Public vs Private...

Discussion in 'Politics' started by D_Tim McGnaw, Oct 25, 2010.

  1. D_Tim McGnaw

    D_Tim McGnaw Account Disabled

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    ...public service provision that is.

    Why do people believe private sector companies whose imperative it is to sell a product at lowest cost to themselves and highest possible cost to the consumer will make excellent replacements for government agencies and public sector provision of public services? Private companies will lie, beg, murder and steal and will sell the cheapest crap at the highest prices they can get away with.


    Why do people believe that private companies can be held accountable by markets which have just now created one of the worst recessions in history by behaving in totally socially irresponsible ways while governments seduced by the argument that the market polices itself for this kind of malpractice just stood by and allowed businesses to cause untold economic destruction in the reckless pursuit of grotesque and seemingly exponential profit?

    Why do people believe that to encourage the entrepreneur is a social good and the best tonic for all that currently ails a substantial portion of the world economy? Wasn't it the inherently selfish nature of this mode of economic activity which fed the recent decades of rampant greed and naked avarice which have brought about the situation we're in now?

    Surely its iniquitous to undermine the public sector which when the chips were down was the only part of most economies which was in good standing with the bank while thousands of private businesses went to wall because of their unregulated and insatiable hunger for profits regardless of the dangers of over extension, or even taking in to account negligence and the possibility of the good times running out.

    Why should public sector jobs be slashed and public service incomes cut across the world forcing millions below the poverty line or at least in to financial turmoil just to try to kick-start a private sector which not only caused the recession we're in now but in causing that recession proved without a shadow of a doubt that it is incapable of regulating itself let alone taking up the slack for a massive public sector shrinkage?

    How could anyone be expected to believe that captains of industry so recently gone down with their ships, ships sunk by incompetence, could fail to make the same balls up of public service provision?

    So why do governments, like that of the UK, around the developed world still think the private sector is anything other than a caged drunk chimera only waiting for the key to be turned in the lock keeping it at bay allowing it to destroy the public sector just as surely as it befouled its own nest?
     
    #1 D_Tim McGnaw, Oct 25, 2010
    Last edited: Oct 28, 2010
  2. Pendlum

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    Because the private sector benefits from people buying into the myth that the free market is some perfect, just, and fair system, so they work hard at getting the people to believe that. And politicians have to get their money from somewhere.
     
  3. B_curiousme01

    B_curiousme01 New Member

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    There is a lot to think about in this post and it hits close to home for me.

    In the USA, it seems like our government wants to control everything that is even mentioned in a sentance in the White House - the newest private sector industry to be hit is healthcare. They are going to make everyone pay and it will be another deduction out of the paycheck. We'll probably be close to 50% of annual income to taxes very, very soon.

    I'd like to mention a few things our gvnm't already controls and mangages such as Social Security, Medicare, and Welfare. From day one all three are deep in debt, misuse, abuse, and thievery. The Veterans Admin has a whole set of problems too.

    I must say that I'm not a fan of any type of government control of me, my paycheck and/or my life. I know these programs create jobs for people, but at a significant cost. The programs are all failures and would probably be better served by sending out to the private sector. There would be jobs there too. And a ton of regulations like everywhere else.

    As far as owning a private company and being an entrepreneur? I've owned a tiny business for about ten years and am proud of the work I accomplished without help/assistance/loans/grants/whatever. It has always been a struggle, but it is worse now than the first day I opened shop. I am a perfect example of someone living at the poverty line or below right now. I am one of millions of small business owners who have been crushed by government involvement in everything imaginable. We are mired in Rules and Regulations from A-Z. I fear what's next. We already have to hire companies to help us operate a business to make sure we follow all the rules, laws, regulations, taxes here, there, and everywhere.

    We are totally out of control.

    To top it all off, CHINA owns just about 50% of the USA thanks to our government. I don't mind China, but I want the USA to be responsible for itself. Like every country should.

    I cannot agree that government is a place to establish any type of business model regardless of how many Federal, State, County, City jobs are created by it.
     
  4. D_Tim McGnaw

    D_Tim McGnaw Account Disabled

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    I'm self employed and own my own business. So I'm a in a similar boat to you.

    But what comes across from your post is that because you personally have no desire to make use of government run services you think no one should either want to or have the opportunity to.

    I have to drop a bombshell on you too, you live in the States right? And you're complaining about the burden of regulation and tax? Enforcement (or lack thereof) aside I suspect you'd have more regulations and bureaucracy to deal with if you lived almost anywhere else in the world, and if you lived in Europe you'd have laws to ensure your business was socially responsible rather than purely about exploiting your customer base without even a nod to communities your business operates in.

    God knows I work hard, and for years I was basically penniless so what success I have now I value very highly and would work twice as hard again to sustain and expand my business.

    However when national EU regulations interpose themselves, or when I'm required to pay taxes I think of that as an opportunity to prove that not only does my business benefit me or those whom I may employ, my customers and those I do business with, but it also benefits the society I live in and frankly am glad I live in.

    Why should I think only about my business, my livelihood, my hard work and success etc when I can think beyond that to the social good these things can be put to also.

    I would be ashamed of myself if in the haste to become a professional artist and craftsperson with a successful business I forgot my responsibility towards those I live and work among. I pay my taxes in the knowledge that some proportion of them is going to help sick people, the elderly, the homeless, or for schools which will offer opportunities to other young artists to get on the path of success which state funded schools and colleges helped me on to.

    Having come from a very working class background myself I know what poverty and lack of opportunity look like and what they do to whole communities. If my taxes go towards developing effective programs which not only help those less fortunate than me keep the wolves at bay but also help them to get out of their situation then I can't see what is so damned wrong about that.

    If my taxes also get used to pay a public servants wages then Christ alone knows why I should object to that either, I'm still doing well enough (and I live in high-tax Europe), and if the state is going to employ anyone then I'm glad my taxes are being recirculated in the economy by being spent by someone working in a socially responsible and socially accountable sector.

    At least I (and the rest of society) can hold the state accountable for how it spends my (our) taxes, private companies are under no obligation whatsoever to care what I or anyone else thinks about how they use their profits.

    Do we seriously want industries which have shown themselves corrupt and negligent, greedy and without conscience to be running government services when unlike politicians we have no leverage with them with which to hold them to account for their actions?
     
  5. joseph8inch

    joseph8inch Well-Known Member

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    People seem to be under the impression that their lives would be much more free and they would have grown up with more equal opportunities if their roads, schools, electric grids, police, and everything else was privatized. The US generally sucks when it comes to public services, but the problem is in how the US government runs it, not the nature of government in general. The problem stems from private campaign financing; we're the only advanced country in the world that still relies completely on private campaign financing, and one of the only advanced countries that even allows private financing to begin with. To top it off, our infrastructure is based around a road and highway system that the states can no longer afford to maintain because of all the wear and tear constantly being caused by the traffic resulting from out 990/1000 car/people ratio, our pharmaceutical industry bleeds us dry (pun intended), and we have the most lax "regulations" of any advanced country, since it's overrun with people straight from the relevant big businesses. Even tax havens like Singapore regulate their health care industries more than we do.

    And sorry to break it to you curious, but those regulations--as lax and laughable as they are--are there to benefit society as a whole, not your individual business. As someone who owes my entire livelihood to the opportunities given by a civilized society that's only achievable through coordinated government, I have no problem paying my share of taxes to maintain that society. In fact, I'd pay another 10-15% if it meant we'd actually get good, well-funded services like those in Europe and Japan. God knows I don't want to live half my life driving from suburbs to downtown for work.
    [​IMG][​IMG][​IMG]
     
  6. dandelion

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    I dont follow the US government or its finances closely, but the clear impression given is that the US spends an incredible amount of money on its military. The normal way to phrase that is to say 'spend money on defence', but in the US case the view is clearly that the best form of defence is offence. The US seems to have taken the view, unlike most of Europe, that the opportunity provided from no longer having to maintain an army to face off the USSR is that said army is now available to go off and fight somewhere else. The UK is currently involved in defence cuts amongst others. How would US finances stand if there was a dramatic cut in that military? Since such a cut would probably dump the country into recession it could not be done at once, but consider the benefits if that spending was used to provide free health care instead, or as research and development for the sort of industry the rest of the world might be interested in buyng. Or to fix some of those rotten roads someone mentioned? How much does the US really benefit from all those soldiers?
     
  7. Hockeytiger

    Hockeytiger Active Member

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    You make a number of shakey assumptions.

    First, you assume it was the private sector that caused the mess. I'd argue that it was a misalignment of incentives caused by the public sector that was the primary cause and the failure of the public sector to keep up with changing market dynamics that secondarily caused the problem.

    If the US government (among others) hadn't incentivized banks to give risky loans, they never would have. Banks are not in the habit of giving out risky loans, but they will, if they are incentivized to do so. Add on to that, the fact that the markets changed to encourage banks to then sell those loans on the market and the government never stepped in to create a transparent system to enable investors to know exactly what they were buying like they did with the Securities Acts of '33 and '34. The banks and financial institutions no longer had to directly worry about default, even if partially gauranteed, since they no longer possessed the loan. Thus, you had the banks incentivized to give out risky loans, and then had no disincentive to give out even riskier loans.

    It wasn't private sector greed that created the problem, it was lack of governmental interest in creating a transparent system for the changing market and the desire to incentivize banks to give out risky loans in the first place. If the government had never incentivized them to give out risky loans then they would never have given the out since the couldn't sell them on the market and would have been stuck with too many defaults.

    In the end, the private sector, with a properly regulatory framework is much more efficient at creating wealth than the public sector. However, it doesn't create that wealth equitably. Thus, there's a need for social welfare programs and inheritance taxes to deal with those inequities created by a more efficient economy.

    A top down oriented economy will rarely create wealth at the same rate as a market (or bottom up) driven economy. The Eastern Bloc and the PRC proved that. Or if you'd prefer an non communist example, take India. But when those countries adopted a more market driven economy, over a generation, their people's standards of living, literacy rates, and even in some cases longevity increased. But inequality is on the rise in all those countries as well.

    Lastly, the UK austerity measures are not being implemented in order to encourage short term economic growth, but rather to avoid economic ruin (AKA Iceland) within the next generation or so. When running a budget deficit, you cannot cut spending or raise taxes to improve short term economic conditions. It won't work. In fact, it will likely do the opposite, which is why it is risky to do so in a recessionary period.

    Greed is something that ought to be managed, not discouraged. It is inherhent to the human conidtion. It won't go away. When I drop a hammer on my foot I don't buy a lighter hammer, or try to change gravitational forces, I create a system that avoids dropping hammers on feet (a tray), or mitigates the damage (a steel toed boot).
     
  8. dandelion

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    I think you just said the world recession was caused by the US government failing to keep up with innovations in modern banking and regulate them effectively? Banks are innovative in their financial instruments so as to get around the existing regulations. I dont understand why anyone thought those banks which did cause this mess would have been expected to do anything else? How many of the people actually processing those loans suffered from what they did? How many got very rich? Similarly the banks themselves made loads of money, and by and large have not suffered at all. There was no risk to their businesses, as we have seen, so they were correct to act as unsoundly as they needed to make money. Bankers may carefully assess risk to minimise it, but the bottom line is the bottom line comes above worrying about risk.

    The theory is that personal greed is a great force to make money, at least for the greedy. Governments find it easiest to tax people who have money, so if you give some reign to that greed it can give the state something to tax. But the state has to have regard for everyone else too, which means keeping the greedy ones firmly in their place and not allowing them to exploit others too much. You are right, they failed to do this last bit. This was a really major failure which demonstrated the inherent danger in this system and the vital need to keep that greed firmly circumscribed.

    By the way, what do you mean 'create wealth'? What does that mean? does it mean have a bigger national GDP, or does it mean everyone has a house? These two, for example, seem to be heading in opposite directions in the UK.

    I think the argument that UK cuts are intended to prevent long term ruin is slightly suspect. Government intention is that the largest part of the current deficit will be resolved by economic growth. The cuts we are arguing about are a modest adjustment in comparison. Granted though, it does represent a change in direction from budgets trending gradiually upwards to gradually downwards. All being well with how this crisis is handled in 5-10 years the policy will be revered again by whichever party happens to be in power. The UK consensus is that big government is a good thing.
     
  9. D_Tim McGnaw

    D_Tim McGnaw Account Disabled

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    So in your conception governments were fools to believe they could trust bankers when they said they were making sensible decisions based on current market conditions and careful risk assessment and should have anticipated that the private sector would do anything to circumvent regulations without actually breaking them and would lie when it was making vast gambles (with or without government guarantees or incentives) which were they lost would cause global recession?

    So presumably you see the radical shrinkage of government in public service provision in many many countries around the world as just comeuppance for the poor judgement of governments. You presumably think then that all the millions of people now in financial crisis after having lost their public service job are collateral damage to this extraordinarily poor decision making.

    In any case you're making my point for me, the description you give (one I'm familiar with and accept the validity of) is exactly of this absurdly trusting attitude politicians have had towards the private sector for the last 20 years.

    You're right governments failed to put in place the kind of regulatory framework your envisaging, they did this because they had accepted a dogma that the markets and the private sector were the font of all blessings and that they operated in an essentially beneficent fashion according to some sublime pattern called "market forces" which would somehow be the engine of the progress of the human species.

    All of that was bollox. In fact the markets are an engine of greed and exploitation. We exploit more people now more efficiently than we ever did before, but there has been precious little social progress as the dividend of this mass exploitation. Any comparison with the High Roman empire and contemporary developed world society is highly instructive.
     
    #9 D_Tim McGnaw, Oct 25, 2010
    Last edited: Oct 25, 2010
  10. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

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    I don't really look at it as an either or proposition. In the US, despite the rhetoric, we have a great deal of socialism in the Military, we just don't call it that. Military spending by some accounts, is at least $1T to $1.4T of a $3.3T budget, it's insane. Much of the money goes to weapons systems, but if you look at benefits for personnel, for instance TriCare, which is health care for both the Military and Congress, it's really great, but it's also really expensive, and they also don't directly pay for it; it's part of their total compensation, the pay portion of which is often horribly low. Pensions are handled the same way as health care.

    The problem with public sector pensions, and you are seeing this all over the globe, France, Greece, etc. not just the US, is that the deals (featherbedding?) agreed to by public sector workers and politicians were often untenable, but since public sector labor/unions could deliver plenty of votes, what aspiring politician would forfeit those votes by vetoing a plush labor deal? Plush, by today's standards, can simply mean having a job, and being able to retire with pay and benefits at 65ish.

    Defined pension benefits were designed for people to work until 60ish, and retire with an expected 8-11 years of retirement pay. Now with all the wonderful benefits of better health care, many are living into their 80's and 90's. So budgeting for 8-11 years of pay at 70-90% of your salary is a very different equation than doing so for 20-30 years. If you started with the former, and are now working with the later, inevitably there will be short fall.

    For private sector pensioners, it has been far worse. Shrunken retirement accounts won't stretch as far, if you still have any, and for many incomes have fallen by up to 50% here, if you still have a job. So for private sector people to ask public sector workers to modify their benefits by paying some portion of their families health care, as often they are provided this for free, contributing 10% of their incomes towards retirement, as well as taking 5% paycuts, or deferring pay rises, doesn't seem like an outrageous request given the far worse economics of millions who have lost their life savings, home and job. Even these modest concessions are bitterly fought over, but may still leave many municipalities broke.

    By the same token private sector workers should have put more aside during the good times. Unfortunately it was not mandatory. So, unlike the Germans, Chinese, and Japanese we mistakenly did not put aside at least 10%, or as much as 50% of our pay, as jobs were plentiful, but for 30 years, our consumers were the economic engines of growth for the world. In retrospect it may not have been real growth, in terms of the greater public good, but it did lift living standards, for many, globally.

    As to the higher morality of markets vs. public sector, I think it's an ontological argument. Inherently politicians define markets by creating the rules of play. Like all, they make mistakes, some times really BIG ones, and so do businesses, sometimes tragically so. The innate distrust of government in the US seems to relate to a sense of scale, if I screw up, it effects me, if a business goes under it effects some of us, but if government blows it, it effects all of us. Our mortgage writing standards blew it for not only us, but many more globally. To that end private securitization, and Fed mandates for lower, if any down payments, combined with super low rates, worked hand in glove to juice the market beyond reason.
     
  11. D_Andreas Sukov

    D_Andreas Sukov Account Disabled

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    Socialism is an idea. Because the government puts money into does not make it socialism. To call spending on the military socialism is an ignorant comment.

    People think private is better than public because people say it is. The media and the government says it is. When BBC make a feature on their website called, "who in the public sector earn more than the PM?" and imply that most people in the Public sector have huge pensions, they are strenghening the myth.

    The average state pension is £5,000. If you are a women, it is unfortunately less.

    Yes, their are people in the public sector that earn too much. Those people are the ones who do the Government's bully work. The social worker gets a pittence. The binman gets nowt and the teacher gets an ok sum, but at the cost of their sanity.

    The idea that the Public sector started the crisis is mad. If governments actually went in hard against rich tax avoiders then there would no crisis, albeit a smaller one.

    Private companies will bleed you dry then charge you more for not having money to pay them anymore. a concept i never really got.

    Governments are irresponsable. But if the private sector and the banks are so good, why didn't they stop them. Big business owns governments. Dont dispute that they couldn't do that.
     
  12. wallyj84

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    The person who said that taxes would reach 50% soon is funny.

    I think the answer to OP's question, for the US at least, is that the right has done an incredible job of demonizing government and the public sector. They have made it so that any kind of government action, unless it's the military, will be viewed as communism and traitorous to the values of the country.
     
  13. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

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    There are many types of socialism: Utopian, Libertarian, Market, Reformist, Scientific and Revolutionary, to name a few. Some forms advocate straight out nationalism, others state control as a way of controlling the means of production, which is what you have in the US, since socialism eliminates the need to purchase munitions, or weapons systems (by design) on the free market, thus creating a closed loop system in which there is no market market feedback, or diversified capital structure. Given the size of the US military (1.1-1.4T for 330M people, vs. the rest of the world's $660B for 6.3B people) the US military is also a form of work fare that creates jobs, or takes advantage of, depending on your point of view, for those without better economic options. Would those jobs (military or weapons system factory worker) be there in that amount without state spending? Not at all. Perhaps when you finish your schooling, you'll understand that government managed economies of scale, and work fare programs, are also considered forms of socialism.
     
  14. dandelion

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    I think one of the delights of a country like the US is that 'socialism' means whatver the speaker says it means. You just about said every country in the world which maintains a standing army is by definition socialist, and the US is the biggest of all. Amusing. The US goes socialist to be able to kill more people than anyone else while most of the rest of the developed nations do it to provide health care.
     
  15. Jason

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  16. D_Andreas Sukov

    D_Andreas Sukov Account Disabled

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    Don't patronise me. Governments know that their work force need general well-being so therefore give them few benefits so they can continue their hand to mouth life. That isn't socialism. They are still being exploited by their bosses and the ruling classes.

    You are right. There are many forms of Socialism, but all of them speak of giving power to the Proletariat.

    You view on Socialism is very Fox news. Maybe it is you that needs to do some schooling.
     
  17. B_crackoff

    B_crackoff New Member

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    A bit disingenuous on pensions. Actual minimum pension is £132.40/wk plus free housing, free council tax & free bus pass, if you've never worked a day in your life. Equivalent to £17K/ann tax free.:smile:

    You don't seem to understand pensions. Final Salary schemes are literally a pyramid scheme that aren't remotely paid enough for those contributing. An average scheme would be fairer, & a recessive tax on those already receiving them would be socially equitable.

    You give the public sector funds - they spend them all. It's a culture of spending all your budget regardless to ensure that you receive the same the next year.

    There is no incentive to economise.

    Public sector workers get paid 12%+ more than private, & receive 15-20% pension contribution compared to 3-4%(& it's gold plated & inflation proof), 5-10 days more holiday, & 3 days more sick leave.

    The problem is when private companies are awarded contracts (through the old social network - regardless of politics)-& still can't do the job.

    The problem we have has little to do with tax avoidance - though that should be tackled - £10Bn/ann - but future liabilities.

    With Public debt, public sector pension, & PFI liabilities etc factored in - the UK owes £2.6TN. The interest on the deficit debt of £160Bn this year is £10Bn alone, every year forever, which matches the tax avoidance recoveries:frown1:

    The only place to cut is the public sector. It's not like it does well!
     
  18. dandelion

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    Doesnt it? where can I see figures on how much the public sector contributes to the Uk economy and how it compares to the private sector? What makes you think that 'empire building' by spending all your budget and asking for more does not happen in the private sector? Think bankers....
     
  19. Jason

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    The contribution of the public sector to UK GDP is £0.

    Wealth is created by industry. The public sector exists to support people and to support industry, and on the nation's balance sheet it is an expense item. We need that expense item - indeed it is crucial. But its financial contribution to the UK economy is nothing whatsoever.

    Creating jobs in the public sector to reduce unemployment is economic insanity (though politicians might still be tempted as it makes them look good). Creating jobs in the private sector to reduce unemployment is economic genius. You do this by reducing tax and regulations on employers and by motivating employees to take jobs at lower wages (and yes that does mean taking an axe to benefits). The idea of cutting public sector jobs while boosting private sector jobs does work, at least in theory. And we will soon see if it works in practice.
     
  20. dandelion

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    ive made this post already and got no answer. Most of the Uk private sector is service industry. What wealth is created by the private train industry which transports people back and forth each day more than was created by the public train industry before privatisation? What tangible benefit in real wealth is created by a restauarant making you dinner, compared to a council home help making you dinner? Is there, or is there not, a tangible increase in your real wealth because a NHS public hospital gives you a new hip, heart, whatever? How would there be any difference if we had the US private medical system? What tangible difference exists in a pension system run by the government as compared to one run by private companies?

    Tax someone and spend the money on park keepers. Dont tax them, and the chap hires himself a gardener. What is the difference, except that we definitely now have a park keeper and a nice park everyone can use, instead of maybe some chap employing a gardener and having a nicer garden for himself alone. Or he might just choose to keep his cash under the bed, helping not at all. Which of these two guarantees a job created, and which gives the greater benefit to society?

    The public and private sectors are similar in size and for the most part do similar things. The problem with this country is that there are bugger all real wealth creating companies, whether operated in the public or private sector. Financial services are some of the worst: they are simply an asdministrative cost on industries which create real tangible wealth.

    The uk has no future as a low wage employer. Hasn't that lesson from history got through yet? Show me the UK cotton industry! shipbuilding! Rich people will not work for third world wages. If you persist in offering unacceptably low wages, what happens? Third world people come over here and take them! That doesnt help one tiny bit. The difficulty in the UK is the huge range in wages from low to high, and this must be addressed. It means chopping down the highs, because having high top wages simply forces up the wages at every grade up the pyramid. It means hauling up the lows, because we need to make those jobs worth doing by british citizens.
     
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