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Has privatisation passed its use-by date?

On Q&A last Monday, RBA board member Heather Ridout expressed her disappointment at the decision by the voters of Queensland to reject the Newman government’s privatisation plans.

Whether it has been noticed or not, that election result coupled with the recent elections in Victoria and Greece share a common denominator that may have far reaching ramifications for future governments all over the OECD world.

The Victorian and Queensland elections were fought primarily on the issues of infrastructure and privatisation. There were other issues in the background but these two took centre stage for most of their respective campaigns.

If you were to combine these two issues and express them as one broader concern for voters, it is likely that concern would be identified as sentiment; a feeling that selling off assets and allowing private companies to buy public utilities that result in costing users more, wasn’t right.

Austerity has been the catch cry in recent times with governments telling us that our present lifestyle is no longer sustainable. They then encourage the privatisation of public assets as if this somehow benefits us.

moneyWhen politicians look at publicly owned assets, all they see is a pile of money sitting there waiting to be collected. They think if that pile of money can be realised without effecting the service it performs, then why not sell it and spend the money on something that will make them look good.

They then try to sell the idea to the public who are led to believe that this will improve their lives and those of future generations.
But it never seems to work out this way. We have seen public assets pass from our hands into the hands of the already wealthy time and time again, without ever seeing any tangible reward.

Has the sale of Telstra, the Commonwealth Bank and the State Electricity Commission of Victoria, just to name a few improved our quality of life?

Looking at the result of these three elections it is worthwhile asking: Are we seeing a wiser electorate waking up to the hypocrisy peddled about privatisation?

In Greece, a country that has been cheated, lied to and then forced to pay the price of neo-liberal excesses by both their own government and the EU Parliament, the people decided enough was enough.

Again, it was sentiment, a feeling they had been punished enough, if indeed, they should have been punished at all. In all three locations the people judged privatisation, austerity and structural reform to be a smoke screen hiding the real agenda behind these moves.

That is not to say the people’s understanding of the real agenda is crystal clear either. But they do understand that the flow of wealth to the top end of town, at their expense, is real. Public assets are generally always undervalued.

powerThey could clearly see that their living standards were in decline while politicians, developers and corporate giants effused a smug arrogance reminiscent of the Frank Underwood character in “House of Cards”.

They decided in all three cases they weren’t going to take it anymore. It begs the question therefore: Is the public perception of neo-liberal philosophy now clearer and are the people finally beginning to reject it?

Unregulated capitalism has always been at odds with those basic human values that we hold in common; fairness, honesty, sympathy, charity, empathy. The notion that people come before profit, was somehow cast aside when the money train left the station and big capital promised big rewards for all; rewards they never intended to share.

If we can take a lesson from Victoria, Greece and Queensland, it is that big capital will have to re-assess the way it treats its most valuable resource: the people who make it work for them.

capitalThe challenge for the new governments in Australia now, is to explain this to big capital.

But if our local business writers continue to suggest as Adele Ferguson of The Age does that, “With an infrastructure backlog and big budget deficits, we can build the infrastructure we need only by selling assets and attracting private capital”, then there is still a long way to go.

Meanwhile, more governments will fall unexpectedly because they ignored public sentiment in favour of private gain.

 

29 comments

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  1. PopsieJ

    Last 6 months the Commonwealth Bank made 4.3 BILLION profit. how much tax did it pay ?

  2. Jennifer Meyer-Smith

    These are exciting times, as the sleeping giant aka the populace, is waking up. That means the major parties are starting to be held to higher standards.

    Watching events unfold in Greece and seeing Syriza make brave, progressive political decisions that bring positive gains for the Greek people, then progressives from all over the world can take heart.

    In the larger landscape, this will only be better incentive for the governments of Victoria, Queensland, SA, to advocate for braver policy planning and implementation that bring true, refreshing reforms that combat the sneering age of austerity lies.

  3. jagman48

    Remenber though states have been told to sell off assets by the LNP to be eligable for infrastructure loans.

  4. John Fraser

    <

    "Sale of Brisbane, Melbourne and Perth Airports "

    http://www.anao.gov.au/~/media/Uploads/Documents/1997%2098_audit_report_38.pdf

    Brisbane airport was Leased ….. that's right, exactly why the State LNP just got voted out as a first term gov ………. for 50 years with a 49 year option … once again exactly the same as the LNP election proposal for ports and rail in Qld …… the Lease price was $1.4 billion.

    Brisbane airport is set on ….. wait for it ….. 2,700 hectares of land within a 20 minute drive of the Brisbane CBD, has a rail link and direct access to the motorway heading to the Gold Coast and the Sunshine Coast.

    The Federal government didn't stop spending taxpayers money on the Brisbane airport until the year before the "Lease" when the new International Terminal was opened.

    Because the Brisbane airport is still considered Federal land development of the 2,700 hectares does not come under State or Local planning laws.

    Both Keating and Howard governments were involved in the sale (Lease) of Brisbane airport.

    A Lease of the Century !

    And they wonder why Australians don't want to know about sales/leasing of Australian assets.

    If they can't run and maintain them at a profit who thinks they can sell/lease them for a fair price.

    No one in Qld …. thats for sure.

  5. Lee

    I’d like to see the evidence that privatisation is more efficient and saves money, because that certainly isn’t my observation. My partner and friends working in the private sector regularly tell me about examples of inefficiency and cutting corners to save money. My own experience working in the public sector for nearly 30 years and seeing the private sector performing the same work is that we sometimes need to do it again properly, and the private sector won’t do those parts of the work where they will incur financial loss.

    I was having a conversation with someone last night about this very topic. I work in a public pathology laboratory. A lot of our engineering/maintenance-type tasks are now contracted out. Contractors need to undergo induction, which takes at least one hour, plus read our biosafety manual (160-170 pages) before they can do a job. The lab staff routinely decontaminate equipment before maintenance or repair is performed. Most of the biosafety manual is not relevant to a contractor. In some instances none of it would be relevant. So we get a contractor in for a job that normally takes one hour to perform and it now takes all day due to the induction nonsense – when contractors are supposed to be accompanied by one of our staff anyway. Either contractors cannot be bothered jumping through all these ridiculous hoops so they don’t tender for pubic service jobs, or they pass the cost of their time onto us.

    During the same conversation my partner mentioned that he was offered a job recently and he needed several certificates, which he doesn’t have, to do it. The person making the offer said it’s almost impossible to find people holding all of the required certificates, so the one or two he can get then charge whatever they like (always a ridiculous fee) to perform the work. His staff spend “half their time” (may have been an exaggeration) just keeping their certificates up to date so they can work.

    My personal opinion is that privatisation and industrial regulations requiring many of these certificates and other ridiculous rules is making a major contribution to eroding employment opportunities, pricing some our industries out of competition with some of the offshore alternatives and damaging our economy.

  6. Rosemary (@RosemaryJ36)

    Look at the profit just announced by the CBA. A major portion of the dividends goes into the pockets of the wealthy and that profit was created despite the payout necessary for the disgustingly self-seeking financial advice given to some investors – who became less wealthy in consequence.
    Greed is the underlying theme and if it had still been “our” bank, those profits would have helped service our needs.
    If superannuation funds were invested in infrastructure, privatisation might become less attractive.

  7. diannaart

    If superannuation funds were invested in infrastructure, privatisation might become less attractive.

    Excellent point Rosemary.

    Particularly considering the entire ideology is at best spurious and at worst a great loss for the public.

    Consider the following

    If competition shows that the best companies to run Britain’s privatised railways are state-owned railways from other countries, what does that say about the justification of privatisation? And what does it say about what privatisation has done to Britain? How did we get to the point where this country’s railways, power stations and postal service were ready to be taken over by foreign versions of British organisations that our own government, claiming patriotism, systematically took to pieces?

    http://www.theguardian.com/politics/2014/aug/22/sale-of-century-privatisation-scam

    We, the public have not only been swindled but our future generations have been cheated as well. Intergenerational Theft indeed!

  8. Phi

    Can’t argue with this opinion piece – spot on Mr JK. I don’t think that the MSM is going to make the radical transition from business servant to peoples’ servant. But, the increasing number of on-line independent media sites is starting to get the message out.

  9. Paul Rayumond Scahill

    John, as usual yoyr blogs are always very informative. I really ony bother with a few bloggers on this site (not that I am on any other sites) however over the past couple of years I have been able to decipher those who realitically report truthfully. I wish you thankfully for that. I enjoy your knowledge and your information. Please keep up the good work.

  10. Peter K

    Unfortunately the neo-libs have won the debate. They have convinced the electorate that running a Sovereign Nation’s is the same as running a household budget. The electorate has been bewitched by the language.;

  11. Lee

    “Unfortunately the neo-libs have won the debate. They have convinced the electorate that running a Sovereign Nation’s is the same as running a household budget. The electorate has been bewitched by the language.;”

    I’m not convinced that they have won. Lately I’m seeing more and more posts in social media stating that the federal budget cannot be compared to a household budget. We need to keep on getting the word out there. Whenever you see someone in social media likening the federal budget to a household budget, point out their error.

  12. mark delmege

    What Heather Ridout didn’t say was that governments should always be able to borrow cheaper than private enterprise. However a discussion is worthy on how and where fund managers can invest our cash. The creation of the massive super funds has changed the nature of Capitalism in Australia – no longer are states ruled by a small number of families. (jumping somewhat) However one only has to compare the population growth rate of around 1.75% – significantly of migrants and the national growth rate of a little over 2% to understand where all that growth is coming from. Sure there is an argument that GDP figures are less relevant than made out but I am not sure we (Joe and Jane citizen) know just where we are heading. Fund managers are using OUR money and we need guidelines on how that can serve – on balance – the wider community. (Fund managments are a form of socialised enforced savings in the hands of neo-liberals – and we would do well to understand this better)

  13. Win jeavons

    How can a service organisation become better by allowing private groups to profit from them ? It made no sense to me in the 90’s and even less now we see privatisation in action. It is a CON!

  14. PennTCJ

    While I think the overall point of this article is well argued and astute, I do object to ‘politicians’ being swept into one big pro-privatisation group. While I know it has been something both sides have tried (hell, Labor lost Queensland in the first place because of it), there are also a great deal of people who have opposed it, and who are entering politics now with this as one of their driving issues – standing up against privatisation (and I’ve heard it theorised that opposing the Bligh government’s targeted privatisation was one of the reasons Jo-Ann Miller retained her seat in the 2012 landslide).

    Anyway, aside from that, hopefully current events are an indication that things are swinging away from privatisation, especially as more people very steadily become more informed.

  15. stephentardrew

    I think your just about spot on John.

    Things are moving and people are getting fed up with the lies.

    If services become relatively more expenses under privatisation eventually there will be blow back.

    All this takes time to filter through to the general populace.

  16. JohnB

    A lottery was created to finance an Opera House…and a fine opera house indeed.
    For many years thereafter, ‘the lotteries’ returned dividends to our government coffers that financed societies support infrastructure.
    But the returns were too easy, as ever avaricious corporations convinced our politicians they were sitting on a one off windfall that would work magic on their budget/electoral success; and they could use their vast entrepreneurial talents to expand lottery sales for even bigger returns into the future…and the politicians were sucked in by their economic snake oil.

    So then they privatised the lotteries, the corporations maximised market penetration, with million dollar ‘bait’ attracted new customers who can ill afford to gamble and provided themselves with greater profits.
    They then concocted elaborate ways to minimise taxable corporate profits, no doubt using offshore subsidiaries (tax havens) to enhance ‘operational efficiencies’.

    It all sounds so good, except for the fact that no more “opera house’s” have been built, and Australia now has a society/family destroying gambling problem – with governments left to pick up the pieces of shattered human health and lives without the vast profits retained by corporations.

    Some deal.

  17. corvus boreus

    I think there is a kind of implicit nod to the increasing public cynicism/distaste for programs of ‘privatisation’ in the fact that the spin doctors have conjured the weasel phrase ‘asset recycling’ to replace it as a policy term.

    Calling a turd a scat does not make it jazz.

  18. Don Winther

    Would anyone know if the Snowy Mountain Scheme got sold off. I protested against the sale years ago and we won but I always felt that it would be sold from under the counter when no one was looking.

  19. Don Winther

    Medibank :- why? Thanks Mathias Cormann ( ex HBA )

  20. mark delmege

    JohnB maybe you could remind people just who bought NSW lottery

  21. JohnB

    @mark delmage 08:50pm

    Yes..how remiss of me…
    Former NSW treasurer Eric Roozendaal
    “NSW Treasurer Eric Roozendaal today announced the sale of NSW Lotteries –
    which will deliver the people of NSW total proceeds of more than $1 billion.
    Mr Roozendaal said the NSW Government has accepted a binding offer to
    transfer NSW Lotteries Corporation to Tatts Group Limited in a transaction that
    will deliver NSW taxpayers total proceeds of approximately $1.01 billion…”
    http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0008/17783/100302_NSW_Lotteries_sale.pdf

    The same Eric Roozendaal:
    “…Eric Roozendaal set to be expelled from NSW Labor party…”
    http://www.smh.com.au/nsw/jodi-mckay-calls-for-eric-roozendaal-to-be-expelled-from-the-labor-party-20140907-10dl5j.html
    He was suspended from the ALP – not sure if he was ever expelled.

  22. JohnB

    @mark delmege February 11, 2015 at 10:42 pm
    From your linked article above:
    “…Despite these notable benefits, under the TPP and TTIP, publicly-owned banks might wind up getting sued for unfair competition because they have advantages not available to private banks, including the backing of their local governments. They have the backing of the government because they are the government. The government would be getting sued for operating efficiently in the best interests of its constituents…”

    If Andrew Robb has his way, we will all be working for the same bag of rice.
    https://independentaustralia.net/business/business-display/the-tpp-the-dirtiest-most-dangerous-deal-youve-never-heard-of,7347?cachebreak=1#comment-1845470386

  23. Colin Young

    Every country should have done what Iceland did, tell the bankers to go to gaol. There would be no austerity measures, no robbing Paul to pay Peter and no stealing from the public plate to line politicians and their pals’ pockets. They’ve simply become too brazen at this. And this Heather Ridout implies an entitlement behind her incredulity.

  24. Denis Hay

    Privatisation has and is costing Australia billions in lost government revenue every year. The CBA has just announced a $9 billion profit for the year. Telstra $4 billion last year and Medibank Private $2.33 billion last years. Australian tax payers used to own these assets which our government sold for short-term gain and to feather the nest of multinational and big businesses. There are also many other public assets that have been sold that used to generate revenue for governments. Governments are still trying to sell the remainder of our assets. Their sales ‘spin’ defies all logic. One has to ask who are our elected representatives working for?

  25. mark delmege

    Presactly Denis they were/are Fifth Columnists. selling the cow to buy milk is never smart

  26. mark delmege

    This is arguably the most important discussion we can have here. Public wealth in the form of super is in the hands of neo-liberals. They’d like to build roads, freeways ports in some form of public private enterprise where we pay for using a toll road … it would seem. This imo is a crazy way of using our immense wealth and we need to understand just what we have so we can move forward and add to useful public wealth and quality of life rather than have them cheat us out of money through tolls.

    The Guardian ran a background piece on one of the new people in power in Greece – he even worked here some years back. You can almost ignore the article and go straight to the youtube clip to see what he is on about. It’s long so you might like to download it to a stick and play back on your TV if you have a usb plug. It will prolly be better entertainment than most shows anyway.

    http://www.theguardian.com/world/2015/feb/13/greece-finance-minister-yanis-varoufakis-interview-syriza-eurozone?CMP=share_btn_fb

  27. Pingback: Has privatisation passed its use-by date? | THE VIEW FROM MY GARDEN

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