COVID-19 pandemic shines harsh light on privatisation & outsourcing

November 27, 2021
Photo: Pixabay

Right from the start, Australia’s response to the COVID-19 pandemic has been shaped by the basic realities of contemporary capitalism and neoliberalism. 

It quickly became apparent that the various global supply chains we depend on for medical supplies and equipment were no longer reliable. 

Early on, getting hold of face masks and ventilators was a big problem. Very little was produced here, and overseas suppliers were too busy fulfilling other orders or being hit by the virus themselves. 

Essential goods supply crisis

The just-in-time, low-inventory approach of today’s big corporations depends on fast and reasonably cheap freight. 

But right now there is a worldwide shipping and transport crisis, with container rates on key routes having quadrupled this year. In some cases, neither containers nor even ships can be had at any price.

In Australia, some producers and retailers have stockpiled for the Christmas period to insulate themselves against delays. But this is a gamble that might end badly if the market shifts, leaving them with huge inventories to clear.

All this is a strong argument for making essential goods in Australia, especially medical supplies and equipment. We need to build up a strong local manufacturing capacity. 

Of course, now that there is a guaranteed market, many companies are coming forward and seeking government support and contracts to manufacture various items.

But the problem with relying on private companies is that they are in it for the money and will produce only insofar as it is profitable. They do not want a big surplus capacity to insure against a future crisis; if production of a given item is not profitable, it simply will not happen.

Low-paid, casualised work

Many people now depend on insecure, low-paid, casualised work. Many of these workers missed out on income support in the various lockdowns. 

A lot of the workforce used in aged care and hotel quarantine are insecure, casual workers. Typically, they are forced to take shifts at several workplaces to make ends meet. This has been a key pathway for spreading the virus.

Even stopping work to get tested or vaccinated means financial hardship for workers on the breadline. After pressure from workers and unions, the federal government introduced the requirement for employers to provide time off work without loss of pay for testing or vaccination.

Casualisation is great for the capitalists but a disaster for workers — it is a social and economic pandemic of its own. We need secure, full-time jobs for all. 

A massively expanded public sector has to lead the way — in healthcare, aged care, disability care and public housing.

Keating’s sell-offs

The AstraZeneca COVID-19 vaccine is being produced in Australia by biotech company CSL under a billion dollar deal with the federal government. Discussions are also underway about CSL setting up production facilities in Melbourne capable of producing mRNA vaccines.

CSL began its life in 1916 as the Commonwealth Serum Laboratories. It was privatised in 1994 by the Paul Keating Labor government. As economist John Quiggin explained in Independent Australia, this was a sordid operation in which a prime public asset was sold to private interests at a fraction of its real value.

In an August 4 letter to the Age, Paul Keating defended his many privatisations: “As Prime Minister I privatised a number of government institutions; the Commonwealth Bank of Australia, CSL and Qantas. All are competitive institutions. The Commonwealth Bank and CSL went on to become world-class companies.”

Just what is a “world-class company”? CSL now has a market capitalisation of almost $100 billion. In 2019-20 its net profit was $US2.1 billion — a return on invested capital of 21.6%.

Furthermore, according to a Yahoo News report, CSL’s CEO Paul Perreault “took home $43,044,606 in realised pay last financial year … making him the nation’s highest-paid CEO”. 

The article explained that it would take a worker on an average salary of $63,085 more than 682 years to earn this sum.

Clearly, CSL long ago left behind its modest public origins. It is now truly “world-class”, with world-class market capitalisation, world-class profitability and world-class CEO pay and Keating presumably thinks we should all feel good about that.

Quiggin argues that “there is now a strong case for renationalisation of a wide range of private assets, including roads, electricity transmission and distribution network and airports. It is time to call the failed experiment of privatisation to a halt”.

In the face of the pandemic, taking CSL back into public hands should be a priority. We need a publicly-owned biotech company, based right here, that can develop and produce vaccines and medicines in a timely way, avoiding corporate profiteering.

A nationalised CSL should not operate on corporate lines (like Australia Post does) but have public service as its overriding aim, be run under real democratic control and with all wages and salaries confined within a very narrow range (that is, no obscene “market rate” CEO and executive pay or outrageous “bonuses”).

Privatisation a big success … for capitalists

Quiggin and other critics of privatisation have described it as a “failed experiment”. Obviously, this is true in one sense. But privatisation was never really an “experiment”. 

It was and is the insistent demand of big business and it is all about profits. And it’s been an outstanding success … for the big capitalists. 

It has been terrible for the mass of people — but public welfare was never the objective.

Despite our governments selling off so many public assets already, this process continues. Every single governmental function is being eyed off for sale to the private sector. 

Those enterprises that remain in public hands have been corporatised with ridiculously high executive pay and an anti-worker culture.

Outsourcing — a modern plague

Even if something still remains in state hands, it will be subject to another modern plague — outsourcing. 

A Michael West Media article by Geordie Wilson exposed how deep the rot has gone: “Documents obtained by show that even senior roles [in the public sector] are being outsourced now. 

“Senior public servants work in department buildings and take orders from the minister, but their real employer is actually a private business.

“We have identified that senior roles in policy, management, biosecurity and even ministerial advice are now filled by private business. Even assistant directors and executives at many departments are now privately run. 

“The headcount of non-IT public servant roles outsourced by the government is in the thousands”.

Wilson said the process had proceeded to an extraordinary extent in the Department of Defence, which currently has 29,000 outsourced roles.

It is highly likely that this process is also underway in various state public services.

Contracts for private companies

In addition to outsourcing personnel, governments routinely contract private companies to perform all sorts of functions.

According to an Independent Australia article by David Paull, major accounting firms such as KPMG and PriceWaterhouseCoopers are profiting from the privatisation of the public sector “to the tune of hundreds of millions of dollars” in the form of contracts for government services. 

KPMG, for example, has secured 596 contracts from Commonwealth departments since 2018. 

According to Melbourne University academic Martin Bortz, the outsourcing and privatisation is caused by “a fundamental view that has permeated public administration in Australia for decades — that governments are just there to steer, and the private sector will do the rowing.

This has led to the “hollowing out of the state”, Bortz says, which involves contracting the private sector to do the work previously done by government. 

COVID-19 & outsourcing

COVID-19 has highlighted major problems with privatisation and outsourcing. Just one example is the problems with the vaccination roll-out in aged care. 

Private operators Aspen Medical and Healthcare Australia were contracted to vaccinate residents in private aged care facilities. It later emerged that the rollout did not include jabbing the staff. No doubt the private operators did not care — they were getting their money anyway.

The pandemic shows that we need strong, well-funded and properly staffed health bodies, including government departments, hospitals and paramedic services. 

Last year, private hospitals had to be incorporated into state health systems (no doubt on profitable contracts), which brought an extra 30,000 beds and 105,000 nurses and staff into the national COVID-19 response.

But government-run hospitals need a lot more staff — to make up for staff required to isolate, to reduce the burden on everyone, and in “normal” times to reduce nurse-patient ratios. 

Of course, expanding nurse numbers would mean paying them properly and improving conditions. Recently, Victoria hired 350 overseas medical staff, mostly doctors, to help maintain the health system in the crisis.

It has long been clear that hotels are not adequately designed for COVID-19 quarantine and there have been regular leaks of the virus. 

But the process of building proper, Howard Springs-style facilities in each state has been incredibly slow. 

In early 2020, China built a 1000-bed COVID-19 hospital in a little over a week. We could have done that with quarantine facilities here, but there has simply not been the political will.

Now something is finally happening. In Victoria, the Commonwealth has contracted Multiplex to construct a big cabin-style facility that is meant to be ready by the end of the year. The Queensland state government also has plans to build facilities. 

Crises the new ‘normal’

Political leaders are trying to convince us that, after the pandemic, life will more or less return to normal. But the pandemic may never quite go away. And there may well be more pandemics as capitalist agriculture continues on its present destructive course.

But the pandemic is not the only problem we have to deal with. Climate change is arguably an even bigger and more dangerous problem. 

The recent fires, heatwaves, hurricanes, droughts and floods around the world, as well as the 2019-20 Black Summer bushfires, should be a warning. Crises of one kind or another or in combination will be the new “normal”. 

Obviously, our key concern has to be trying to stop them at the source by cutting greenhouse gas emissions to zero as rapidly as possible and moving away from destructive capitalist agricultural practices. 

But a lot of the fallout is in the pipeline already and we need to make plans to deal with it.

All emergency response services must be provided with vastly increased budgets and the necessary full-time staff — in the health sector and the general emergency response area. 

We need public housing on a huge scale to cut out the speculators (“developers”) and provide cheap quality homes to all who need them. 

We need the capacity to house people forced out of certain areas by bushfires, extreme heat, drought, floods and sea level rise. We need projects to guarantee access to food for everyone in the face of what is coming.

If our response is dependent on the profit-motivated capitalist corporations, society simply will not be able to cope. 

People want our lives and welfare protected; the corporations want profits. They are not the same thing.

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