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10 March 2010

PRIVATE AFFLUENCE, PUBLIC SQUALOR

“First of all the Georgian silver goes, and then all that nice furniture that used to be in the saloon. Then the Canalettos go.”

This is a passage from a speech made by Harold Macmillan, UK Prime Minister from 1957 to 1963, as reported in the London Times newspaper on 9 November 1985.

Mr Macmillan was criticizing the privatisation of the public sector set afoot in Britain in the early 1980s by one of his successors as Prime Minister, Margaret Thatcher, who was PM from 1979 to 1990.

Both Prime Ministers belonged to the rightwing Tory party but Macmillan was a big-tent “One Nation” Tory, whereas Thatcher believed in dividing and ruling.

However, Macmillan’s speech constituted the swan song of the Tory old guard and it was Thatcher’s views that won the day – and that have been in the ascendant in Britain ever since, regardless of which of the two major parties has been in power.

In fact, the Labour and Tory parties have vied with one another to determine which could sell off the most public assets in the shortest possible time.

Thatcher’s successor John Major, Tory PM from 1990 to 1997, continued the privatisation drive from where she had left off.

When the Labour party came to power under Anthony Charles Lynton Blair, PM from 1997 to 2007, the privatisation programme powered ahead as if there had been no change of government. Which, of course, ideologically speaking, was in fact the case. Blair, whose party originated in the 19C struggle for workers’ rights, even went so far as to boast that he was an admirer of Thatcher. Unsurprisingly, privatisation continued apace under Blair’s successor Gordon Brown, who was Labour PM from 2007 to 2010.

The current Tory/Liberal coalition government, which took office in 2010, instigated a step change, extending privatisation to every nook and cranny of the public sector.

It emerged only this week that, following the earlier introduction of privately run prisons, the police are the latest public service slated to come under the hammer of privatisation.

Will the army be next? Will we have to rely on soldiers of fortune to defend the country?

The police move follows hot on the heels of legislation to marketise the national health service – despite the outright opposition of virtually the entire medical profession – and to hack back public welfare and social services, including those provided by local authorities, which now outsource many of their previous in-house services to private businesses (for example, in the field of refuse collection).

The utilities and the railways were denationalised some years ago.

Now all remaining areas of the public sector are being scrutinised with a view to their privatisation, further privatisation or part-privatisation (where private companies compete with public bodies operating in the same field).

The leitmotiv is: public sector bad, private sector good.

But frenzied marketisation is not limited to Britain.

The reigning ideology in the western world today reflects the view that purpose of elected governments is to sell off the public sector to the private sector.

By the public sector we mean real estate owned, services operated and products manufactured by the public sector.

It is an axiom of faith among the free marketeers that anything the public sector can do the private sector can do better – and more cheaply.

In fact, time and again, the facts on the ground show that this is by no means always the case.

Take the railways, for instance.

In the 1990s, under the Tory government of John Major, the national public rail undertaking, British Rail, was privatised. Responsibility for running rail services was divided among no fewer than 25 different private rail companies. What is more, responsibility for maintaing the permanent way was given to another company, Railtrack, quite separate from the 25 firms which operated the trains.

The result, for travellers, was increased fares and chaos. It was obvious from the start, for instance, that each of the 25 private rail companies would have a near-monopoly in the geographical area of the country in which it was licensed to run trains. This gave the company no incentive to improve rolling stock,  which quickly deteriorated to 19th-century standards, but every incentive, given the lack of competition in its geographical area, to raise fares.

And so it came to pass.

The following is an item of news from the Press Association news agency that was published in the Guardian on 6 February 2012:

“UK railways judged worst for fares and efficiency”

“Britain’s railways have been judged worst for fares, efficiency and comfort in a study of rail services in Europe. The report by the thinktank Just Economics said UK rail services were less affordable, less comfortable, slower, more inefficient, worse value for money and more expensive than those in France, Germany, Spain and Italy. Frequency of trains was the only area in which the UK performed better.”

This in a country which gave birth to the railways! Richard Trevithick, who invented the steam locomotive in 1801, and George Stephenson, who opened the first passenger railway line from Stockton to Darlington in 1825, must be turning in their graves.

Let us take another example from the national health service. In an earlier phase of Labour/Tory privatisation before the marketisation bill now going through the UK Parliament, many hospitals outsourced their cleaning operations to private companies, who then employed cleaners at rock-bottom rates of pay. The result: filthy hospitals and outraged patients.

In a ploy to magic public debt out of the public accounts, successive Tory and Labour governments, starting with John Major (PM from 1990 to 1997), have made much use of a wheeze called the Private Finance Initiative (PFI). Under PFI, the public sector surrenders responsibility for providing infrastructure (eg building a school or police station) or running a public service (say, a group of hospitals) to a private company (often foreign-owned) in exchange for guaranteeing that company a substantial return over periods as long as thirty years.

According to Wikipedia, “The private finance initiative (PFI) is a procurement method which uses private sector capacity and public resources in order to deliver public sector infrastructure and/or services according to a specification defined by the public sector…. Beyond developing the infrastructure and providing finance, private sector companies operate the public facilities at a higher cost, despite in many cases using former public sector staff who have had their employment contracts transferred to the private sector.”

The UK House of Commons Treasury Select Committee recently found that “higher borrowing costs since the credit crisis mean that PFI is now an ‘extremely inefficient’ method of financing projects“.

You don’t have to be a rocket scientist to twig  why private companies sometimes succeed in providing a product or a service at a cheaper price than the public sector: it is usually because they provide an inferior product or service or because they cut wages. There is an old saying: “if you pay peanuts, you get monkeys.”

Readers of the blog will perhaps remember our definition of the market economy: the provision of the shoddiest possible goods or services at the highest possible prices.

As we have repeatedly argued in the blog, there are no essential doctrinal or functional differences between the two main political parties that exist in all so-called social democracies. Whatever ideology the parties claim to espouse is irrelevant; the reality is that, in practice, they are virtually identical. In particular, both parties are umbilically attached to the “free” market. Thus, when in office they both systematically set about dismantling the state and selling it off to the private sector.

Which means selling it off to their friends and contacts in the private sector.

For there is an extensive interchange of personnel between public and private sectors. This is sometimes called the “revolving door” between government and business. When in office, politicians do the bidding of the private undertakings whose public placemen they are. When out of office, they segue seamlessly into directorships and executive positions in those same private businesses whose affairs they have been regulating as government ministers.

This exchange of personnel between public and private sectors also applies to senior civil servants, who can be heads of government departments one day and yet pop up the next in the boardrooms of major banks.

Harvard economist J K Galbraith (1908-2006) predicted the ultimate outcome of this approach in his 1958 ground-breaking classic ‘The Affluent Society’ :

Private affluence, Public squalor.

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You might perhaps care to view some of our earlier posts.  For instance:

 1. Why? or How? That is the question (3 Jan 2012)

2. Das Vierte Reich/The Fourth Reich (6 Feb 2012)

3. The shoddiest possible goods at the highest possible prices (2 Feb 2012)

4. Where’s the beef? Ontology and tinned meat (31 Jan 2012)

5. What would Gandhi have said? (30 Jan 2012)

Every so often we shall change this sample of previously published posts.

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