Sunday, August 20, 2017

Privatising governments are out of touch

A recent report from the Transnational Institute on the transfer of public assets into the private sector has revealed what many consumers around the world already know — four decades of privatisation have generally not brought anything like the golden promise of cheaper, more efficient services.

Instead they have often produced a litany of run-down operations, failed infrastructure, corner cutting and profit and shareholder value maximisation over the needs of the consumer.

Such is the extent of the problem that in Europe there is a major shift towards wresting privately-run utilities back into public ownership. In Germany alone there are hundreds of municipalities deciding not to renew private company contracts; France is not far behind.

In the United Kingdom, Labour leader Jeremy Corbyn struck a chord with the electorate when he promised to re-nationalise the privately run rail network. Years of ownership by various companies have seen the price of travel rise in direct proportion to the decline in services provided.

In Australia, the reputation of the four major banking companies has never been lower, to the point where the Government is casting around for new players in the market in the hope that competition might placate a population thoroughly fed up with high charges and indifferent services.

Professor at the School of Economics at the University of Queensland John Quiggin summed up the mood when he said that most Australians now firmly believed that privatisation was a policy that had consistently failed.

“Yet it is still remorselessly pushed by the political elite. It is little surprise that voters are turning to populism in response,” Professor Quiggin said.

He cites the example of “the comprehensive failure of vocational education privatisation…yet despite this, the push for privatisation has gone on…for-profit education in the United States has been a disaster area”.

The UK’s Corbyn nearly caused the biggest election upset in modern times with a platform that contained the re-nationalisation of the railways and water industries. Shadow Chancellor of the Exchequer John McDonnell pointed out that three decades of water utilities in private hands had led to ownership by a handful of foreign investors, many based in overseas tax havens. 

“Meanwhile, prices have increased by 40 per cent and over a quarter of the amount consumers pay on bills goes towards servicing debt interest and paying out dividends,” McDonnell said

In Indonesia, the courts have intervened to annul water privatisation contracts in the capital, Jakarta, finding that the public-private partnerships had been negligent in fulfilling the human right to water for the city’s residents.

For decades we have been fed the mantra that the private sector, existing in the “real world” where competition mandated management efficiency, would do a better job of running public assets than lazy, uncommitted and incompetent public servants. Over time that rationale has resulted in privately run prisons, security systems, telecommunications networks and the management of resources.

If the chaos and misery spread by the global financial crisis was not warning enough of the effects of an out-of-control private sector, surely the Government of US President Donald Trump, a businessman with no experience in public administration, is the clincher.

While the private sector has a role to play — and in some areas it is just too complicated to return to public ownership — a rebalancing of the privatisation craze is necessary if we have any hope of moving towards a more just, sustainable future.

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