By Joe Montero
Australian Competition and Consumer Commission (ACCC) chair Rod Sims is saying that he has lost faith in privatisation and deregulation.
He deserves full marks for having the courage to tell it as he sees it. This is a man, who has been in the driver’s seat, in one of the key organisations delivering and monitoring these changes. In this capacity, he has a good view of a considerable amount of the evidence about the impact of the effect in the real world.
This is what lies behind his blistering attack on what he was once a keen supporter of.
Key targets at an address he gave to the Melbourne Economic Forum last Tuesday, were the sale of the electricity infrastructure and ports, and the deregulation of vocational training. Decades of experience has shown that instead of delivering better performance, the standard of their operation has declined.
He said: “I’m now almost to the point of opposing privatisation because its been done to boost proceeds, its been done to boost asset sales and I think its severely damaging to our economy.”
By speaking out, Rod Sims is helping to put attention on that Australia is on the wrong track and that this must change, if the nation’s performance is going to improve.
The evidence is incontrovertible. These and other forms of privatisation did result in making fortunes from quick grabs and asset sales.
Rod Sims listed the selling of Port botany and Port Kembla in NSW together, as well as the sale of the Port of Melbourne and its built-in restriction of competition from other ports. He talked about Medibank Private, about the sale of poles and wires in Queensland and NSW. He accused government of being complicit in the profiteering of corporations.
To the chairman of the ACCC, the central problem is that instead of fostering competition, it has restricted it by creating private monopolies. True enough. But there is also much more to it.
Privatisation was never meant to lift competition and deliver greater productivity, as the political establishment has always claimed. The function was always to remove what are considered blockages to the free flow of resources. This is traditional economic theory, which, in the face of more recent economic problems, has achieved a new urgency achieved a new urgency as the fix all.
In the English speaking world, it emerged during the time of Ronald Regan in the United States and Margaret Thatcher in the United Kingdom. It was brought into Australia by the Hawke government. The economic theory became known as neoliberalism.
It revolves around a belief that existing economic problems exist, because barriers have been constructed to prevent the free flow of capital and labour. Only by restoring the free flow, can bring the economy back into balance. This is the crux of the argument.
Government involvement in the economy is a major blockage. The existence of unions is another one.
Both are regarded as monopoly problems that hinder the operation of demand and supply. The propagators of this view, usually omit to consider private monopolies to be something that should be restricted, for acting against them would in itself be s restriction of the free flow of resources.
Government has to be removed from the economy as much as possible, and unions must, if they can’t be abolished, at least prevented from interfering to the extent that it can be achievable.
Thirdly, the role of the investor must be dominant, because it is held that the investor that must be the driving force for economic restoration, using personal interest to allocate resources in the most efficient way.
An important implication is, that too much allocation of national income in the hands of most of the population gets in the way of the most efficient investment decisions and this, it is believed, must be corrected by policies that guarantee a an upward redistribution of income.
All this was supposed to have restored the economy. It didn’t.
Nothing illustrates the failure of neoliberalism more thoroughly. It has not only magnified the existing problems. The future has been sacrificed for short-term expedience. Even though those who are benefiting from it now, must themselves be caught up in the eventual consequences. There will be a price to pay.
Most of the players of course, care little about the theory. Nor do they care about society or the future, so long as they get their cut now. Provide those with the means to make a quick buck, they will take it up.
To fulfill the ambition of withdrawing form government involvement in the economy, governments were compelled to make the sale of public assets attractive enough for major investors to take them up. So these assets were sold for well below their real value.
Many of them were tied to extensive and expensive infrastructure. This is why they were government run concerns in the first place. The level of investment required, relative to the return was not enough for the private sector to operate. This is why they they are transferred on the cheap, got government subsidies and often a minimum profit guarantee, again, subsidised with government money.
In short, this is why Rod Sims’ problem about privatisation boosting proceeds and asset sales came from. Get something on the cheap, and individual interest dictates that it would be foolish to forgo a fistful of dollars now, for a smaller return somewhere down the track. The greater good doesn’t have much currency in these circumstances.
The theory is right about one thing. The problem is blockages getting in the way of the best use of resources. But these are blockages of a very different kind. They concern the best allocation of investment from the viewpoint of society as a whole, which filters down to the way business is done at the micro level.
Rather than the lack of productivity being the problem, the problem is that the level of productivity has been higher that the capacity of the economy to absorb it.
Driving this has been a technological revolution, which has at one and the same time, cheapened what is put on the market, increased capacity enormously, and favoured business on a large scale, and thereby, increased monopoly control.
The best evidence of the incapacity of the economy to absorb the present level of productivity has been the emergence of the credit crisis.
Any real alternative must move away from the illusion that individual interest is all that matters. It is important. At the same time, society also has a collective interest, and it is important to recognise that both interests ultimately work together.
Having said this, it remains that at this time, it is the interests of society that must be elevated. The divergence between the the individual and the collective makes this mandatory. In fact it is central to the growing problem of an economy not working properly, our sense of place in it and capacity to do something about it.
A great deal must be done to ensure that society as a whole plays an important role in the allocation of capital and labour.
A part of this can be the re-nationalisation of key strategic industries and resources. Not to merely put them back into public hands. This has its own problems. A workable solution must go further and work towards a truly democratic economy.
It is not only about working to counter existing private monopoly control. Bringing in change provides the opportunity to provide those who work in the enterprises and the communities they serve, to have a major say in the making and carrying out of decisions.
Without this other part, how can it be said that society is in charge of its own economic and social destiny?