Saturday, 7 September 2013

Why Privatize Public Services?

NOTE:  A slightly shorter version of this post was published in the Leader Post, September 16. 

The mainstream media and our political leaders insist that the only real question involved in the building of a new sewage treatment plant for Regina is who can do it cheaper, the government or the private sector. But there are much more important issues.
Regina's Wascana Lake

In the 19th century in Canada and elsewhere basic public utility services were provided by private corporations. As we know well in Saskatchewan, the private corporations provided services only where they could make a profit. Governments were then elected that created Crown corporations on the provincial level and municipal public services on the local level. The goal was always to provide essential public utility services to all, no matter where they lived or how low their incomes happened to be. This was the co-operative democratic approach.

The Reagan/Thatcher revolution
Beginning in the mid-1970s, private capital and their organizations made it clear that they would like governments to privatize these successful public services. This was one of the major policy goals of Margaret Thatcher’s Conservative government in Great Britain and Ronald Reagan’s Republican administration in the United States. In 1989 the Thatcher government privatized the water/sanitation public utilities in England and Wales.

In Saskatchewan, the Conservative government of Grant Devine (1982-91) closely followed the model set by the Thatcher government as it privatized a number of important provincial Crown Corporations. They even used Thatcher’s advisers.

Stephen Harper’s Conservative government shares a similar political ideology and that is why the federal tax money provided to local governments for constructing new public facilities is limited to projects which involve contracting out construction and operation to private corporations.

The spread of right-wing neoliberal program
This political program, pushed by all the large business organizations, was carried over to international organizations. The World Bank, the International Monetary Fund and the World Trade Organization created a policy package known as “The Washington Consensus.” As governments in the less developed countries experienced financial difficulties, these organizations provided some monetary assistance as long as they agreed to the package of structural adjustment programs that included deregulation and the privatization and contracting out of public services.

When the housing and finance industries collapsed in 2008, governments went deep into debt to bankroll the private banking sector. As a result, we are now experiencing “austerity programs” in the advanced industrialized countries. In Europe the World Bank, the International Monetary Fund and the European Common Market provide assistance to governments with serious debt problems but insist that they adopt a package of policies which include the privatization and contracting out of basic public services. They also insist that there be major cuts in public sector employment.

The general attack on the public sector trade unions
For good reason CUPE is concerned about these developments. The neoliberal agenda of the political right includes a strong attack on the trade union movement. Where privatizations have taken place in public services, management numbers and remuneration have increased significantly while large numbers of front line workers have been sacked. Our neighbours who work for the City of Regina have every right to earn a decent income that allows them to raise a family and even buy a home. No one wants to have to work for Walmart wages and benefits.

Regina used to be an NDP town. There was always a majority on City Council who supported the NDP. The general public had greater influence over major policy decisions. Builders and developers were not in complete control. The neoliberal policies of the Romanow-Calvert NDP governments disillusioned great numbers of NDP supporters. They left the party, and it is clear that many don’t even turn out to vote. When the turnout in municipal elections falls to 25 to 33 percent of eligible voters, it is inevitable that right wing political forces will win. Numerous studies show this to be the case. That is why the Mayor and the City Council are so sure they are going to win the referendum.

Addendum.

Impact of the privatization of water/sanitation public services by Margaret Thatcher’s Conservatives government.

In 1989 Margaret Thatcher’s government privatized the water/sanitation services in England and Wales. They remained under public ownership in Scotland. Before the privatization, the Thatcher government wrote off all the public debt (ca $US 8 billion). The operations were then sold to private corporation for around 22% of their market value.

In the first ten years of operation, profits of the now private water/sanitation corporations were far higher than other water/sanitation corporations.

Salaries and bonuses paid to the top management increased between 50% and 200% in the first seven years of operation.

Between 1989 and 2001, employment by front line workers fell by 21%.

Over the first five years after privatization, the number of low income households cut off from services tripled.

Over the period from 1989 - 2012 water bills tripled while inflation doubled. The cost of water has been consistently higher than in Scotland, where water/sanitation remains a public service.

Ownership of the water/sanitation service is now by a few large transnational corporations.

The net debt as a percentage of assets for the now privatized water/sanitation operations has risen from 30% (1996) to 70% (2011).

Profits from the operation of the water/sanitation services have been consistently 15% higher than the average for non-financial companies.


Sources: See the University of Greenwich study: “UK Water Privatization - a briefing.” 2001.
“The Water Industry: A Case to Answer.” New Policy Institute, 2013. Both can be found on the Internet.

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