience in Europe, anyone can imagine how worse it can be in the US. Decision - never again visit the Disneyland anywhere.

So what's the connection between the two above?

Comparing these two examples from different countries may be like comparing apples to oranges. Yet, the point to understand and analyze is that how did government excel and provides better service than private sector.

There's enough competition for the transport operators to improve and provide great quality services. One may argue that because private transporters incur bribe (the bribe regulatory authorities like transport department officials extort) that government transport is exempt from and consequently the quality of private transporters tends to be poor and tickets are priced high. The counter-argument, indeed the correct one, is that private transporters do illegal things such as carrying commercial cargo on passenger buses and many more, so they bribe; also, even government transport is not at an advantage; even in government enterprises, politicians take kick-backs and a government enterprise does not get the deal it truly deserves. So, in the above example, the government transport enterprise and the private transporters are on equal footing of disadvantage or on the Level Playing Field, to borrow from Thomas Friedman. Still, government transport quality is far superior to the private transport quality. If not for lower fares in Government buses and trains, the private operators would have charged consumers even more and fleeced thoroughly or even made it inaccessible to larger masses (akin to Healthcare in the US).

It is true that unlike the Louvre, Disneyland cannot afford to let kids in free because kids are the primary if not the sole reason for Disneyland visits. Yet, Paris Disneyland is also not so cramped for space or on personnel that it cannot safe-keep luggage for free; could the reason be that luggage-carrying customers could get tired and use fewer rides / see fewer shows thereby saving Disney's resources and accommodating more customers? If yes, then Disneyland has succeed in its profiteering pursuit. Upon a causal chat with a French lady on the Thalys, we got to know that Jardin de Clemenceau (hope I have spelled it correctly) was a much better amusement park for kids and a lot less expensive than Paris Disneyland.

In B-school, I was taught that Market is the best acid test platform, competition is panacea for weeding out the incompetent players, for offering best services to consumers and that the market corrects itself. The above experiences and data is dis-conforming to theory taught at B-schools.

Why is that so?

Governments need to play an active role in the market, not just that of a regulator. A good Government's role not only tries to keep the market consumer-friendly, but also avoids cartelization. One may cite conflict of interests if the government participates both as a regulator and as a player. In countries with good judicial system, government cannot abuse its position of regulator, even if it is a player. This is because, even if the government participates in dual role, other players in the market have a judicial recourse to rein in any conflict of interests of the government.

Stretching this thought a little more, one can notice the stark differences between the US, Europe and countries like India. In the US, government is more of a regulator and almost absent as a participant. So, with the lack of participation of the government in many sectors, many services including the basic ones, have become inaccessible to public in the US. In many European countries, governments are active participants and not just regulators.This has helped in good infrastructure, good regulation and healthy private sector participation. In countries like India, the story is heterogeneous. In some cases government has done far better than private sector (milk revolution by aiding of cooperatives, public transportation in Karnataka); in some cases, government is playing catch-up with private sector (BSNL landline phone service has improved after its monopoly was broken); in some cases, it is doing excellently a regulator (the Banking industry and the Information Technology) and there are many sectors where government is still lagging behind private sector. One can see that low corruption governments in Europe have provided better quality of life to their citizens and successive governments in India have plundered country's wealth to fill a few pockets.

I am not making a case for totalitarian benevolent womb-to-tomb welfare governments. The point is governments cannot be ringside regulators, they have to be active participants.