On Privatization

[HANLY@xxxxxxxxxxx]

This is a letter I recently published in the Brandon Sun. It may also appear
in the Winnipeg Free Press. I think I have solved the line length problem
now without comrade Louis. Filmon is the premier of Manitoba. The reference
to "tentative friends" in the final passage refers to the fact that
when it was pointed out that one of the owners of a home care service who might
profit from privatisation of home care was a friend of Filmon, he replied
that she was only a  tentative friend!
            Cheers, Ken Hanly

Why Privatization?

   One of the main functions of public ownership in the past was to reduce
costs to the private sector of unprofitable infrastructure developments.
States owned railways, harbors, canals, water-supply systems, airports,
road systems, and other parts of the economic infrastructure essential for
business as well as the general population. There were other functions as
well.
        On occasion ailing private corporations were nationalized and
upgraded and then turned back to the private sector. An excellent
example of this is Jaguar. This private car manufacturer was taken over
by the British government, turned around into a profitable company, and
then privatized again. As a private company it continued to make a profit.
In 1987 Stephen Rogers, then British Columbia's minister of
privatization, crowed that Jaguar was a perfect example of the failure of
state ownership and the virtues of privatization. Rogers failed to mention
that it was the private company that originally failed and it was turned
around under state ownership. The name given to the practice of taking
failing private corporations into the public sector is hospitalisation. After
injections of public money and restoration to profitability companies are
usually privatized again. If public ownership was of benefit to capital in
the past why is it that now there is a world-wide trend towards
privatization of services and publicly owned institutions?
   Since approximately the 1970's there have been massive changes in the
world economy. Markets are being further globalized as restrictions to
the flow of capital have been removed through the GATT (General
Agreement on Tariffs and Trade) and free trade agreements among
several countries. New technology has made it possible for fewer units to
satisfy global demand. In advanced capitalist countries the growth of the
welfare state had bought labor peace and the belief that capitalism was
clearly better than socialism even for the worst off. The downside of this
for capital however was that it also brought an increasing growth in the
public sector and huge debt loads that were regarded as unproductive for
capital, with interest payments that swallowed up an increasing portion of
the gross domestic product.
        Production within a public sector gives no direct return to private
capital. By the 1980's many industrial countries were spending over a
third of GNP in the public sector and growth in the private sector was
slowing down. Outlets for capital accumulation were narrowing and what
was needed for renewed growth were new areas for private investment.
Privatization achieves several purposes for capital at once. First, it gives
new outlets for investment capital. Second, it generates revenue for stock
brokers, financial institutions and consultants. Filmon has already paid
CIBC Wood Gundy  $300,000 to study MTS. Now who would have
thought a group like that would commend privatization? Third, it
removes the power of the state to use public corporations for purposes
that might be contrary to that of capital. Fourth, it puts the state in a
weaker position financially and more at the mercy of finance capital
because it loses tangible assets with which to bargain for better rates.
Fifth, it weans the public away from the idea that the state should have an
extensive role in providing services. This is a prelude to reduction in
entitlements such as medicare, the privatization of services, and further
dismantling of the welfare state. Sixth, privatization weakens the power
of labor vis-à-vis capital. Typically when services or corporations are
privatized the stakeholders who lose most are the workers.  Seventh,
privatization is a means by which debt is reduced without having to raise
taxes--a great political plus for any governing party. Given the value of
privatization to rich capitalists, governments who privatize can expect
rewards in terms of donations and political support. The  Globe and Mail
and numerous other papers will pen paeans of praise to them.
        Three common justifications of privatization are that it increases
efficiency, that it enables firms to complete globally, and that it reduces a
source of state debt. Yet none of these consequences may follow. Even
when some do follow it may be at the expense of working people. Private
home care may be more efficient in the sense that the same services might
be provided for less cost, but this could be because private home care
pays workers poorly. If, as Filmon says, it is not a matter of money he
could guarantee that privatized home care recognize the existing union
and all union contracts in the present public sector.
        Since private operations must generate a profit, privatization of
services may actually increase rather than decrease costs. We have
experienced deregulation of our phone services and we now pay more
not less for our local services. Now that we are experiencing the wonders
of a deregulated market we can see that at least those who sell TV ads to
competing telelphone companies, have prospered considerably To
celebrate the great leap forward into deregulation MTS, in preparation
for privatization, shed 1,000 workers, but not to worry they can buy
shares in the new private corporation and become rich capitalists! While
there is competition in long distance there is no competition in local
service. Local service remains a monopoly regulated in such a way that
the now private company must be given a state guaranteed profit! We
benefit from the rigors of competition in the long distance sector by
having our local rates go sky high. If one moves to a market based
system then rates for rural and isolated areas will skyrocket. Even in
cities, local rates will no doubt go up drastically. In Winnipeg, at present,
under the public MTS rates are about 13 dollars a month; in Edmonton,
under private ownership, the rates are 20 dollars. The president of the
Alberta chapter of the  Consumer's Association of Canada claims that the
private owners of the Alberta system are looking for an increase that will
double local phone rates within the next year. If the global competition in
long distance doesn't give a decent profit a company can always get the
regulators to hoist up the local rates.
   Filmon promises us public hearings on this issue. Let us all get out and
tell him that the public is tired of feeding his pigs and "tentative friends"
that are oinking around the public trough. If something has to go to
market let it be them.

Ken Hanly


email hanly@xxxxxxxxxxx
        Sources: Gary Teeple GLOBALIZATION AND THE DECLINE
OF SOCIAL REFORM Toronto: Garamond Press 1995
      Herschel Hardin THE PRIVATISATION PUTSCH  Halifax N.S.:
Institute for Research on Public Policy 1989
     Winnipeg Free Press May 3, 1996
     Globe and Mail May 3, 1996



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