Wednesday, 23 February 2011

Public good, private bad

I never thought I would be re-publishing a previous post on this blog, but David Cameron's statement this week that every public service should be privatised made me realise that this re-post was essential. This was posted in April 2009, when we had a new Labour government but it anticipates what a future Tory government would do:

People who have followed the posts on this blog will know that I have been explaining how privatisation benefits the rich at the expense of the poor but it is probably worth pulling it all together in one post so here goes.

Privatisation of public services has been a key part of the neoliberal Thatcherite project of the past thirty years. Privatisation of public services makes the rich richer and the poor poorer. This neoliberal project is all about dumping costs onto the poor whilst creaming off more of society's wealth for the rich.

So how does it work? Quite simple really but it has to be bolstered by one big crucial lie. The lie is that the private sector is always, but always, more efficient than the public sector alternative. No evidence is ever produced for this but it has been repeated so often over the last few decades that most people accept it as a fact. There is evidence though to show that the private sector is not more efficient than the public sector. Here is an example that comes from the International Monetary Fund! (IMF) - see this paper. Here is a quote you might find interesting:

“….the empirical evidence and the theoretical debates do not support this assumption. There is a consistent stream of empirical evidence consistently and repeatedly showing that there is no systematic significant difference between public and private operators in terms of efficiency or other performance measures. The theory behind the assumption of private sector superiority is also being shown to have serious flaws”.

But we do need to consider what is meant by 'efficiency'. Normally it is taken to mean that the private sector can deliver public services at a lower cost - as if that was all that mattered anyway. The fact that the private sector can deliver services at a lower cost is questionable to say the least. But let’s consider what happens when a public service is privatised. A private company moves in and takes over the service and the workforce that delivers it. The company needs to make a profit so the first thing it does is to cut the workforce and lower the terms and conditions of the remaining workers. Workers have their pay, holidays and pensions slashed. The cost of resulting unemployment and low pay is pushed onto the taxpayer and the cost of the profit is pushed onto the remaining workforce. In fact the employer is literally taking money out of the pockets of its new employees and giving it to shareholders - hence a direct transfer of money from the poor to the rich. This is not lower cost delivery it is dumping the costs onto workers and the wider society. Its not efficiency - it is legalised robbery.

But it’s much worse than just this. Because we don't have competing public services (i.e. you only have one waste collector in your local council area) - what you end up with is a private monopoly. Once the public sector alternative has gone what happens if the company providing the service goes bust? Well it has to be bailed out. Why? Because even if you wanted to you couldn't just bring in another company to take over at short notice – wheelie bins have to be emptied. We are also sold a lot of guff about competitive tendering as if hundreds of companies were competing for every public service contract. This simply isn't the case and contracts are awarded to one of a few usual suspects.

What we end up with is a very cosy private monopoly replacing the public service and easy money for the people who own the company. In time, costs can be hiked up to increase profits and all this is at the taxpayer’s expense. No private company could ever compete with an efficient public sector alternative. Why? Because the public sector alternative does not have to make a profit therefore it will always offer better value for money. In addition, the public sector can always borrow money for investment at a lower rate of interest then the private sector which again saves the taxpayer money. The reality is that the most cost effective way to deliver public services is the public sector option. That is the way services should be delivered, paid for collectively by all of us and delivered without the profit motive.

Of course, it is an essential part of the privatisation project that the public sector is excluded from competing with the private sector because it is unacceptable to the privatisers for the public sector to be seen to provide better value for money and competing successfully. That is why everything has to be privatised. And that is why the public sector is now being privatised by stealth - slowly but surely. Once the Tories get into power they will have the confidence to accelerate this process because they will claim that they are eliminating 'public sector waste' and delivering ‘better value’ in a time of budgetary restraint.

Privatisation of public services is basically a racket. Its hard for people to understand that their government would want to institute a system which costs them more, reduces their employment opportunities, dumps costs onto local communities and only benefits capitalists but that is the kind of government we have. That is what New Labour stands for. In the long run we will all have to pay more for less and those who benefit will be the better off.

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