The truth about privatisation

June 21, 1995

By Karl Miller

MELBOURNE — The Victorian Liberal government is on a privatisation binge.

Its privatisation plans and accomplishments include: electricity generation, electricity transmission/distribution, water distribution, gas production and distribution, ambulance, fire and police emergency dispatches, some ambulance services, 50% of all local council functions, hospital cleaning, some new roads and some parks.

At state and federal levels, both Liberal and Labor parties are selling off public assets.

Privatisation is not popular. The October 1994 Saulwick Age national poll found that at least two-thirds of those polled supported public ownership and management of water, postal services and electricity. A 1994 EPAC study showed that a big majority of Australians support government provision of infrastructure.

To counter this trend, supporters of privatisation (such as the Victorian government) advocate it on the grounds of efficiency, competition and profitability.

Advocates of privatisation argue that government activities are inherently inefficient. In many cases, government bureaucracies are inefficient. But that does not mean that the services should be sold.

In economic "rationalist" dogma, "efficiency" means fewer workers providing the same services; those who lose their jobs are not guaranteed retraining and re-employment. One of the immediate results of greater "efficiency" is greater unemployment.

Privatisation often means quality suffers. The "efficiency" of the ambulance service in Victoria has been improved in the last few years, against the wishes of the union. On several occasions people have died because ambulances have arrived several hours after being called. While the ALP and the Liberals indulged in a slanging match about the computer's reliability, the union pointed out that the major problem was a lack of resources: the dispatching service worked fine, but is designed for 100 ambulances, and only 55 are available.

Competition supposedly improves efficiency. The theory is that private companies compete with each other in the market, and the most efficient supplier makes the best profit. This argument doesn't always make sense. For example, the federal ALP is selling off the airports. But how does an airport compete for passengers or goods? The distribution of air journeys is something an airport company has little control over.

Similarly for the sale of electricity and water distribution. If you are thinking of building a new factory, you might choose eastern Victoria rather than western for the location if the electricity is cheaper there. But for the other 2-3 million customers, the choice of where we live involves many other concerns.

One of the main arguments for privatisation, particularly in Victoria after the collapse of the State Bank, is the impact it will have on the public debt. This argument is another furphy. It is always the most profitable areas of the public sector which are sold first. (Who would buy an unprofitable company?) But a one-off payment doesn't come close to matching accumulated income over a 10 or 20-year period. It also reduces the government's ability to meet its debts.

In 1994 the Liberal government commissioned a report by the Victorian Office of State Owned Enterprises as part of its rationalisation for privatisation. The report claimed that the Victorian electricity system "remains relatively costly, inefficient and unresponsive to consumer demands".

By contrast, a detailed 1991 study of 100 international electricity utilities, by the Electricity Supply Association, rated the State Electricity Corporation of Victoria (SECV) in the top 10% for efficiency of resource use and very highly for technical efficiency of distribution.

For the last five years the SECV has provided an annual $200 million dividend. Its work force has declined by about half. Yet this efficient, productive, competitive industry had to be privatised, according to the government.

Privatisation really benefits only private companies because it increases profits. That is why the most profitable and efficient sectors of government are first to be sold. And that is why governments often corporatise enterprises before selling them: this reduces the cost of privatisation as far as the buyers are concerned.

In Victoria, as in every other state, the government and its attendant unelected bureaucracies govern in favour of the rich. Privatisation is part of the more general austerity drive, to cut wages, conditions, jobs and government spending. The poor and oppressed are being forced pay for the rich to get richer.

No-one expects the Liberals to stop privatising. However, despite the evidence of the last 15 years, some claim that the ALP will. But it hasn't — and it won't, because both major parties have the same interests at heart — to manage capitalism.

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