What's worse than a state monopoly?
The case of the port of Hamburg #29
Something happened in Germany this week that is confusing not only at first but also at second glance.
A few days after Xi Jinping consolidated his power at the 20th National Congress of the Chinese Communist Party (CCP), making it clear to the world that no shred of democracy is to be expected in the world's most populous country for the foreseeable future, the German cabinet allowed China's Cosco to buy a stake in a terminal in the country's largest port in a decision pushed through by Chancellor Olaf Scholz.
The approved investment is less than the initially planned 35 per cent stake that the Chinese shipping giant aimed for and does not give Cosco any say in the management or strategic decisions.
It is widely known that economic policy is ultimately power politics for the Chinese state. Therefore, most observers (myself included) cannot understand why a Chinese economic giant can be given access to the port of Hamburg (the third largest in Europe after Rotterdam and Antwerp).
What's more, this isn't just about China.
Infrastructure always belongs in the hands of the state when there is no competition possible. The rails of the railroad system (not rail traffic since there is competition possible) belong to such infrastructure or power lines. Ports also naturally lack competition.
Such natural monopolies do not belong in private hands. At least they have to be closely monitored by state institutions.
Infrastructure owned by the state is still a monopoly, though, but one that (in a democracy) is under the supervision of the people. That's still better than an unchecked private monopoly, where there are hardly any upper price limits.
So there is nothing good to say about a private company becoming a co-owner of a large port like the one in Hamburg. In the case of Cosco, there is even a third negative factor that speaks against a Chinese company joining the Hamburger Hafen und Logistik (of which the majority belongs to the city of Hamburg). This is that Cosco is not mainly a port operator but a shipping company. So Cosco competes with other shipping companies.
What will happen to other shipping companies if one owns parts at a port? What will be the prices and accesses at the port of Hamburg for non-Cosco shipping companies in the future? The answers are easy to guess.
Therefore, today's grown-up politics should take three rules into account:
You don't privatise infrastructure that is a natural monopoly (unless it is controlled very tight).
You don’t give a single company access to vital positions suitable for making life difficult for competitors.
You don't let Chinese companies buy a country's infrastructure.
The German government had better followed these rules.