CUTTING ROOM: Pity the poor dancers; what the wind-up of Railtrack really means; a strange summary of America's achievements; Finland's finesse ... Evan Davis at large

CUTTING ROOM: Pity the poor dancers; what the wind-up of Railtrack really means; a strange summary of America's achievements; Finland's finesse ... Evan Davis at large - How glamorous the life of a broadcast journalist can be. I've just been talking at a

by EVAN DAVIS, economics editor, BBC
Last Updated: 31 Aug 2010

How glamorous the life of a broadcast journalist can be. I've just been talking at a conference of professional dancers, and what a pleasant relief it provided from the usual audience of grey-suited business people. The dancers wanted an economist to explain why they're paid as badly as they are. (Sponsors please take note that, despite their skills, dedication and training, they probably earn less than pounds 15,000 a year.)

I know little about dancing, and what I do know is unreliable, since it comes from the movie Billy Elliot. But I was surprised to discover how little I understood about earnings as well.

You see, I thought the reason for dancers' low pay is that they do a job they like and can wear outlandish clothes and so do not have to be compensated for the daily drudge of work that most of us do. But there's a flaw in this explanation - in most professions, it is the people with the best jobs who get paid the most. Dancers seem to be the exception.

No wonder they are upset. But maybe it is not they who are paid too little, but many of the rest of us who are paid too much.

So farewell, Railtrack. I can't say I'll miss it. If any company deserved to disappear, this was it. I might be alone in thinking that its biggest contribution to mankind was to be shut down, thus demonstrating to everybody involved in a contract with government that it is not the Treasury's job to act as lender of last resort to a badly run public-private partnership (PPP).

It is a sad fact that no-one has understood the implications of private involvement in public services: the transfer of risk to the private sector. The City made a huge error in carping about the end of Railtrack. It seems to think that 'risk' means that the Government bails you out however badly run the private operation is, and however large the profits have been in the private sector. The Government, on the other hand, seems to think that transferring risk to the private sector can be achieved at no cost, constantly hoping that private risk-takers will simply earn risk-free rates of return. Both need to understand that risk should be transferred to the private sector, and this will mean that the private sector sometimes earns huge returns and at other times no returns at all.

The only downside to the Railtrack experience is that the players are so burned on all sides that the whole PPP or private finance initiative (PFI) will run into the buffers. The Treasury now seems to be going through a change in mindset, appearing to think that getting the private sector to take public-sector risks may not be as important as getting it to provide management for public projects. If this is the new thinking there, look out for some big changes to the PFI, and a contraction in the PFI-related industry of accountants, banks and consultants, most of whom are devoted to drawing up contracts that attempt to define who bears the costs of what risks.

I was disappointed to see a study from the Brookings Institution, one of Washington's most respected policy think tanks, that purports to rank the 50 greatest achievements of the US government over the past 50 years, based on a survey of 1,039 college professors. A facile exercise, if ever I have heard of one, more suited to Cosmopolitan magazine than a serious academic research centre.

As it happens, the top-ranking achievement - 'rebuilding Europe after the war' - is sensible enough, even if that was substantially outside the period under investigation. But perusing the list, one can't help but feel that the whole project makes the opposite of the pro-government case it is trying to support: the momentous achievement of 'reducing workplace discrimination' is number 5, just ahead of 'ensuring safe food and drinking water'. And further down you will find that renowned post-war American success, 'Reducing crime', at number 36. And at number 29, another: 'Maintaining stability in the Persian Gulf.'

Talking of fatuous league tables, what's going on in Finland? First I am at a seminar where an academic describes Silicon Valley as passe and praises Finland as the new epicentre of the world. Then I notice that Finland comes top of the World Economic Forum's Global Competitiveness Report league. Apparently, Finland has more computers than the whole of Latin America. It also comes top of a league of environmental sustainability. Well done, Finland, but now the hordes of commentators are on to you, it's downhill from here, I'm afraid.

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