Privatization failed. Australia needs to leave behind the ‘incentives’ rhetoric and just spend money on things we need | Richard Dennis

Daniel Andrews’ plan to re-establish a state electricity commission is not just proof that privatization has failed, it’s proof that the politics of privatization have failed.

It’s not for nothing that the Victorian premier is using a brand name from the past for his investment in the energy generation of the future. And it comes as no surprise that during an election campaign he focuses on public provision of an essential service. The Australian public was never as fond of privatization as their political class.

Andrews is not alone in seeing the economic and political benefits of nationalizing the key infrastructure on which Australia’s economy and community are built. Malcolm Turnbull created Snowy 2.0, Barnaby Joyce is immensely proud of the public rail company, and the Queensland government — which had failed previous bids to privatize its electricity generators — recently announced $62 billion in new public investment in renewable energy to electricity utilities through its state Ownership.

Economic theory does not give clear rules about which assets are best owned by the government and which are most owned by the private sector. The simple fact is that different governments, in different countries, at different points in history, have made very different decisions about what governments should own, control and sell.

Just as there is no strong economic case for the assets that governments should own, there has never been any strong economic evidence that privatization benefits budgets.

While governments eager to sell the assets built up by their predecessors always focus on reducing public debt in the short term, they rarely talk about the long-term effects of lost revenue streams over the next few decades.

In the 1990s, Jeff Kennett sold Victoria’s electrical assets for $23.5 billion, but it is estimated that the electrical industry made $23 billion from Victorian consumers and businesses alone last year. oops.

The productivity benefits of privatization are just as vague.

While the rhetoric of privatization revolves around the greater innovation, efficiency and spending discipline of the private sector, the reality is that since the privatization trend began, the growth of middle managers and salespeople in the Australian utilities sector has been extraordinary. For example, between 1997 and 2012, the energy, gas and water sectors – where most of the privatization took place – saw the number of sales employees grow from 1,000 to 6,000, the number of companies, human resources and marketing grew from 2,000 to 9,000, and the number of general purpose managers explodes from 6,000 to 19,000. The number of technicians and craftsmen, on the other hand, only increased by 28%.

While the high prices and low quality of privatized services are well known, one of the least visible but most important drawbacks associated with the change of ownership of public assets is the impact on apprenticeships and skills.

Before economic rationalism and neo-liberalism got into the minds of Australian politicians, public companies employed tens of thousands of young apprentices each year, most of whom went on to work in the private sector after their on-the-job training, supported by formal education. training in public “tech colleges”.

Today, most public companies and public technical colleges have been replaced by private companies, but it is perhaps unsurprising that the privatization of training has led not to an increase in quality, but to a so-called skills shortage.

Considering that companies like burger chain Grill’d were the largest recipient of the former coalition government’s wage subsidy scheme to boost apprenticeships, and privatized training institutions should be banned from offering free iPads to trick vulnerable people into enrolling for inappropriate courses, it should come as no surprise that despite record amounts of training, Australia has to look abroad to provide workers with a wide variety of skills, including electricians, bakers and masons.

Privatization has made a mess of Australia’s vocational training system. But Andrews’ plan to create new “technical schools” to introduce more students to more professions before they leave school proves that governments are beginning to believe that the economics and politics of old-fashioned public spending are a better way to solve problems. to solve.

Direct government investment in essential services through old-fashioned entities such as Victoria’s State Electricity Commission and our school system allows governments to solve many problems directly at once. Not only can the Andrews government invest directly in the renewable energy that the low-carbon economy clearly needs, it can also play a direct role in shaping the wages, conditions, training and gender balance of its workforce. Likewise, it can ensure that the physical investment and training of the workforce takes place where they make the most economic, social and environmental sense.

Governments cannot and should not do everything. But after decades of privatization, deregulation, outsourcing and the creation of private markets to replace public regulation, it is positive to see a state government not only investing directly in public solutions, but being so public and proud in the process.

Let’s hope the federal government drops the rhetoric of building a “green Wall Street” to fund environmental protection and its “agreement” with the pension funds to build public housing and instead spends some money on protecting animals in wildlife and building houses. It’s not high finance, but it’s a lot cheaper and more effective.

Leave a Comment