The perils of privatisation and private greed

Aug 28, 2020

The pandemic has starkly shown us the importance of good government, good public policies and good public institutions. It has also shown us the failure of private institutions, private markets and outsourcing to private providers. If the wholesale arm of Telstra had been kept in public hands we would have had a modern NBN long ago. The behaviour of the privatised Commonwealth Bank has bought shame to us all.

The Liberal Party platform spells out very clearly the Government’s dislike of the public sector and the public good. The Platform says that ‘…businesses and individuals- not government- are true creators of wealth and employment’. So the public sector in its various forms must be reduced and eroded, from Medicare to Nursing Homes. And there is a visceral dislike of successful industry superannuation involving the trade unions.

A key feature of that conservative philosophy has been privatisation. It has mostly failed but it has brought large unearned benefits for a few.

Eddie Obeid was a small-time rip-off merchant when compared to the very large but legal rip-offs we have seen by those participating in recent privatisations – bankers, underwriters, brokers, lawyers, accountants and, most importantly, the new owners of public utilities, like the electricity generators and distributors that have exploited their monopoly situation to jack up prices.

This is Australian-style cronyism – selling off public assets to benefit political mates and indulge a political philosophy that privately applauds greed..

Australia’s litany of privatisation abuse and failure includes the following:

  • The network arm of Telstra should never have been sold by John Howard. If it had been kept in public hands, we would now be well on the way to – or have completed – a successful fibre rollout of NBN instead of the mess Tony Abbott and Malcolm Turnbull bequeathed us. Had it been retained in public hands, Telstra’s network business would have rolled out fibre broadband as part of its core business, which is what happened in New Zealand.
  • The Hawke and Keating governments sold off the Commonwealth Bank. We are not better off with a privatised CBA leading the race to the bottom with greedy executives  and unethical behaviour while making record profits.
  • Medicare’s operating costs are one-third those of private health insurance (PHI). 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 PHI had become in 1974. It is the same story again today.PHI is a private scam.
  • Governments facilitated unscrupulous private providers to compete with TAFE to provide vocational training with disastrous results. Rod Sims, the chair of the Australian Competition and Consumer Commission, said that the mess of the Vocational Education and training FEE-HELP scheme carried out by the private sector would take two years and counting to clean up. It is clear that the mess is on a much wider scale than he suggested- not just VET but child care and nursing homes.
  • Sims also warned us that privatising the National Disability Insurance Scheme services could be a repeat of the VET FEE-HELP mess. It is happening.
  • We sold off natural monopolies such as our airports. We should not be surprised that these new private monopolies exploit consumers through excessive charges.
  • Seven hospitals in NSW and South Australia 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 one 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 to protect Port Botany. That is real crony capitalism.
  • The NSW government sold off the Land Titles Office, which underpins the whole property system in the state. It was no surprise that the new owner tried to increase some land title fees by 1900%.
  • Other privatisations are attempted through the back door. The federal government says 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, which he and Gina Rinehart help fund. Further, the ABC is subject to continual harassment and intimidation by ministers. Editorially it is crumbling under political pressure.
  • In similar fashion, the NSW government says it will not sell the state’s national parks but starves them of funds to force their commercialisation to benefit political mates.
  • The privatisation of electricity generation and distribution has been a mess. Electricity prices have almost doubled since 2000.
  • Public and social housing has been deliberately run down. The financial bonanza for private investors in housing has placed housing out of the reach of a generation of younger Australians. Housing has become a commodity to be traded and not a social good.

Conservatives tell us that selling public assets enables government to build new infrastructure. It is a cover to hide previous privatisation failures and provide another opportunity for rent seekers to again exploit the public.

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

The February 2015 Essential Report’s public polling was as follows:

Question: Do you agree with the following statements about the 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%

There is no sign that public sentiment has changed about the sad record of one privatisation after another.

Yet ideology continues to win out over public interest. Privatisation has become the last refuge of ideologues, conservatives and businesses that want a profit opportunity.  They refuse to accept the clear public opposition to much privatisation.

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

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