Critical Times

Anna Pha

Neo-liberal policies have failed dismally. The policies of deregulation and corporate welfare have impacted on most areas of the economy to the detriment of ordinary people.

The financial sector is in crisis; water usage has been mismanaged; river systems are drying up; housing is becoming unaffordable for many; ships are queuing to load the tonnes of resources being thoughtlessly ripped out of the ground; private health and educations systems propped up to the neglect of the superior public systems; vital rail services slashed; privatised electricity prices sky-rocketing with blackouts more common; public transport systems underfunded, short of stock and unreliable; climate change neglected; and so the list goes.

One of the key questions in the 2008-09 budget is the extent to which government should be involved in economic questions — the role and size of the public sector, the extent to which the private sector is regulated and the level of corporate welfare.

For several decades successive governments have pursued policies of deregulation and privatisation and left it to the “markets” (meaning the transnational corporations) to dictate policy and determine the direction of the economy. The corporate sector told governments to butt out, that central planning was socialist and that the public sector was inefficient. But the markets have failed so badly that even the corporate sector is screaming for governments to intervene and bail them out of the quagmire they’ve created.

Companies cry out over skilled labour shortages, clogged up ports, lack of rail and other infrastructure, at the same time as calling for more freedom and less regulation. Yet it is these freedoms and lack of government involvement that has created the anarchistic environment where corporations narrowly focus on their individual needs, regardless of the consequences for others. Higher electricity and telecommunications profits bring higher costs, not just for regular consumers but for businesses.

The markets do not plan in an overall sense for the common good. They invest in what looks to offer the largest profits in the short term, such as where demand for a product or service exceeds current supply. They abandon investments or do not invest where there is a surplus on the market or where it is less profitable or not profitable to invest. The actual needs of people or other businesses are secondary — their primary concern is the size and profitability of the market.

This ad hoc, unplanned, profit-driven approach to investment and the provision of infrastructure has resulted in shortcuts, including health and safety issues, long-term neglect of maintenance and provision of new infrastructure for future needs. It is not just the private sector that has failed. Governments, pursuing budget surpluses and contracting out such responsibilities as management or maintenance of services to the private sector, have also let key infrastructure run down.

The role of government has become more focused on tax concessions and making financial contributions to ensure the profitability of the private sector. This is seen in the public private partnerships (PPPs) where secret contracts bind government to making up the shortfall in profits for the private partner. Meanwhile the private sector operator can bleed the investment dry, walk away after years of neglect and leave it to the taxpaying public to foot the bill to get the service back on its feet.

Private sector publicly funded

On the eve of the budget one industry organisation, Infrastructure Partnerships Australia, has called for planning and more assistance from government. “For the federal government it’s more about getting the overall planning in place, getting the funding right and having a steady stream of projects… I think that the key issue for us is around planning,” Penny Bingham-Hall, executive general manager, strategy, at Leighton holdings, told a business round table discussion with the Financial Review (8/5/08).

In particular they are interested in the government’s new Building Australia Fund. “That money really should be allocated into those projects with significant social, economic, environmental benefits aren’t suitable for private sector investment,” said Bingham-Hall.

On the same question of the Building Australia Fund, Tony Shepherd, chairman Connect East and Transfield Services (beneficiaries of the privatisation of Melbourne’s public transport), added, “I would be hoping that the fund could make significant contributions to large projects where it’s impossible for the private sector to fund it all, but the project is vital and we need a mix of public and private funding.”

In other words, it is also about the government providing bucket loads of funding, and the state retaining services that the private sector feel are not realistic profit generators.

Shepherd still looks to the markets for pricing and profit-gouging, but wants the government to supply much of the capital and carry the risks. After all, borrowing money is becoming more expensive and harder to raise.

Privatised water no solution

“Why do we have a water shortage?” Shepherd asks. “Because it’s not priced properly and consequently we haven’t invested in the proper infrastructure … By all means subsidise people who need to be subsidised. But that’s a separate issue,” he says in answer to his own question.

The message is loud and clear: keep up the supply of corporate welfare, but don’t interfere with the running of the economy. Leave it those failed markets!

He is correct in saying that we have a water shortage. The solution does not lie in making water more expensive so that it becomes highly profitable and more investments are made.

The solution lies in tight regulation and allocation of water according to prioritised needs and in planning and investment in the necessary infrastructure. For example, which is more important and socially and environmentally sound — the opening of new coalmines or water supply to country towns? These are decisions that should be made by government, by government which is not electorally funded by mining corporations.

Water is an essential of life; it should be affordable and accessible according to need and sustainable usage. Privatised, higher priced water would result in distribution based on ability to pay regardless of community needs and its impact on climate change.

The first consideration in relation to water, electricity, fuel, public transport, rail freight, housing, education, welfare services, banking, insurance, etc, should be the social and economic needs of the people. Only the public sector can do this.

Once the private sector steps in, public needs take a back seat and profit determines everything. The service, whether it be water, electricity, public transport — all become a vehicle for the generation of private profits. Hence prices skyrocket and services deteriorate. What should be a right becomes a accessible according to ability to pay.

We have had more than enough of capitalist markets to demonstrate their inability to meet the needs of society. It is time for governments to step in and take their social and economic responsibilities seriously. To do this the private sector must come under tighter regulation, accountability and subjected to price controls. The public sector must be expanded.