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Australian Super Funds wanting to invest in America’s infrastructure privatisation, is it ethical?

When I recently learned of the push for Australia’s superannuation industry to invest in American infrastructure, alarm bells rang. Neoliberalism is still very much in economical favour so what was this really all about? When I read articles about it from Australia a little closer, I realised that they were missing the meat of the story, all that I was reading was the bare bones.

Firstly there is no $US1.5 trillion infrastructure plan as such in the 2019 budget. The Trump administration’s infrastructure plan is basically a finance deal that includes deregulation, and the privatisation of America’s state and local government assets. $US200bn is all that the American government is willing to spend, including $US100bn that has been allocated to an Incentives Program. These figures however, do not include $US178bn worth of cuts to be made in the state and local government’s infrastructure budgets. They pretty much cancel each other out. The deep cuts in funding, and the need to fix their infrastructure will leave many of these governments no choice but to look at private funding and selling off its assets.

No matter where the funding comes from, privatisation requires taking over a government function at a lower cost than the government can provide it, and to make a profit, or it wouldn’t be worth its while.

America has been undergoing privatisation since the Reagan administration through its neoliberal policies. These policies enabled private enterprises to take over energy infrastructure and utilities, but not roads, rails, ports and airports, they have mainly remained as state and local government assets. Privatisation though is not as popular as it once was due to Americans seeing and living with the consequences of privatisation; they know how it affects their lives, wallets, and their communities. In Chicago for example, parking meters were privatised 10 years ago with a 75-year lease that has cost the city $US974m in lost revenue, so far.

Privatisation in Australia under the guise of ‘asset recycling’ has been used to lobby American politicians for the last couple of years. It was introduced to Australia by former Australian Treasurer, Joe Hockey. Hockey in his current role as American Ambassador has led the charge with assistance from others, including former New South Wales Premier Mike Baird. In Australia it involved selling state assets to private to help pay for infrastructure projects, and the federal government paid an incentive payment to add to the funding. There were no big cuts or deregulation involved. The super funds think selling it to the American public as “workers capital” rather than private, to pay for public assets will do the trick. The super funds have even re-branded: Public Private Partnerships in America, to Pension Public Partnerships.

You might be asking yourself: ‘Why should I care where or how Australian Super is invested if it’s bringing back returns?’ That’s a good question. America has inflicted neoliberalism policies around the world for the last 40 years, and this has led to the global decay of infrastructure. The global race to fix ailing infrastructure (or to gobble up what’s left of public assets), is being touted by Australia’s Foreign Minister, Julie Bishop, as the answer to sustaining economic growth. Neoliberal policies are profit-driven, whereas things like infrastructure maintenance are not very profitable. Hence the decline. Pretty ironic when you think about it.

Is it right or ethical for super funds to invest in a country that is also being deregulated within an inch of its life to make it easier for private with their investments? There are grave concerns for the plan to deregulate the country’s water supplies, some water utilities are already struggling to keep their water clean. Did you know that 16 million Americans get sick from dirty tap water each year? Deregulation, especially in regards to environmental restrictions designed to protect communities, will once again add to the monetary burden of cleaning it up onto the states and local governments. Even if super funds just invested in toll roads there like IFM Investors with their Indiana investment, wouldn’t it be better to invest in Australia’s infrastructure? In particular renewable energy, there’s a whole industry waiting to be untapped. Or perhaps the super funds could look to our neighbours in Asia needing infrastructure assistance, including being climate change ready. There is so much more to ethically invest in than road tolls and user charges around the world.

And on a final note, another concern that I have is if investing super into anything that makes a profit becomes the norm and accepted, what other ideas or policies that are unpalatable now, are lurking waiting for the right moment to be introduced? The privatisation of sidewalks in Australia? It’s already happening in Kansas City and Missouri.

There are only public assets (including public land), and services left to invest in or take over. If this were to happen what would the world look like? I don’t even want to imagine.

This article was originally published on Political Omniscience.

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23 comments

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  1. Andrew Smith

    Without understanding all details, one could assume that previously proposed corporate tax cuts would aid US and other funds investing in Australia (plus fund managers like Blackstone etc.) e.g. Canadian Teachers’ Pension Fund is a significant global investor and in Oz too.

    However, each Oz fund’s own members would need to be aware at the Australian end of actual and planned investments here and elsewhere, and give approval, in theory…..

  2. Margaret Frew

    Take your cotton picking hands off our super. Simply because when you lose it the treasury will be absolutely broke and all of us will be destitute. If the people like Joe Hockey want to put their own money in then that is up to them.Why oh why do these pollies want to do this, they are supposedly educated and if I can add up then they should be able to. This comes just after Turnbull has met with Trump and he is the best spin doctor I have ever heard. 3 times he went bankrupt and was bailed out now he wants our money to do the same. And Turnbull has been taken in by him. Ohh if only I and many others could get him to see sense.

  3. Kronomex

    The calculators at the super fund boards would be going into overdrive as they work out what sort of bonuses they will pay each other for such brilliant schemes and plans. If it all goes arse up they will be contrite, sorry, and blame it on market forces while they consult their Cayman Island banks to see how their stashed cash is going. And, as usual, the little person gets another kick in the teeth.

  4. Freethinker

    Oh well, if Mexico is not going to pay for the wall the Australian Super Funds can help on that.
    We need a change of government soon before the damage it is beyond repairs.

  5. Matters Not

    Re:

    It was introduced to Australia by former Australian Treasurer, Joe Hockey.

    Don’t think so. The concept emerged much earlier than that. In Queensland, for example, Treasury luminaries spruiked lazy capital and the need to energise same (via asset sales) at least 25 years ago, well before the arrival of Hockey.

    Selling assets makes State Budgets look healthy – but only in the short term. Then again, when was the time that State Governments were ever concerned with a future that went beyond the next election?

    Then there’s public private partnerships . The labels evolve, but the outcomes remain the same – wealth transfer to those who already more than enough.

  6. johnF

    According to Roy Morgan there were 2.59m Australians unemployed or under-employed in January .
    There is no rail line past Geraldton on the west coast.
    No, f**k it, invest it all in the F35, that’ll be a winner!

  7. John Zahra

    We will take your refugees and you will give us your superannuation funds…….

  8. paul walter

    We have already seen the like in miniature with the Commonwealth Bank’s “financial advisers”. The Big One, the REAL heist, is now coming.

  9. Alpo

    “Australian Super Funds wanting to invest in America’s infrastructure privatisation, is it ethical?”…. It’s definitely stupid, that’s for sure!… Only madmen would invest their superannuation in Trump’s USA…. But if they want to do it, go for it. I only say to Bill Shorten: when you become PM have no mercy, no mercy at all with those superannuation funds that invested in the USA and are now on the verge of bankruptcy… let them sink and their superannuants sink with them!…. It’s a good learning experience.

  10. Alpo

    Good point, John Zahra…. very good point!

  11. diannaart

    @ Freethinker

    Oh well, if Mexico is not going to pay for the wall the Australian Super Funds can help on that.

    Funny because it could well be true?

    ~~~~~

    Until there is massive change of priorities of both our federal government and that of the USA (which needs a big rethink on government/business vested interests), best not go into ANY ventures involving Australia’s superannuation.

  12. jimhaz

    Hockey might have introduced the term “Asset Recycling” into our politics, but I used to prepare “outsourcing” surveys in the 90’s for the NSW Treasury.

    In using the term, I’d say Hockey was hiding the DISVESTMENT Howard ramped up, portraying this divestment as using the funds for new infrastructure when it was not actaully so.

    From Public to Private:
    The Australian Experience of Privatisation

    https://crawford.anu.edu.au/pdf/staff/janine_oflynn/2009/apj_public_administration_2007.pdf

  13. Topenda

    Sounds like a great idea! What could possibly go wrong?

    —end sarcasm—

    Might I suggest people check out the range of ethical superannuation investor services?

  14. Eddie Seymour

    I am sure that the directors of the Industry funds in Australia would have a different view of investing in the infrastructure of gool old USA!! why not invest in the infrastructure of Australia, build a new Australian flagged/crewed shipping line/build new and fast railways (not the super fast one), build/repair the 750 bridges in NSW (as reported by Local Govt Association 2015), yes there is a productive outcome to this proposals! Invest in renewable energy/renewable powered desalination , all achievable.

  15. Keyser Soze

    If these parasites “loan” the US our superannuation funds then God help us all. Not theirs to give. To help America’s infrastructure? How much do they spend on Defence? How much do they give Israel every year? Is that more important than helping their own people?
    They’ve dug their own hole of debt and now want Australia to help out? Joke.
    Read on.
    https://www.zerohedge.com/news/2018-02-27/us-government-lost-12-trillion-2017

  16. joantremelling

    How does anyone think superannuation funds ‘make a quid?’ – they invest in all kinds of things. They lend our money at whatever interest they think they will gain from investments we know nothing about and it is the profits which get paid out if/when we call on our super. Investing in Australian infrastructure is my choice but just imagine the outcry if super holders had to wait for yonks for the ‘interest’ to be earned in a country with such a small population.

  17. Matters Not

    Yes joantremelling there’s not a lot of understanding on this thread re Australian Super Funds (including (union)Industry Super Funds) and how they diversify their investments and in many instances the best returns come from investments outside interest earned.

    Capital growth usually beats interest earned.

  18. Andreas Bimba

    A top rate article Mel.

    Unfortunately in our democracy and theirs (the US) the lonely voice of evidence, reason and truth is not heard amongst the fluff and lies of a largely neoliberal propagandist mainstream mass media and well funded advertising and lobbying campaigns by the myriad of business sector vested interests.

    The rust belt voter that voted for Trump will only see the propaganda and will actually think Trump is looking after their best interests by massively investing in infrastructure. They fell for his massive business tax cuts are good for jobs lie as well even though this means a net transfer of national wealth to the most wealthy and a net transfer of the federal taxation burden onto the less well off.

    The Tasmanian election results are an example of our stacked democratic system even when one factors in most of our current economic and social policy problems arise at the federal level and the Tasmanian Liberal government sometimes does try to be reasonable.

    Our entire superannuation system is a neoliberal lie. The federal government can easily afford the aged pension for all from a more reasonable age like 60, especially if an assets test is applied. The superannuation contributions concession that overwhelmingly benefits the most wealthy costs the federal government’s revenue stream about the same as does the aged pension currently.

    Superannuation fund managers apart from the few more ethical funds, have proven to be lazy and immoral investors that basically encourage a short term cost cutting, profit driven culture in the businesses that they invest in which is often harmful over the long term. Most funds are also happy to invest in fossil fuel companies and infrastructure, cigarette manufacturers, the gambling industry, alcohol product manufacturers and retailers and environmentally damaging businesses. If it makes a buck go for it!

    Some of our super funds also like public private partnership infrastructure projects that in general are highly profitable due to a captive consumer that is effectively taxed with impunity and generous tax deductions for investors which are effectively a subsidy by taxpayers.

    Instead our federal government and the US federal government could fund worthy infrastructure through currency issuence by the central bank or by providing extremely low interest loans. Taxpayers and infrastructure users would benefit most from this approach – but that is not the point in our current world that is run by the crony capitalist scammers.

    Our super fund managers currently receive about $25 billion p.a. in management fees while delivering rates of return that are in general below the appreciation rate of the applicable share market indices. In other words fund management could effectively be at no cost apart from client communication and administration by investing in a static general market fund. The industry funds are however much better with lower fees but those owned by our major banks and insurance companies generally apply the highest fees.

    In the neoliberal era not only is the little guy being scammed in every possible way, our only means of redress – a democratic process that is supposed to act in the best interests of the people, has almost completely, been taken from our grasp.

  19. Alan Luchetti

    I’d add what Mike Hall observes here:
    https://www.facebook.com/groups/MMTforRP/permalink/1938269553153306/

    “Some important things, as regards the universal intellectual economics fraud of pensions thinking today…

    Real goods and services cannot be transported from one period of time to another, without time machines that don’t and may never exist. ‘Money’ is not a substitute.

    Secondly, mass savings for pensions is a classic ‘paradox of thrift’. Not that anyone would know this, as it’s been studiously ignored for the best part of my lifetime, and probably ever since the day Keynes wrote that phrase some 80 or so years ago.
    Of course, this ignorance has had considerable assistance from the Financial or ‘F.I.R.E.’ sector who make out like bandits on pensions and other labour class savings’ ‘fees’.

    It is also a matter of monetary system Accounting that the ONLY possible source of net savings, for the Non-Gov sector — to the penny- is the accumulated Deficits (net spending) of the Government sector.

    IF the Government fails to net (deficit) spend enough to accommodate those net savings desires, the result is increased unemployment.

    Do take a moment to think about that.

    Private pensions is in fact nothing more than an attempt to create Capital owning rentiers out of the labour class. And that, en masse, is an impossibility. Such a strategy, by ‘fallacy of composition’ (another forgotten phrase, since the mainstream charlatans don’t ‘do’ macro economics), cannot work, except for a tiny few.

    Pensions, for everybody, should be provided out of current Gov expenditure for all pensioners. And its monetary level, as with all things, determined at the time of payments according to the aggregate real resources and productive capacity available for distribution in the society of the day.

    It also thus follows that pensions are, and will remain, in macro economics reality, a matter of private Capital accumulation for the relatively small number of better off workers who can afford such net savings, absent massive net Gov spending to accommodate such savings in the first place.

    It’s about time trade unionists started thinking in macro economics reality terms, and consider the appropriate actions in solidarity with their origins — the labour class as a whole.
    #LearnMMT — Modern Monetary Theory. And let’s put the charlatanism and snake oil ignorance of (macro blind) mainstream professional and academic economics behind us.”

  20. flogga

    Matters Not – Hockey played a major role in the privatisation of GIO (NSW) before he became a polititician – that was well over 25 years ago

  21. Matters Not

    flogga – point taken. Nevertheless, at that point in history Hockey wasn’t driving the political bus – just a backside driver of sorts. The essence of my position was that Hockey, when Treasurer, didn’t suddenly discover this good idea. It was out and about before his ascendency to Treasurer – as you affirm.

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