Privatization Doesn’t Work — Common Sense Says It Never Could Have

Privatization basically takes a public enterprise and adds a layer of profit-seeking management, who then cut employment rolls and services in that quest.  Simple and obvious, and a recipe for the failure of public services, which then feeds into a vicious cycle whereby the enemies of the public good can bolster their claims that government “doesn’t work” in order to fold more public enterprises into their parasitic endeavors.

—  Wat

After Carillion, Can Capitalism Clean Up Its Act? Or Will Marx Have the Final Word?

By Yves SmithFebruary 13, 2018

Yves here. While this article focuses on the Carillion and the broader failure of privatization and other Thatcherite fads, it is germane to American readers too. It describes how the demonization of the public sector and the insistence that private operators would do better was evidence free…and no one has been keeping tabs to see if the claims of improved performance came to fruition. There are plenty of anecdotes I can supply that would suggest not.

By Trevor Smith, co-founder of Democratic Audit and a Liberal Democrat life peer. Originally published atopenDemocracy

Carillion’s collapse – and other failures such as privatised forensics firm Randox – show the limits of the managerial revolution. But who’ll take on the robber barons?

The Carillion bankruptcy is but the most spectacular illustration to date of the malfunctioning of the UK economy. Coming hard on the heels of the equally high profile failure of BHS, it has raised a fundamental questioning as to whether it is yet another one-off incident or symptomatic of a much deeper malaise. The public debate that has ensued has brought the ideas of Karl Marx back into fashion: does late stage monopoly capitalism contain within itself the seeds of its own destruction? Answers to that age-old conundrum are best left to the rhetoricians, but the latest corporate collapse reveals that more immediate and widespread practical reforms are now called for.

To state the obvious, Carillion occurred against an already very bad economic background. The gap between rich and poor continues to widen. Top executive remuneration packages now show that the difference between them and average pay packets amounts to a ratio of 120:1 *High Pay Centre, Feb 2018), while the gender pay divide remains at 20% according to ACAS. Other glaring inequalities include both ethnic minority life chances, widespread regional disparities and especially the North/South divide, and the stasis caused by social immobility. In addition, home ownership has been plunging and more people are compelled to rent, usually with short tenure and often in sub-standard accommodation.

A short history of the ‘end of history’

Mid-twentieth century Britain appeared to point to a very different future. During the first half of the 1950s the Keynesian consensus, that went by the term “Butskellism”, seemed set fair to become a long-lasting paradigmatic formula for operating the economy. Looking back, it could have been seen as portending the coming of Fukeyama’s “the end of history”, though the “mixed economy” turned out to be a short-lived trailer for a story that wouldn’t last. It was replaced by Gaullist-style “indicative planning” under the Britain of the two Harolds (Macmillan and Wilson). These sequential consensuses gave way to the wholesale privatisation of the nationalised public utilities. Privatisation characterised Margaret Thatcher’s government but the actuality did not live up to the free market slogans she flauntingly employed in promoting it. Privatisation did not usher in extensive price competition – it merely created a new series of cartels that necessitated the recruitment of a vast number of allegedly “independent” agencies in an attempt to regulate their activities. Thatcherism’s main accomplishment was to firmly embed the notion that “private” was good and “public” was bad – this was to become the new consensus.

A major off-shoot of privatisation was the subsequent invention of the Public/Private Partnership (PFI). It was John Major’s innovation when he was prime minister and was first employed to enable the construction of the Heathrow Express from Paddington mainline station to London airport. The device was seized upon by the incoming government of Tony Blair and aggressively pursued by Gordon Brown as chancellor and John Prescott as deputy prime minister. PFIs became an extensive new industry providing the wherewithal for building rafts of schools, hospitals, prisons and other such infrastructural developments.

PFIs turned out to be too good to be true. Whereas the Heathrow Express generated its own cash flow that would both help re

 

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