JOHN MENADUE. Privatisation is a clear example of the failure of neoliberalism.

Oct 24, 2018

Neoliberalism puts markets and companies before society and the public interest. That is why after 23 successive years of economic growth there is a widespread sense that the economy is working for a privileged few  and at the expense of the many. The growing popular sense of resentment and unfairness is not at all surprising.

A key feature of neo liberalism has been privatisation.It has  mostly failed the majority but brought large  unearned benefits for a few.

Eddie Obeid was a small time rip off merchant compared to the very large but legal rip offs that we have seen by those gorging themselves in recent privatisations-bankers, underwriters ,brokers, lawyers ,accountants and most importantly the new owners like the electricity generators who exploited their monopoly market situation to jack up prices. This is Australian style cronyism, selling off public assets to benefit political mates.

There is a litany of privatisation abuse and failure in Australia.

  • The network arm of Telstra should never have been sold by John Howard.  If the network arm had been kept in public hands, we would now be well on the way – or have completed – a successful fibre rollout of NBN instead of the mess that Tony Abbott and Malcolm Turnbull have bequeathed to us.  If the network business of Telstra had been retained in public hands, it would have rolled out fibre broadband as part of its core business like NZ.
  • The Hawke and Keating governments sold off the Commonwealth Bank. We are not better off with the privatised CBA leading the race to the bottom in record profits, greedy executive salaries and unethical behaviour? We need to consider again a new ‘peoples bank’ like CBA was before privatisation.
  • Medicare has operating costs one third of those of private health insurance. But the government is using $12 billion of taxpayers’ money each year to prop up the inefficient and confusing mess called PHI. Our health system is being privatized by stealth through an enormous corporate subsidy to PHI. Medicare was established by the Whitlam Government because of the shambles that private health insurance had become in 1974. It is the same story again today.
  • Governments facilitated unscrupulous private providers to compete with TAFE with disastrous results. Rod Sims the Chair of the Australian Competition and Consumer Commission said that the mess of the VET-fee scheme with vocational training carried out by the private sector would take two years and counting to clean up.
  • He has also warned us that privatising the NDIS services could be a repeat of the VET-fee mess.
  • We sold off natural monopolies like our airports. We should not be surprised that these new private monopolies exploit consumers with excessive charges.
  • Seven hospitals in NSW and SA were privatised, but then reverted to public ownership because of poor services and high costs.
  • The NSW government sold Port Botany and Port Kembla to the same buyer, making competition between the two ports impossible. The result was increased rental charges of up to 400%.
  • The efficient Newcastle container port has been privatised, with a cap placed on its container business in order to protect Port Botany. That is real crony capitalism.
  • To top it off, the NSW government sold off the Land Titles Office which underpins the whole property system in NSW. It was no surprise when we learned that the new owner attempted to increase some land title fees by 1900%
  • Other privatisations are attempted through the back door. The federal government says that it will not privatise the ABC despite its federal council proposing just that. Instead the government is cutting funds to the ABC at the behest of Rupert Murdoch and the Institute of Public Affairs that he and Gina Rinehart fund. Further the ABC is subject to continual harassment and intimidation by ministers.
  • In similar fashion the NSW government says that it will not sell National Parks but starves them of funds to force commercialisation to benefit its political mates.
  • A major privatisation mess has of course been in electricity generation and distribution. As Tim Colebatch has reported in Inside Story, electricity prices have soared 187% since 2000. He commented ‘the privatisation and deregulation of gas and electricity has failed consumers’

Conservatives tell us that selling off public assets enables government to build new infrastructure.  The fact is that as any economist will tell you, the sale of income producing assets like the Land and Titles Office in NSW does not introduce any additional capacity for public investment in non-commercial capital projects.

Whilst conservative and neoliberal ideologues refuse to face the facts, the public clearly understands that privatisation of public utilities that are natural monopolies is foolish.

Essential Report in February 2015 reported in its public polling as follows:

Question: Do you agree with the following statements about privatisation of government-owned assets like electricity, water, rail, ports, etc.?

Total Agree Total Disagree
Selling off public utilities to private companies will help the economy 25% 53%
Privatization mainly benefits the corporate sector 70% 13%
Utilities like water and power suppliers are too important to be sold off 72% 13%
Private companies can run public utilities more efficiently than governments 36% 39%
Privatization means more competition which benefits consumers 33% 49%
Private companies deliver better quality services than government-run organizations 33% 46%
Prices always increase more when services are privatized 70% 13%

Clearly privatisation is running into serious headwinds. Ideology is winning out over public interest. And voters are showing very clearly that they are not attracted at all to the privatisation of many public utilities.

Ian McAuley in ‘Warning from Colin Barnett: Privatisation is on the nose’ in this blog set out the principal reasons for privatisation.  The first is that markets  change.  An example would be the government-owned airline TAA being sold when a competitive market had developed.  Public ownership was not then so important. Second,  there is fiscal opportunism in selling assets to get cash for new political ventures.  We know that one reason for this political opportunism is that we have seen large and effective campaigns against government debt.  But if  public businesses are run efficiently and for good social and economic reasons, increased government debt is affordable and particularly at a time when interest rates are at historic lows.  Third, some times private companies are more efficient than public ones.  But that is not true in every case as Medicare shows.  The efficiency of public sector bodies is also prejudiced when governments deny them resources to do their jobs properly – such as Centrelink and NDIS.  The fourth and main reason for privatisation is cronyism – selling off public assets to political friends and in the process, ensuring maximum price for government by limiting competition for the newly privatised venture.  In the process many special interests – bankers, underwriters, accountants and solicitors – skim off large fees.

Privatisation has become the last refuge of ideologues, conservatives and businesses that want a hand out.  They refuse to accept the clear public opposition to much privatisation

Society should contain markets and not the other way around. Privatisation is too often put ahead of society and the public interests. And the political friends of ministers jack up prices and cream off large fees.


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