ERIC SIDOTI. Let the Privatisation Games Begin

Privatisation has been the source of ongoing debate in this country since at least the 1980s. For much of the intervening years though to question the virtues of privatisation – and the accompanying sanctification of competition and choice- has been treated as economic heresy. The threat of political excommunication strangled policy development. It’s to be hoped that we are witnessing the passing of those days as the welcome exchanges between John Menadue and Michael Keating in this revered blog might suggest. However, a genuine debate must go beyond the origins and the entrenched belief that privatisation is purely a matter of economic practice. 

 In supporting the need to situate privatisation within a broader context I would simply make a couple of brief observations drawing on Keating’s recent piece Privatisation: When does it work, and when doesn’t it work?

On the face of it Keating’s call to consider privatisation on a case-by-case basis makes good sense. And it’s tempting to accept without question his characterisation of the ‘for and against’ camps as ‘equally ideological’: the implication being that ideology (undefined) is bad and arguments put forward from an ideological position are not worth considering.

Well yes – and no. Whether you call it ideology or not, it is critical to have an articulated framework for policy priorities, development and decision-making. This is more than the oft-mentioned ‘narrative’. It is the substance that anchors any genuine narrative. A philosophical framework allows you to link one policy to another; for such a platform is much more than the aggregation of individual policies. Compare the Whitlam Government’s Platform and GetUp! to get a sense of the difference.

It actually isn’t enough simply to consider privatisation on a case-by-case basis unless it is situated within the broader framework. The reality remains that a social democrat will approach the question differently to a neo-liberal. I would contend that this is a good thing because what we should be debating is what kind of society we want and what we expect of governments (and citizens) not just what we want to own, control or sell.

Philip Mirowski’s critically important work on the nature and origins of neo-liberalism opened my eyes in this regard. Mirowski insists that you cannot understand neo-liberalism unless you realise that it is essentially a philosophy: to only think of it in economic terms is to ignore its deeper significance. (“..we can and should appreciate the fact that the neoliberal project managed to converge over time on a shared political philosophy and worldview…”)

The point here is that privatisation should not be considered as an exclusively economic question.

This is one reason I remain unconvinced by Keating’s defence. The giveaway is in the first few words of his discussion on suggested criteria where he opens with “As economists generally recognise…” This immediately limits the criteria for assessing privatisation in general or any particular proposal for privatisation.

The second observation I’d make is prompted by Keating’s discussion of ‘implementation failures of privatisation’. Again it seems reasonable enough to claim that frequently failure is not because of conceptually unsound policies but because of their implementation. As a general point it is true and anyone who’s been involved in public policy could cite their own chapters and verses. I certainly can.

It is probably true in some cases of privatisation though even in Keating’s own terms I remain unconvinced when it comes to the areas that I happen to have had a bit to do with – employment services being one.

The Commonwealth Employment Service was in a sorry state and its demise not much lamented but that should not assume that there were no alternatives to privatisation. Nor should it ignore the fact that the concept of community-based organisations providing a more human service informed by local knowledge morphed into a strange beast in which a good few individuals and companies have become very wealthy while the dwindling number of community-based organisations faced extinction or possibly more disturbing warded off cannibalisation by their erstwhile organisational neighbours. And everyone became subject to the dictates of government contracts that voided discretion, mandated compliance and made the CES look friendly and humane by comparison.

To simply put such failures down to implementation is to gloss over the history: one of the critical questions we must interrogate from the Hawke-Keating years is how ostensibly sound reform gets corrupted over time. How did the freeing up of Australia’s financial system end up with the debacle exposed by the Banking Royal Commission?

Any assessment of privatisation and its future relevance surely needs to ask what happens 10-15 years down the track when even an initially sensible proposition can turn out to be disastrous.

The answer I’d suggest may lie in a deeper appreciation of the need to explicitly tie the way we design our institutions (including the vehicles for delivering policy) to our philosophical framework. While we need to be more much considered and cautious in whom (and what) we label as neo-liberal, it is clear that the true neo-liberals understood this very clearly. Professor Anna Yeatman’s insightful paper The Question for Our Times: Institutional Design for a Free Society examines the respective social democratic and neoliberal conceptions of institutional design (the ‘ordering of relationships between individuals’). It is well worth a read.

So I find myself wondering whether my most fundamental disagreement with Michael Keating is that privatisation as it has evolved actually is conceptually unsound. This is not to say it’s always bad, or should never be deployed, but simply that we may need to re-conceptualise it.

It has been a very long winter beyond The Wall. Social Democrats so long frozen out – haunted by neo-liberal White Walkers and taunted by desperate Wildlings- are back.

And when it comes to privatisation, how nice it is to actually be having the discussion rather than being labelled a heretic for challenging the idea at all.

Eric Sidoti is Vice-Chancellor’s Fellow and Adjunct Professor with the Institute for Culture and Society at Western Sydney University

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7 Responses to ERIC SIDOTI. Let the Privatisation Games Begin

  1. Wayne McMillan says:

    Thank you Eric for a refreshing open approach to the question of public policy and privatisation. Privatisation originated from a neo-liberal ideology and Mirowski’s insights are pertinent. From that ideology political parties of the centre saw some value in privatisation as a better way to deliver some public services more efficiently and effectively. For political parties of the right it was an ideologically designed weapon to remove public services out of the public sector and provide jobs for their mates in the private sector.
    However there are few cases internationally where privatisation has been implemented successfully and the empirical evidence on the failures is damning. John Quiggin who one of Australia’s preeminent research economists has written in this blog indicating the failure of privatisation and he isn’t alone internationally in his criticisms. Mariana Mazzucato talks about revitalising the public sector and Joe Stiglitz believes that more education, research and development, needs to be done by the public sector for the ‘common good.

    Most enlightened economists across the world now realise that the common good has been lost by privatisation and the public sector must be brought back into the picture for the delivery of public services.

    There are very few cases and I mean FEW, where the economic public policy evidence requires us to privatise public services. The economic/societal costs of privatisation far outweigh the benefits for it to be continued as a viable public policy tool. It has been tried, tested and has failed. It should now be put into the public policy tool dustbin.
    There are plenty of new ways we can delivering public services within the public sector that are customer friendly, responsive, efficient and effective, we just need to be more creative and innovative.

  2. Eric, you are on the right track. It is good to see Philip Mirowski’s name in print. Keeping public policy in the middle of the road is amazingly difficult. That was Franklin Roosevelt’s genius. Geoff Mann’s new book on Keynes also sounds interesting. It is reviewed by Geoff Dow in the current issue of the Journal of Australian Political Economy.

    Another way of looking at the issue comes from Terry Moran calling for more input to policy from sociology, psychology, anthropology and history — not just economics. Terry appeared on Pearls and Irritations on 29 and 30 November 2017 and I quoted him in a post on the WA public service on 14 December 2017.

    I quoted Mirowski in the Corruption or Ideology post of 4 October 2017 and earlier Australian critics of privatisation were Michael Pusey, Simon Marginson and Hugh Stretton. The Nugget Coombs generation of economists worried about the specialisation of their discipline that was originally based on a broad education in the humanities.

    As you note, we now have the task of undoing the mistakes of the neoliberal era. The process should start with the Australian Labor Party national conference. I received my copy of the Palestine resolution yesterday.

  3. Michael Keating says:

    Thank you Eric for your thoughtful critique of my assessment of the impact of privatisation. I guess my take on your critique is that privatisation can change the culture of the service delivery. I accept that is possible, but as someone who was responsible for much public service delivery, I think it is naive to imagine that all public servants are focused on assisting the client.

    • Wayne McMillan says:

      Nor are private sector businesses, Michael as the Royal Commission into Banking has clearly pointed out to us.

  4. Malcolm Crout says:

    Privatisation in itself may not be the key reasons why they fail to deliver on the promises. To provide an attractive business proposition, State Governments, often at the instigation of their Federal counterparts, engage in privatisation deals and in order to gain the “best price” will offer accompanying deregulation in various forms, whether immediate or progressive. Federal Governments then meddle in the so called free markets, which eventuate in things like what we call the Energy Market. The Health Market is another example where privatisation is only viable as long as publicly funded corporate welfare keeps the boat afloat.

    What most common folk agree upon is that certain essential services they rely upon in day to day life should remain as public entities. In this regard the politicians have failed and are paying the ultimate price at the ballot box. On the heels of a flakey immigration policy and poorly managed PPP arrangements for infrastructure, most people just want the nightmare to end. I see no pathway but the nationalisation of certain industries, albeit that will be a difficult nut to crack. Since many state assets are globally owned, the dithering politicians are poorly placed to take up the cause. We are in deep shit.

  5. Evan Hadkins says:

    Very well said Eric, thanks.

    The roots of neo-liberalism in Hayek et al are important. Understanding the issues it is based on can be enlightening – that freedom is constrained matters.

    Which means institutions that embody a sense of connected-individuals rather than isolated-individuals. I really don’t understand why co-op’s aren’t more part of the economic conversation for instance.

    The big challenge I think is putting the commons on the agenda. Which probably will undermine most of the neo-liberal project.

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