Thursday, 26 August 2010

Destroying the Public Sphere?

James Wickham: The terms of reference for the ‘Review Group on State Assets...’ are about ‘asset disposal’ in the public sector. What do we know about the sale of state assets?

1. The impact on efficiency is debatable. If state enterprises provide services of general interest they have to be regulated, and the costs of regulation can be very high. Often the requirement of competition can produce duplication and/or lack of transparent information to customers. The privatisation of public transport provides plenty of examples. It’s also worth noting that when politicians believe that only privatisation can provide efficiency, they abdicate responsibility for enforcing improvement through other means. Thus we still have no publicly responsible authority for Dublin transport, because of course eventually there’s going to be privatisation...

2. What we do know is that privatisation increases inequality. Most obviously, because it leads to lower wages for the weaker employees and higher remuneration packages for senior managers. In the worst case, managers behave somewhat like the nomenklatura of Russia, appropriating to themselves a massive share of what was public property. Less obviously, what was public property becomes private property in the form of shares, and shares are the most unequally distributed forms of personal wealth. On all this see especially Florio (2004), The Great Divestiture (Cambridge, Mass.: MIT Press).

3. In some cases, privatisation destroys the public sphere, the non-market area where citizens meet as citizens not as consumers and not as members of a particularistic group, such as a family or an ethnic group. The obvious case is public broadcasting. One of the differences between most countries of Europe and the USA is that we have public broadcasting, they have Fox. We may not appreciate the impact of this on public life, others do. Read for example the American Steven Hill’s book Europe’s Promise on how European public discussion is broader than that of the USA, partly because of public broadcasting. Even the apparently mundane service of public transport also has this sort of public element.

4. Privatisation weakens trade unions. It’s probably the major reason for the collapse of British trade union membership between 1979 and the 1990s. Again see Florio’s study for starters. So privatisation reduces the most effective countervailing power to private wealth: it probably narrows the range of public debate and undermines effective democracy.

Of course, many people want more inequality, many people want weaker trade unions, many people want to live in a more privatised and individualistic world. There are even people who believe that the wealthy should have more political power. We could have a serious democratic discussion about these values. It would be rather more honest than a discussion about ‘asset disposal’.


Anonymous said...

I suppose by the same token, it would be good for someone from ICTU or one of the unions to come out and oppose selling some state assets on the grounds that it would weaken the unions.

Paul Hunt said...

Quite apart from any consideration of asset sales, there seems to be some acceptance (by, for example, Paul Sweeney) that some restructuring of the existing semi-states is required in both the public and the companies' own interest. But when it comes to exploring the nature of the restructuring that might be required, one is greeted by silence.

Until those who are loud in their opposition to any consideration of asset sales in the semi-states are prepared to spell out how these semi-states should be restructured so that they may be financed and organised more efficiently a period of silence and reflection might be more appropriate.

Michael Burke said...

Paul Hunt,

The terms restructuring and sale are not synonyms.

A genuine restructuring, involving price determination set in the interests of the economy as a whole, judicious use of subsidies and incentves, use of the substantial balances for much-needed investment, and an element of democratic control through an oversight body representing users, government and the workforce would all be welcome.

All privatisation would achieve is increaed price-gouging by newly private monopolies who would now be obliged both to provide a profit to shareholders and pay higher interest payments on borrowings.

There is no consumer or wider interest served by privatising Eircom, Aer Lingus, Greencore or ICC Bank, etc. etc.

Nat O`Connor said...

To add to the above, and without claiming to be exhaustive, improved state-owned bodies would require:

- A review of corporate governance, including how we define 'public interest' directors.

- A review of worker directors - i.e. employee representation on boards.

- Stricter reporting guidelines re accounts, performance, etc. In researching Mapping the Golden Circle we found that the annual reports of semi-states often had less detail than the reports of private companies on the stock exchange.

- Bringing state-owned bodies under the Freedom of Information Act.

- Review the pension funds (and potential weaknessnes/liabilities) across the state-owned sector and put in place a plan to resolve these.

- Publishing a comprehensive public sector balance sheet including all the assets of all state-owned bodies.

- Building on the above, and documents such as the National Development Plan, review national infrastructure in terms of roads, broadband, modern electricity transmission capacity, etc. See where state-owned bodies could act to bridge gaps in the above. There are many often over-looked examples, like the one in ten households that are refused basic banking facilities by the high street banks. A state-owned bank or post office should be able to supply this, if regulation fails to make it happen (as it has to date).

- Review state regulations which may restrict the above from occuring - e.g. state price regulation.

These are just examples. But it seems that there is plenty that it would be sensible to do anyway, never mind as a step towards a more strategic role for state-owned bodies in the economy.

Antoin O Lachtnain said...

This country needs cash to invest in development. One of the ways it can get cash is to sell things it owns. What is wrong with selling a power plant (say) for a fair price to get the money to pay to build a needed road or a railway?

Re duplication and/or lack of transparent information to customers - Is this not what we have already, with state-dominated transport? Twenty years of promises of a unified system have led nowhere. Your remarks about political intent appear to be completely contrary to the changes in the Dublin Transport Authority Act 2008 (for example, sections 57-63)

There is a lot more to US television and media than Fox News. The United States has brought major innovations in television programming. Is it as open to alternative points of view as it should be? No, but then neither is our state-dominated system.

Could you explain how the private provision of public transport (say) has destroyed the public sphere in London?

The general reason for the demise of trade unions in the late twentieth century was that the way they went about their business and arguably, their whole structure and nature, was no longer relevant to the modern workplace. In the UK the particular problem was that unions opposed something that was inevitably going to happen. They also represented the interests of their members in a uncoordinated, aggressive way, leading to a calamitous confrontation.

As for public sector restructuring, everybody talks about it, but the problem is that nobody in the public sector seems to be willing to step forward and actually bell the cat.

Paul Hunt said...

This is all wonderful and potentially useful stuff, but it reveals nothing about how the semi-states - in particular the big players such as the ESB and BGE - will be structured and financed. Should they remain as financially integrated businesses in the face of EU pressure and international experience that full ownership unbundling is in the interests of all market participants and consumers? Given the refusal of successive governments to provide any new equity investment (as any rational shareholder would have),the reluctance to increase gearing and the excessive reliance on investment-financing from consumers, what financial structure is envisaged?

These are the pressing structural questions that need to be addressed, irrespective of any consideration of asset sales.

William Wall said...

Aantoin O Lachtnain asks "Could you explain how the private provision of public transport (say) has destroyed the public sphere in London?"
Two things should be said about this: Transport For London is a creation of a socialist Mayor - Ken Livingstone. It certainly works very well. Individually, the private companies operating the system before TFL were a disaster. Ken knocked their heads together and imposed the solution.
Outside of London is a different matter. I take it, Antoin, you haven't had the pleasure of travelling by Southern Railway, for example. I spent a year travelling frequently between London and the South Coast. Delays were standard, cancellations frequent, costs high. Once a driver announced that the train would have to stop (between stations) for 45 minutes and 'No member of the crew of this train is responsible', he added in the course of an apology. On another occasion, the train having been delayed at three stations, the driver got off at the fifth and went home in disgust. The next train was cancelled... Southern Railway is, of course, one of the 'more efficient private services' and competes on most of its routes with at least one other company.