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Privatise the profits

By 2353NM

Despite concerns, there were no electricity shortages – load shedding – on Australia’s east coast during May or June. The outcome was managed by Australia’s Australian Electricity Market Operator (AEMO), the body responsible for maintaining the apparent delicate balance between supply and demand in a network that doesn’t have enough off-line storage to keep any surplus electricity produced until needed. AEMO effectively threw the electricity generation rule book out the window and along with the Government, demanded that various companies that own generation plant to run, averting the potential crisis, however they were paid extra to do so.

Even though a number of the so called ‘reliable’ coal powered generators were out of service due to breakdowns, other generation units were apparently taken off line because it was uneconomic to operate according to the rules. The price of the coal and gas used to generate power across most of Australia has increased due to international factors including the lack of fossil fuel supply to western Europe from Russia. While anger was directed at the companies that operate the power generators, predominately in New South Wales and Victoria, the real reason for the apparent attitude of profit at all costs goes way further back in history.

From the 1970s until fairly recently, in the name of ‘competition’, Australian Governments at state and federal level sold off a lot of their ‘essential services’ business endeavours. The list is extensive and includes Telstra, Qantas, Medibank, some power generators and a number of other household names including the Commonwealth Bank. Other government businesses including public transport operations and ports were leased to corporate entities for various periods of time. The governments did receive a ‘return’ from the sales or leases which was spent on all sorts of things in the eternal mirage of aiming for the ‘balanced budget’.

The claims at the time suggested that governments in general were inefficient business proprietors and there would be a suitable return to the taxpayer and members of the public if household names like Qantas, Telstra, railways, the power generators and power retailers were freed from their yoke of government interference, regulation and overly complicated decision making.

The reality has been quite different. We now have power generators who could be accused of gaming the system to maximise their income, large trucks owned by private concerns chewing up publicly funded roads (while formerly state owned rail lines that could easily carry the loads fall into disrepair because the cost of running a train includes full maintenance to the infrastructure – unlike a road) and our ‘National airline’ cutting domestic flights due to fuel costs and self-inflicted staff shortages.

As one of the ‘big 4’ banks, the formerly government-owned Commonwealth Bank has acted in a similar way to most competitors by closing branches, reducing services to the public and charging (at times) unreasonable fees or selling useless products through its banking and insurance arms. In fact, the Commonwealth Bank usually ‘wins’ the competition for the most complained about bank in recent years, although it’s questionable if the win should be celebrated.

The Saturday Paper recently suggested it is a wonder that Qantas ever gets a plane off the ground. In the hunt for profit maximisation apparently most ‘below the wing’ services such as luggage handling have been outsourced and the service providers’ pay those who put the luggage on a plane around $22 an hour. At a recent senate hearing

Labor’s Tony Sheldon asked Qantas general counsel Andrew Finch if the corporation requires that contractors engaged by the airline pay their employees a living wage.
Finch was deadpan in his response: “What’s a living wage?”

If you or your contractors pay peanuts, you engender a culture where some will only do what is necessary as there is no incentive to build a career. Most contractor employees will quickly work out that the service contractor and the owner of the business are only interested in cost minimisation. If someone comes along at the contract renewal period that is cheaper – the business owner will choose the cheaper supplier. In this case, the cost cutting has apparently resulted in Qantas flying plane loads of baggage around the country without passengers to try and reunite them and their possessions.

To be fair, Qantas’ General Counsel who doesn’t know what a living wage is and the Commonwealth Bank management that were charging unreasonable fees or selling junk insurance aren’t solely to blame – the political system that attempts to privatise the profits and socialise the losses has a part to play. And as the privatised power generators and gas producers have recently shown us, they have the right, as well as a legal obligation, to maximise the profits they earn for their shareholders. They are good at their job.

While profit in itself is not a bad concept, you have to ask the question if it is right and proper to withhold supply to maximise profit on a product necessary for our society. If things are as bad at Qantas as The Saturday Paper suggests, and recent reports of stranding a plane load of passengers in Dallas Fort Worth Airport for an entire day suggests they might be, the publicity will encourage people to try another airline. At the end of the day it’s Qantas’ loss, not ours as other airlines will happily take your money and fly you from Dallas to Australia. But there has to be a social contract with the owners of privatised government assets that are essential such as power, water, communications and freight transport to provide the service regardless of the immediate cost.

Past governments owned and managed banks, telecommunications. power and transport providers to provide a social good to the community. While, according to the detractors, management by government department may not be as efficient as private equity, at least government services understand and respect the need to provide a service rather than always being profitable.

Private ownership of essential services has been proven to be worse than public ownership, as the owners’ real customers are their shareholders – not our society. The costs for the ultimate customer haven’t gone down, the service hasn’t improved and the management of the private companies are required by law to maximise the shareholder’s profit. And as we’ve recently seen with power generators, we subsidise the private owners of essential assets if economic conditions change! If we privatise the profits, why do we accept socialisation of the losses?

What do you think?

This article was originally published on The Political Sword

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13 comments

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  1. Stephengb

    I am not so articulate, but I have been saying this since Hawke and Keating started the wholesale privatisation of Telstra, CBA, and QANTAS.

    They sold us out

    Yes

    THEY SOLD US OUT – bustards.

  2. margcal

    I have always said that if you have to factor in profits for shareholders then prices must go up or corners cut in producing services …. and in reality, both of those have happened – increased prices, inferior services, incl by lack of maintenance of infrastructure.
    The equation was never rocket science but big business and their politician partners were never going to admit it. Pulled the wool over most people’s eyes that private was more efficient than public. And now this lie is being heralded as a great new discovery. Bah!

  3. Terence Mills

    As I see it, the principal cause of rising prices is oil/gas supplies and freight costs.

    Looking around the world we have stifled Venezuela production (highest known global oil/ gas reserves) with sanctions : we have imposed sanctions on Iran (4th largest reserves) . We have smashed Iraq (fifth largest reserves) and now Biden has gone cap in hand to the Saudis to increase production (second highest reserves) with no guarantees that they will.

    And, of course we have sanctions on Russia (sixth largest reserves).

    This was entirely foreseeable !

    https://worldpopulationreview.com/country-rankings/oil-reserves-by-country

  4. pierre wilkinson

    StephanGB
    Beginning in 1997 and finalizing in 2011, the federal government began to privatise the corporation. The first three stages were initiated by the Liberal–National Coalition’s Howard Government:
    Keating did sell CBC and Qantas.

  5. leefe

    It gets down to the old question of what government is for. To me, they exist to do those things that would not be done, or at least not be done equitably, when left to the private sector. These days, with capitalism gone rogue, that apppears to be almost everything. Certtainly, basic utilities can not be managed with profitability being the primary factor.

    I’m more than old enough to remember, and remember well, what it was like when Telstra was a public enterprise. They were efficient, well-staffed, relatively cheap, and presided over a telecommunicattions system that was one of the best in the world. That system has, compared to infrastructure elsewhere, continually declined over recent decades, while price-gouging a captive market.

    How anyone can look at the past and present performance of entities such as Qantas and Telstra and the Commonwealth Bank and insist that the coountry is, as a whole, better off with them privatised, begs belief.

    Stephengb:
    Precisely. I have a lot of time for Hawke and Keating, but they were start of neoliberalism and privatisation and I will never forgive them for it.

  6. Pete Petrass

    My own thoughts have always been that utilities should be government run, never privatised. Utilities are essential services for the general population and should never be held to ransom for private profit. Every Australian has a right to water, electricity, gas, roads, internet and the like, and because of that basic right they should all be run and provided by government.
    We have seen the ridiculous situation where Sydney is the most tolled city in the world. The number of toll roads is staggering, almost as staggering as the profits made by the companies that own them. They get guaranteed annual increases and can just sit back and watch the dollars roll in. And the roads are not exactly well maintained either. Why is it governments can no longer afford to build roads??? Our taxes used to build the roads. Where has that money gone??? We now continue to pay those same taxes and also have to pay exhorbitent fees to drive on the roads. Where has our taxes gone???
    Power companies are now all privatised and, lucky for them, prices for things like gas and oil are now linked to overseas costs which just guarantees them more money and more profits. And despite all those profits the taxpayer is still forced to hand over squillions to help them out when times get tough.
    Governments run utilities for the people, not for profit and that is why it works. When utilities are privatised the only winners are the private companies while consumers get royally screwed.

  7. New England Cocky

    @ Terence Mills: And the winners are ….. the multinational oil & gas corporations taking huge windfall profits ….. why am I not surprised? Because the same thing happened in 1973 with the then ”Oil Crisis”.

  8. andy56

    well i see it slightly differently. Privatising Qantas was a good move. We will celebrate that in years to come. Other services, maybe not so much. Postal services i see pretty much as a fad society went through. Now we have parcel services and EMAIL. Letters are still with us but for how long? It could have integrated with the private field to give us the best of both worlds, a one stop shop. Telstra, a fucking disaster from start to finish. Totally short sighted politicians looking at money rather than the services we clearly need. And Tony Abbotts fuck-brain , he must have been hearing a boxing bell everyday of his fucked up political life. SEC, another fucking disaster from start to finish. Politicians setting up a fake market, adding middle men everywhere. Neo liberalism failure writ large. All because they didnt want to be seen as raising taxes to allow the SEC to modernise. Well that fucked up well didnt it? We do have to spend the money now. Instead of a $50 tax hike, we will get a $1000 power bill.

  9. wam

    A friend and I got asked to leave the opening of ‘The Feathers’ for singing Irish freedom He got called up and for nearly 40 years stayed left, pro freedom and anti-LNP when all around were rabbottians. He was so good at his ‘career’, that, despite the handicap of being a conscript, he clawed his way to colonel and would, almost certainly, have been a great general when the lying rodent sold(gave away) his section and retired the senior officers. Within two years the infrastructure and equipment was so neglected as to be useless and the service just stopped as the private company took their profit and left. I have no doubt this style of ‘privatisation’ is to be found throughout all privatisations where money is made at the expense of service.
    ps
    Andy, for darwin QANTAS as a private company has been disastrous in that there is no qantas service to Adelaide or overseas only gov could sustain such routes.

  10. Zathras

    I can’t remember which Scandinavian country decreed it illegal to privatise essential public services, such as water, gas and electricity but in Sweden the oil companies are subject to a tax rate of around 83%. Despite this they still operate in that country because they realise that even 17% of something is better than 100% of nothing – a strategy we are too cowardly to implement. The fetish for privatisation came from the Thatcher/Reagan era but was also operating in the WTO where they sometimes offered to give poor countries some debt relief in return for them privatising their water resources.

    It’s always only been about transferring public wealth into private hands and I’m sure there are many Russian oligarchs who would agree with me.

  11. GL

    Zathras,

    Are you Zathras or the other Zathras, or may be even the Zathras who has yet to announce Zathras?

  12. Jack sprat

    Gladys Berejiklian did not sell Liddell power station but instead gave it away for free to AGL and then sold Vales Points power station for less than the price of a house in Sydney ( one million dollars) to ex national party hack Trevor St Baker and in doing so made him a billionaire within a few years of the sale.

  13. Jack sprat

    Ps forgot part of the deal of the sale of Vales Point power station was that tax payers foot most of the bill to clean up the power station site after it is de commissioned

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