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

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

  1. Joyce Marshall says:

    Thankyou for sharing this vital information.

  2. Bruce Waddell says:

    Apart from the supposed benefit of selling public utilities proving to be wrong there has been a social loss in the staff once employed. The argument that those instrumentalities were top heavy, slow, and expensive to run was the sales pitch to sell them. However the job loss has also undermined society. People of every employable age found purpose and pride in their work. This started with school leavers employed in apprenticeships or paid internships while they learned a skill. It provided a system that aided stability in society. Further it decentralised employment and aided the regions. What has been lost is a greater loss to society than the enrichment of cronies. The “theft” you catalogue John is but part of the damage caused in the name of progress. Your thoughtful arguments are valued and they illustrate all that is lost when intellectual assets are not fully appreciated.

  3. Jean Ely says:

    Thank you for this article.
    The ‘privatisation’ not covered in your article – perhaps because it is more subtle – is the privatisation of education. This has been going on since the return of public subsidisation of the sector in the 1960s after a break of almost a century. What is perhaps of most interest is the simple fact that the public system is still alive and well and fighting.
    Some leaders of the public system, spooked by the ‘sectarian’ label, compromised and sold out as early as 1973 but many, like Ray Nilsen of the DOGS did not.
    Privatisation was at its most obvious in Kennett’s Victoria where public schools were closed and sold to developers or private schools. The fight back at Richmond secondary college was inspirational. Thanks to Kennett a new generation of parents was politicised. Ray Nilsen is gone to a better country, but Steve Jolley is still involved in politics.
    We need to remember and recognise our heroes and heroines and keep up the fight.
    Jean Ely

  4. Wags Stewart says:

    Great article John, and some interesting comments as well so far.
    A couple of points though.

    From the perspective of neoliberal ideologues
    the results of privatisation are overwhelmingly considered to be not a failure at all but a complete success – even if they will never say that in public.. Massive price hikes, poor quality, unreliable goods and services, restricted supply and access, obscene unjustified remuneration packages to a closed off private club coterie of useless bludging executives – while screwing down the salaries and wages of real workers, killing off competition through crony capitalism and regulatory capture etc, are all real neoliberal objectives for privatisation which have been achieved with astonishing success. It’s all about money and profit. If this creates a less efficient, poorly performing, high unemployment, high debt economy, macro instability, recessions, dead cat bounces or inflationary spirals, or any other economic catastrophe they (ie. real neoliberals) don’t actually care.

    Real neoliberalism has never been about efficient markets. NEVER. It’s not about economics it’s about ideology, class and power. Since at least the formation of the Mont Pelerin Society in its sustained formative structure in 1947, neoliberalism has been hell bent on reversing the small moves towards more equitable and just societies achieved in some western economies during the trente gloriouses period (approx 1945 – 1975). As Piketty has shown this period was an aberration. Various crises in the mid-to-late 1970s gave neoliberals the chance to strike and they have been determined to destroy what they considered to be the monstrosity of the slightly more equitable world achieved during the 1945-1975 period ever since. Destroying such an aberration, structurally and ideologically, and preventing it from ever occurring again, has always been the key objective. Again, neoliberalism is about power, class, control, privatising profits and socialising losses etc, it’s not about efficient markets, scarcity, Marshallian crosses, utility maximisation or any other Economics 101 “principles” or the myriad assumptions about mythical perfect competition underlying it. And it’s not about small government. It’s about big government for the rich. Ask Bush and Barrack Obama about the bank bail outs during the GFC and let’s hear how that fits with the idea of small, non-interventionist government. In fact we could ask the same of K.Rudd about the bank guarantees here in Australia at the same tine. The point is we should really dispense with any connection between neoliberalism, economics and small government etc – and frankly I don’t care if that makes the likes of Friedman, Hayek or Von Mises turn over in their graves. I don’t think they would though because I doubt they ever really believed in the drivel they peddled anyway.

    Getting rid of competition is a first principle for neoliberalism. And hasn’t that been a synch in the political market place. Buying off the two or three major political parties in notional western democracies has been one of the easiest achieved wins for neoliberalism in pursuit of its objectives. It has been cheap too – the political party bastards have only been too willing to whore themselves off to big capital at bargain basement prices. Witness Labor’s pathetic, mealy mouthed rhetoric around the TPP11 deal. They’ll agree to it now but fix up its obscene power concessions to capital “… when they get into government…” Really!! Pigs are on the wing everywhere.

    Privatisation, deregulation, cutting the tax base, creating false emergencies about public debt and affordability of public assets (consider Modern Monetary Theory), rubbish efficiency arguments (in many but admittedly not all cases), demonising organised labour, demonising the dispossessed and powerless, globalisation, financialisation, creation of the casino economy etc and on and on are all part and parcel of the project’s instruments and aim – to ensure an economically priveleged ruling class own, or at least control almost everything and lock the masses out, while perpetuating myths about democracy, merit, equal opportunity, deservingness, jealously, envy, dole bludgers, whingers etc.

    Moves towards eventual full privatisation of tertiary education and the cowed penury it will generate for current and future generations is one of the most fundamental control pillars of the project. This is a weapon of neoliberal privatisation in one of its most powerful and brutal forms. And so many of the political bastards that have been implementing this creeping policy, even to do this day, were all too willing beneficiaries of Whitlam’s free tertiary education access reforms in the 1970s and into the 1980s when they were at Uni. Hypocrites!

    Another area we could discuss in a broader area of privatisation and finance is the insidious role of big capital and government motivations in the rise of the Public Private Partnership (PPP) finance model for public infrastructure development – sometimes good but very often very bad. But that’s best left for a separate discussion.

    Neoliberalism, in my view, is an ideological tool, attempting to permeate every aspect of humanity, not just economics and politics. In this respect it’s like a retro virus trying to recode humanity’s DNA. If successful, concepts such as community and society and justice and equity and kindness and helping will be erased altogether. If ultimately achieved this would result in an Ayn Randian utopian world. And there is no shortage of neoliberal ideologues that salivate at the very prospect – they tend to be the ones that already possess massive wealth and power on the not so level playing field.

    So, despite its many failings, and increasing criticism from a wide range of sources, I think we can look forward to more and more privatisation in general. There might be the odd roll back here and there but in the main the juggernaut will continue on. Privatisation is a central, indispensable pillar of the neoliberal project. Neoliberalism has bought politics and it expects payouts on its investment. It faces no serious threats and it’s going nowhere soon. We can have all the Royal Commissions we like, it will be game on again ASAP. Greed is not good, greed is God.

  5. Rob Swalling says:

    Thanks from me as well. An excellent catalogue of massive taxpayer gifts to private corporations by politicians conned by a few economists, political donations and of course ideology. Public ownership and government control is an insurance policy for taxpayers, and is why politicians are easily convinced to sell us out, they are scared absolutely witless by being held to account. This was the weakness exploited by the economists who dreamed up neoliberal theory to make corporations all powerful and disempower wage earners, clients/customers/consumers in the process, in particular those disadvantaged in the marketplace. Taxpayers have funded all the infrastructure we take for granted, governments need to take responsibility for it on our behalf. Where is the guillotine?

  6. Michael D. Breen says:

    Great article, John. So self evident that it makes one wonder why so much of the mess continues. The argument that the government gets funds to spend on infrastructure to benefit all is a furphy. Governments enter into private/government contracts for which we then pay tolls as indirect further taxes. But the cronies get the jobs and they continue to vote conservative. Still there are economies the poor cannot afford. And the unfounded proposition that the private provider is cheaper than a government job prevails.
    The situation is made worse as you imply by the stripping of organizations tasked with regulating service delivery. Governments avoid responsibility by blaming the contractor and vice versa for contractors.

  7. Chris wieteska says:

    One mustn’t forget the ideological extremism of neoliberalism that’s driving privstisations and the concomitant behind the scenes corrupting influence of the corporate sector on our so called elected ‘representatives’. There is also the implacable pressure from our main ally not to stray from the path of ‘markets’ as defined by the Harvard/Chicago business schools and the myriad ‘think’ tanks funded by corporate interests, Wikileaks’ publication of US Canberra embassy cables from the time of Gillard taking over from Rudd clearly demonstrating who’s calling the shots. That episode also explained Australian government’s otherwise inexplicable abandonment of Assange.

  8. Colin Cook says:

    Excellent article setting out privatisation failures.
    As a start to reversing public acceptance, maybe we should demolish the benign sounding ‘competitive neutrality’ concept.
    This concept is explained by the Commission thus:
    “Competitive neutrality policies aim to promote efficient competition between public and private businesses. Specifically they seek to ensure that Government businesses do not enjoy competitive advantages over their private sector competitors simply by virtue of their public sector ownership.”
    It is a core function of the Productivity Commission to police this according to their website and is the basis for the Hanson-inspired enquiry into the ABC currently.
    Surely, in a market economy if any institution or body has a ‘competitive advantage’, society should be organised to benefit from this.

  9. John. In its understanding of ‘Privatisation’ our government is confused between its State’s social perpetual or long -term duty and responsibility to maintain stability and harmony and equity in society and the individual freedom of expression and enterprise.
    The latter for the present discussion is simply ‘let the market place determine the course of action. The State itself can be an individual and operate in the market like the State Owned Enterprises do in China. Thus the Commonwealth Bank, Medibank etc could have remained SOEs.
    But within its sovereign domain of the public sector the State alone must carry out its social mandate and thus fund and provide policies that must be abided by whatever political party or ideology is in power. Policies like (1) 80% of the people must be middle class to ensure that the people (2) public education, health, housing, transport, amenities and full employment etc. These cannot be delegated to the market place. Or else the elite, the ‘poker hands’ of the market place will be a state within a State. The State then is controlled by the market place and not by the people.
    There is never any need to sell State assets of whatever kind, unless it is a derivative SOE operating in the market place and needs to take in private investors to meet public listing requirements, but even then taking in investors is not ‘selling’.
    A case can be made for the State ‘leasing out’ an asset for a 30 or even much longer term to a private party for a sum upfront but no selling!
    Seeking to fund public infrastructure is a lame excuse. President Lincoln when he could not find finance for the war simply printed and issued ‘Greenbacks’. As long as the value added by the new public infrastructure equals the fiat money paid, there is even no need to raise taxes.

    Vincent Cheok @ https://whirlwindrambler.com/

  10. Chris Parsons says:

    Totally agree, when selling exactly the same product (ie electricity) how can there be competition

  11. steve johnson says:

    Why is it that these “sell off governments” keep getting elected? The public clearly do not like privatisation and yet they gain power and start another run of sell-offs. Perhaps we have to have the chickens coming home to roost with tens of billions lost before we do something. Watch this space for the NDIS disaster coming to a screen near you.
    Maybe if we could have a mechanism of limiting the fees obtainable from sell offs making them less attractive with the neo liberals moving on to graze elsewhere. A national ICAC is essential also. Jeremy Corbyn would soon sort them out!

    • Chris Blaikie says:

      Because privatisations are largely a bi-partisan policy. We don’t have any choice of a non-neo-liberal ‘party with a chance’.
      Sorry Labor supprotters.
      The nationwide popularity of SALabor did not translate to votes here and I suspect that besides the Murdoch press monopoly people did not see Labor as having Labor values and could not work out what they really stood for.
      eg.
      Forestry SA privatised in 2012 for $670 million;
      SA Lotteries privatised in 2012 for $427 million;
      MAC privatised in 2014 for $2 billion plus;
      Lands Titles Office privatised in 2017 for $1.6 billion.
      ….and of course the attempt to set up the workers compensation system for full privatisation by guaranteeing no fairness in an attempt to make it profitable.
      Because of this we instead ended up with the destructive failure of a Liberal administration that so far seems only capable of wrecking previous legislation and various parts of the environment.

      …wow the number of captcha frames i just had to click on surely entitles me to canonisation as australia’s next saint. 😉

  12. Lorraine Osborn says:

    Agree with every point in your wonderful piece John. Should be promoted all over the land because it would resonate with literally millions.

  13. R. N. England says:

    To people who need a job to survive, privatisation means devoting one’s working life to making rich people richer. The shareholder is king and the customer is an object of exploitation. Cooperating to strengthen a culture that provides a good life for all its members far into the future (socialism) is stamped out. When the person of good will is displaced by the crawler, the result is demoralising. Humans become vermin polluting the biosphere.

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