Privatisation is theft

[Green Left Weekly, #201, September 6, 1995]

Throughout the western world, governments are engaged in a veritable orgy of privatisation of state assets and functions. In the poor and dependent countries of the Third World, this process is being brutally imposed by the IMF and World Bank as a condition of desperately needed loans. The only real winners from this process are the corporate rich; working people are everywhere worse off as a result. In Australia, privatisation is in high gear. There are a number of key questions socialist and progressive forces must ponder in considering how to respond. Just what is happening? What is behind the relentless development of this process? Is it really possible to resist this trend? Is the demand for nationalisation still a valid and realistic element in the socialist program today?

Perhaps a good starting point is to look at the size and scope of the public sector. In its heyday in the 1970s and early 1980s — ie, before the current wave of privatisation got under way in earnest — on the federal, state and local levels the public sector encompassed a vast range of functions, services and associated enterprises. Today, the contours of this huge edifice are in transition as the state radically "downsizes", privatises and opts out of many traditional activities.

The accompanying table provides a picture of the size of the Australian public sector in 1987. The figures are taken from the report of the ALP-oriented Evatt Research Centre, State of Siege (Pluto Press, 1989; p 282). More than 1.6 million people, almost 29% of the total paid work force, were employed in this area in the six states.

Since then, these numbers have been significantly reduced. For instance, in its final three years the last Victorian Labor government eliminated some 20,000 public sector jobs; Coalition Premier Jeff Kennett has since wiped out a further 50,000, and the process is far from finished. Similar developments are under way in other states and also in the Commonwealth sector.

Sea change

Capitalism is undergoing a sea change, and the traditional state sector is being radically reduced. A whole school of ideologues has arisen to condemn the "inefficiency" of the public sector compared with private enterprise. But in an earlier period of capitalist development, this same public sector was massively enlarged without any great controversy or opposition from business — in fact, with its full support.

The development of the state sector in the various leading capitalist countries exhibits some distinctive features. In Britain, for example, the state sector was massively expanded in the aftermath of World War II. The reforming Labour Party government nationalised coal, steel, electricity, gas and rail and road transport. There was no serious struggle against this process by big business or the Conservatives. There was wide agreement that it was best for the system as a whole if the state operated these industries, at least for the time being.

In Austria, to cite another example, at its height the state sector included the country's three main banks; the main mines; the largest iron, steel and aluminium plants; the oil production facilities; the chief electrical equipment plants; the automobile, locomotive and shipbuilding industries; the electrical power generation system; the Danube Shipping Company; Austrian Airlines and the tobacco monopoly.

This vast economic apparatus had its specific origins in the seizure by the state of Nazi assets following the end of the war, but it also fitted in with the welfare state that was built up by the country's long-dominant Social-Democrats.

In Australia, it was different yet again. State of Siege distinguishes four main stages in the development of the public sector. It is worth briefly looking at these to put the present situation in its proper perspective.

1. The period of "colonial socialism" from 1850 to 1914. The state took the lead in the construction of the basic infrastructure needed for private economic development: railways, telegraph lines, water supply and sewerage systems, gas lighting and so on. "By 1900 state governments owned approximately half the total fixed capital (excluding land) and conducted the largest enterprises in the economy ... They employed about 5% of the total work force and generated about 6% of GDP." In this period the state also subsidised some 350,000 migrants, almost half the total influx.

2. 1914 to 1945. Regulatory activity became a more important concern of government. However, government enterprise continued. Indeed, "the 1930s provide the highwater mark in the development of public enterprise and regulations ... [The labour historian Brian] Fitzpatrick described a 'remarkable change' in which 'systems like supervision of labour relations in industry, and the institution of public financial and industrial undertakings ... the New Protection and public competition with private enterprise in production' took hold. It gave 'an impression that an experiment in State control or modification of capitalism was being pursued'."

However, the reality was that private capital never lost its control of the country's economic organisation. It accepted public economic activity in essential areas in which it could not profitably operate — the railways are the prime example here. State enterprises which didn't come under this heading were generally sold off (as were the profitable NSW government brickworks, metal quarries and pipeworks in 1936).

3. The post-World War II period, in which "the principles of Keynesian macro-economic counter-cyclical policy were accepted by key personnel and institutions". The framework of the welfare state was developed. However, as an observer of this process quoted in State of Siege notes: "the extension of a Labor concept of a welfare state was less marked than in many other countries because of prior development of old age, invalid and maternity benefits and child endowment and unemployment relief. It was coherence rather than sharp increase in outlays, arising from these cash benefits, that marked post-war Australian welfare policies."

4. The fourth stage is the present one, which began in the 1980s. This is a period of economic austerity, of cutbacks in government social spending and of public sector "downsizing" and restructuring. The state is divesting itself of a whole range of functions and activities which it had assumed over the previous historical period.

Forms of privatisation

The term which accurately describes this general process is privatisation. We can distinguish five main forms:

1. Direct sale of public sector assets or functions to the private sector. Sell-offs are often preceded by the government corporatising or commercialising the department or service concerned. This may involve cutting staff and increasing charges to the public to make the sale more attractive to business.

2. Contracting out or competitive tendering. Government departments or enterprises have always used private contractors but the scale of this practice has been radically increased. Kennett, for instance, has legislated to force Victorian local councils to put all their traditional services out to tender — the meals-on-wheels programs, operation of libraries, garbage collection and so on.

3. Liberalisation and deregulation. Liberalisation means the ending of a government monopoly in a certain area (such as telecommunications), while deregulation refers to the removal of government regulations applying to an industry. A classic case of the latter is the Victorian government's new industrial safety legislation, which amounts to self-policing by business.

4. Governments are also abrogating — i.e., simply abandoning or withdrawing from — some of their traditional responsibilities. For instance, under the laudable banner of deinstitutionalisation, much of the responsibility for the care of intellectually and psychiatrically handicapped people is being shifted from the state to volunteers, charities and families.

5. A big element of privatisation is the radical extension of the "user pays" principle. State utilities have always charged for the provision of water, power, transport and so on, but both the scale and scope of such charges are being dramatically enlarged. Victorians, for example, are now increasingly being charged for their education (in one way or another) and also for the disposal of their sewage; many local councils are nerving themselves to impose charges for withdrawing library books.

Without dwelling on details, we can say that privatisation leads to big reductions in services and sharply increasedcosts to the public. (In the case of Kennett's restructuring of the Victorian ambulance service, the cuts were so severe that patients were dying because ambulances were late in arriving. In the end, Kennett retreated and announced a funding increase — in order, we can be quite sure, to continue his butchery of the health system in other, less conspicuous areas.)

Selling off public assets leads to big job losses and worsening conditions for those who continue to be employed. Privatisation means decay of the infrastructure we all depend on: roads, bridges, railways, power generation and distribution, water supply and sewage disposal systems and public housing will all suffer under the new regime. Privatisation has no mechanism for the necessary but hugely expensive large-scale renewal of infrastructure except massive hikes in charges and reduction of the scope of service.

In its overall impact, privatisation represents a massive attack on ordinary working people and a big drop in our quality of life.

Why privatisation?

Why is all this happening. Why is the capitalist state engaged in such a fundamental restructuring? Why is the welfare state under such relentless attack?

The arguments of the privatisers don't stand up to any sort of scrutiny, especially the claim that the public sector is inefficient and only the private sector can deliver goods and services in an efficient manner. Whatever the problems of the state sector under capitalism (and they are profound), this particular claim is absurd.

On all the evidence to hand, when a public enterprise is sold, the main "efficiency" demonstrated is in generating extremely fat salaries for the executives and big profits for the private owners — all at the expense of the public. From the standpoint of the interests of society as a whole, the private sector is extremely inefficient.

The efficiency argument is just an ideological smokescreen to cover the process of selling profitable public assets to the private sector and reducing government social spending.

In reality the privatisation push is driven by the crisis of world capitalism.

In an earlier period, the capitalist class was keen to have the state build up the infrastructure and services necessary for the economy. In the postwar period (and earlier in Australia) the ruling elite supported the establishment of a welfare state in order to buttress the social consensus and reconcile the working class to the system.

But the current period is one of sharply intensifying international competition. Each national capitalist class wants drastic cutbacks in social spending and big increases in handouts and subsidies to big business. The bosses want to get their hands on any parts of the public sector that can be used to make a profit.

We cannot accept the argument that this whole vast process, embracing the entire capitalist world, is due simply to the rise to favour of the school of neo-liberal ideologues, the so-called economic rationalists. We can point to the irrationality of their arguments, but the explanation of the privatisation phenomenon must be sought in the changed circumstances and needs of monopoly capitalism.

How to fight it

Privatisation in this country is a bipartisan policy. Rhetoric aside, both the Labor Party and the Coalition support it. It would be a fundamental error for opponents of privatisation to look to the ALP for salvation.

Victorian Labor leader John Brumby is trying to associate the ALP with the widespread opposition to selling off the old State Electricity Commission. This is strictly for the gullible. The federal ALP government is selling off every public asset in sight and shows no signs of drawing the line at any particular point. When it was last in office in Victoria, Labor sold off the Loy Yang B power station to US giant Mission Energy and also began the process of contracting out and corporatisation of state enterprises, the preludes to complete privatisation.

Furthermore, Brumby has pointedly refused to commit the party to renationalising any privatised enterprises, the SEC in particular, even though it is clear that such a stand would most likely deal a severe blow to Kennett's plans. Brumby won't make any such commitment, but if he did it would be stupid to believe him.

The struggle against privatisation is part and parcel of the general fight against neo-liberal austerity and the capitalist offensive against the working class. The bosses' attack will be halted or slowed down only if it meets intense, sustained, mass resistance. The ruling elite is certainly not going to be talked out of it, argued out of it or lobbied out of it.

Any campaign against privatisation must be independent of the Labor Party and be aimed at mobilising very large numbers of people — especially those most affected as workers and consumers/users — on the streets and in the workplaces.

The fight against the gutting of the public sector raises two related issues: the nationalisation or renationalisation of privately owned companies and the progressive reform of the public service. A future article will take up these questions.