Consider the following tale:
The manager, a Basil Fawlty-like character, resolutely refuses to even consider buying a new TV for the residents of the old-folks home. But they won't be bullied by this upstart, so they agree to raise the funds themselves. The TV might be old, but every night they enjoy a good squabble about what to watch after dinner. After much argument, Basil reluctantly agrees to hold the money for safekeeping. Eventually, he is even persuaded to purchase the new TV. And for a few weeks the residents enjoy the benefits - taking squabbling to a whole new level. One day, however, the TV suddenly disappears. Worried about its whereabouts, the residents ask the manager where it has gone. Looking a bit embarrassed he reluctantly admits to selling the TV at a low price to one of the residents – Mrs Rich - who has moved the set into her rooms for private viewing. Mrs Rich is happy to allow residents to view the TV, but in future they will have to pay a small fee to help cover her costs.
The pensioners are confused and angry, how could he do that, he had no right, the TV was bought and paid for with their money. But Basil dismisses their complaints; they had given him the money for safekeeping; and the TV was purchased in the name of the home not its residents. And anyway, why are they worrying when the money from Mrs Rich will be used to lower the fees of some of the wealthier residents who've been complaining that they pay too much for the extra resources they use. And in future only those who actually watch TV will have to pay – what could possibly be fairer than that?
But, apart from a few of the wealthier ones, the residents are not happy, they demand that the manager immediately recover the TV from Mrs Rich. After a long, awkward silence, he admits he can't do it. The truth is that he's entered into a long-term contract with her and if he breaches the contract he will have to pay her compensation, with money he doesn't have - although the residents can raise the funds if they like. The residents are even more outraged - they remind him that they already raised the funds once to buy the TV in the first place. Then old Mrs Jeffries comes up with a good idea: recover the old TV from the cellar where it has been gathering dust over the last few weeks. But Basil says he can't do that either. The contract with Mrs Rich contains 'non-competition guarantees' which allow her to claim compensation in the event that, for whatever reason, her revenues are reduced by any alternative entertainment. The contract prevents him from introducing any changes - even the introduction of a new radio, or a card table or in fact any form of change that might detract from contractually agreed TV viewing levels.
Now make the following parallel connections
|
Manager |
Government |
|
Residents |
Citizens |
|
Mrs Rich |
Corporations |
|
TV |
Public assets |
|
Resident’s fees |
Income Tax |
And you have a good analogy for privatisation.
Governments sell public assets – the assets of the commoners - to private corporations at knockdown prices. Assets once owned in common are now owned in private by corporations. Citizens must now pay for access. The revenue from the sales is used to lower income taxes on the wealthy because, according to the standard argument, the poor spend all of their income, but the rich invest almost all of theirs and this creates economic growth and higher incomes, some of which will eventually 'trickle down' to the poor. So in the end everybody wins. This 'neoliberal' story is, of course, a complete fairy tale. The surplus funds of the wealthy are rarely invested in productive assets; instead they are withdrawn from circulation leading to a collapse in effective demand and higher unemployment; or alternatively they are used to feed speculative asset bubbles such as the sub-prime mortgage catastrophe; or they are invested offshore which reduces our capacity to compete overseas. The truth is that we can have very little confidence that the wealthy will use their assets for productive investment.
Of course, corporations don't deprive the commoners of the asset altogether, their aim is to derive a permanent income stream by charging consumers for its use. So, instead, they introduce ‘user pays’ tolling systems that give citizens restricted access which, at the same time, yield a perpetual revenue stream to the corporation. These privatization deals, shrouded in secrecy, contain extraordinary 'no-competition' clauses which guarantee the corporation's earnings either by restricting anything that potentially threatens their revenues or by financially compensating them if it actually costs them money. This sleight of hand completely masks the fact that the people have already bought and paid for the asset with their taxes.
And this entire system of misdirection, this clever pea and thimble trick is contradicted by fatalities on the privatised London transport system stemming from reduced maintenance standards, the debacle on the privatised Sydney Cross-City Tunnel, and by expert report after report showing deteriorating service standards and safety performance on privatised projects. When like is compared with like, when proper cost-benefit analyses are undertaken, when the full range of social costs and externalities are taken into account, government is far more efficient and far less costly than the capitalist corporation. We should give the TV back to the pensioners, after all they bought it and they own it. Capitalist corporations cannot and should not manage the public interest.
