Infrastructure is the area where Government performs better than private enterprise. Rail systems and communication networks need to be government owned because private enterprise can seldom make them pay, but they are vital for business. The national communication network needs to be government controled for other reasons such as emergencies. The idea that Telsta should be the provider of infrastructure with no retail outlets has been around for many years and I support that concept. Let the telcos rent form the national network, but keep the network itself safe, secure and modern. Only governments can do that.

Do you remember what it was like when Telstra/Telecom/PMG had a monopoly? How long it took to get a phone connected? How long it took to get one repaired? How you had to buy all equipment from Telstra?
Do you remember what it was like with regulated banks? How you had to beg and plead to get a housing loan? How savings earned interest of about 3%, whatever the market rates were?
If anyone - government owned or no - is given a broadband monopoly we will have frozen infrastructure and technology, which is a particularly dopey thing in a field where technology is changing so rapidly. I once bought a modem which had a speed of 9600kbs and was assured by the vender that this was the absolutely top speed possible.
I agree that there is an argument for governments financing and therefore owning capital intensive assets as their cost of money is lower. But they should not manage them. I don't believe the airports should have been sold, for instance, but the private managers are doing a much better job than the government did.

Once again Tristan attacks a caricature of “neo-liberalism” bearing scant resemblance to actual ideas and practices in Australian public policy.

Many utilities provide revenue to their government owners. But unless the utility is run as efficiently as a private entity, the amount they return to their taxpayer “shareholders” is less than alternative investments, so they are not usually very good investments.

And there is opportunity cost. The social cost of tying up resources in businesses like banks (which the private sector runs perfectly well), is that less is available to spend roads, hospitals etc (which the private sector does less well, or does only for those willing to pay).

Tristan implies that without cross-subsidy, the needy will not get access to essential services. But there is no dispute over whether the needy should be guaranteed access to essential services like water and electricity, only on how best to achieve it. Cross-subsidisation lost favour because it is opaque, causes inefficiency by distorting prices and requires anti-competitive restrictions to prevent the subsidising customers switching to alternative suppliers. The needy still get subsidised access to these services, but generally the subsidy is nowadays paid for by a direct government subsidy. This is an improvement.

The “strategic” direction of the lending practices of government-run banks degenerates too easily into political direction. The lessons of WA Inc, Rothwells, the Bank of Victoria and SGIO should not be forgotten.

Comparing Telstra’s performance against the OECD average as evidence of the failure of deregulation is deceptive. All OECD countries have privatised and/or deregulated telecommunications in the past 20 years. Our failure to match the performance of the OECD average could as well be down to too little deregulation as too much. Indeed, the OECD report Tristan cites argues “markets with healthy levels of competition have led to the introduction of innovative services and appealing pricing packages.”

I have looked at the tables on relative prices in the OECD report (tables 7.3 to 7.5, pages 229-231) and can’t replicate the 15% premium (I get 3%-12.0%). Does anyone know where this estimate came from?

http://www.oecd.org/document/17/0,3343,en_2649_33703_38876369_1_1_1_1,00.html

Ken; I think you’ll find many of the issues re: the quality of service in the past – had a lot to do with technology: and as I argue in the paper, these matters stood to be redressed regardless of privatisation.

Re:Telstra holding a monopoly on equipment–indeed such a situation is not ideal. But there’s no reason why we cannot continue to purchase mobile phones, i-phones, modems etc through retailers outside of Telstra. As Optus’s network is established,competition will persist-but all of us pay for the duplication.

Indeed - I don’t see a reason why there could not be a public monopoly of infrastructure.

But retailers should be charged a fair market rate for access to the network.Customers of a public Telstra shouldn't be expected to subsidise rent-seeking enterprises. A Telstra GBE/retailer should be able to pass on the benefits of its economies of scale – while cross-subsidising those who would otherwise be disadvantaged. (the poor, rural customers etc)

Also it's true - technology seems to always be advancing. But the situation is Catch-22. We could put off investment in crucial infrastructure forever–in anticipation on new technology. But surely this cannot go on forever. And in the meanwhile there is lost productivity and poorer quality of service.

If, say, new infrastructure required $20 billion–that’s less than 2% of GDP… A big investment, yes, but what if it lasted us 20 years – or more?

And what of the benefits in productivity and service lost in the meantime? Surely we are capable of these kind of nation-building projects – if only we could take it in the proper perspective.

BTW–you’re right that public finance is far more cost-efficient. And I agree that airports should never have been sold… Destinations may compete–not the airports themselves. Neo-liberal ideology taken to extremes.

Finally – I’m open-minded about private management… if there is real competition… But what if – instead of competition – you get rent-seeking behaviour, favouritism, corruption?

Thanks for commenting :)

Tristan

What makes you think Kevin Rudd have the expertise to operate a National broadband service, do you think anyone in this government or in the opposition knows how to run a boardband service?

I would suggest the best people to run this service are the experts in the field, ie Telstra and Optus. They know what to charge and how to run the services most efficiently

As for other services run by the government, living in NSW has shown me that Governments cannot provide the services required by the community. For example, the NSW government knew for 15 years that there need to be a North West rail link, and it is still not built yet. It is arguable that if the demand was there (as the NSW government thinks it is) A private enterprise would have build it.

As for pricing, you are correct in saying that public utility pricing would be lower. However that is because its inefficiencies are being subsidised by taxpayer's money. Instead of providing the discount to everyone, the government can save money, and return these money to the needy, or provide Australia with other infrastructure need.

The government does not have a role to compete with private enterprise, it is an argument that was lost 20 years ago. It is inefficient. cost ineffective and a drain on the taxpayers.

Stop living in the past and please return to the 21st century

"I think you’ll find many of the issues re: the quality of service in the past – had a lot to do with technology: and as I argue in the paper, these matters stood to be redressed regardless of privatisation."
No, they were the result of poor, unaccountable management and the (almost inevitable) union capture of government monopolies.

I do not object to anyone making an investment in national BB infrastructure - just in whoever it is being given a monopoly which would prevent new and better technology being introduced.

Twenty years ago I wrote an EPAC paper on Productivity in Australia. At that time the productivity of Australia’s government-owned infrastructure was around 40-45% of the OECD average. Far from having “more efficient cost structures” that “resulted in cheaper services for consumers,” government utilities were grossly inefficient, typified by feather-bedding and gold-plating, and unresponsive to user needs. They imposed costs on all trade-exposed firms, in both goods and services, which made it difficult for them to compete. Reform was essential.

The fact that subsequent reform was often flawed was not down to economists but to politicians. For example, in the late ‘80s there was a strong consensus among economists for retention of public sector telecoms infrastructure with market competition in supply of services. The ALP and Coalition both opposed this because they could raise more revenue from the sale of Telstra without separation. Corporatisation at the state level was heavily undermined by pro-union bias, appointment of party mates rather than commercial boards and directing the so-called “arms-length” boards so as to boost government revenue rather than to provide an efficient service with timely investment. There was no understanding by government of the boost that efficient infrastructure could provide for trade-exposed business. The South Australian electricity privatisation, for example, flew in the face of all economic advice, being aimed at maximisation of revenue rather than economic growth, the consequential high electricity prices had a serious negative impact. Queensland Rail, whose bulk freight charges were about six times the costs of miner-owned-and-operated rail freight in Western Australia, was exempted from NCP price rules for many years, and used the time as a monopoly supplier to lock-in users to long-term contracts so as to hobble eventual competition. Etc, etc.

I have seen from the inside that government provision of and direction of infrastructure is driven by short-term goals unrelated to the public interest, especially at state level. The role of government needs to be further reduced rather than increased.

Ken, you make some good points, but "I agree that there is an argument for governments financing and therefore owning capital intensive assets as their cost of money is lower" is not among them. On average, government has a lower cost of borrowing because it engages mainly in low-risk activities and can always raise taxes rather than default. However, government's risk for any particular infrastructure project is at least as high as that for the private sector, perhaps higher because of the lesser expertise and less outcome-oriented incentives for public servants. The relevant pricing of capital for each project should depend on the risk involved rather than the government's average cost of funds.

Re incentives, I demonstrated clearly within the Queensland government that the Australian Magnesium project could never be viable, my analysis was never challenged but those who backed the project got promoted and suffered no retribution when it failed with the loss of $450 million of mainly government money; I know of many similar instances, where the project risk was actually very high because of the low quality of government involvement. The private sector thrives or fails by getting risk assessment right, not so government.

Ken re:‘union capture’-There should be fair conditions and wages–but also flexibility when necessary for restructure–and with generous and just compensation where jobs are lost. There’s no saying that union coverage automatically means bad productivity.

Dovif2: Your claims are ideology–in the real sense of the word… You assume there is something ‘essentially’ inferior about the public sector. The reality is much more complex than this… Yes there was an ideological shift – which was in full swing 20 years ago – but since then neo-liberal assumptions have proven to be faulty.

Unjust fees and charges proliferate in Australia’s banking oligopoly-and have been accompanied by branch closures–with record profits.

Diversion of profits to services,here, may have been enough to pay for the expansive ‘fibre to the home’ broadband infrastructure I mention–over around four years….

You assume that the existing hegemony is self-legitimising and need not be questioned: that social democratic models are inferior and forever gone - regardless of their merits… I point to the current financial crisis, however, and respond:surely such times as these (recession/financial meltdown) demand a rethinking of our economic assumptions!

Public finance is cheaper because governments provide security…If there is less risk involved, governments–and the people they represent–reap the benefits…

Re:responsive private markets or public enterprise and services...

a) we can have both...

b) the key is a mobilised citizenry, and a participatory and critical public sphere – including media (public and private) … It’s up to us to ensure democracy works – and that public enterprise is held accountable..

Finally – re: the skill base of Telstra – this in itself is a good argument for re-socialisation.

Rhian – it’s true there are different means of subsidy for the disadvantaged. This can potentially be addressed through welfare and tax reform. But even here revenue from GBEs could be diverted into these aims… Otherwise they must come from somewhere else – eg: restructuring and increasing taxes; or austerity/program cuts elsewhere.

Finally - re:monopoly-see my points on duplicated cost structures and exploitation of market power

As someone who has worked in the telecommunication industry for over thirty years (from the PMG to Telstra via Telecom and OTC) I've seen significant changes in technology and corporate attitude.

While there has been a world-wide trend toward privatisation over the last decade it should be pointed out that most public Telcos remain at least partially owned by their respective governments and Australia is in the minority.

More than ever, telecommunications is the nerve centre of the entire economy - like the National Highways - and the core network should have remained in public hands with the customer related services left to competitive forces. Now that's gone and there's not much opportunity for true competition while one company owns that last kilometre of copper in the ground. If you think that this is all going to be replaced by optical fibre, you're in for a disappointment. If you think that 4G or 5G mobiles are going to handle it, expect to see Base Stations every kilometre or so.

All Telcos are just money-making machines and if Sol stays true to form, he'll completely ditch the non-profitable rural sectors as soon as he can and leave the taxpayer to subsidise them - just as they are now paying for rural mobile Base Stations and Satellite Broadband in those areas.

Telecom's "commission" was to provide a basic telephony service to about 98% of the population at a reasonable cost. It could have achieved this just in the "golden boomerang" (From Brisbane to Adelaide along the East Coast) but was driven by the national interest in providing widespread coverage. It cost about the same to buy a service in Wilcannia as it did in Randwick, due to heavy cross-subsidisation. The same outcome could have been achieved with Broadband.

We could indeed have faster Broadband tomorrow but in this case, it's competion that has stalled it - fear of handing over capacity to competitors.

Although the privatisation debate is well and truly over -
Efficiency is not the same as effectiveness and
Performance is a result of management - not ownership.

Well balanced article. About time we read an economic article from someone who appears to understand the complexities.
The myth that private management is inherently more effective/efficient really needs examining!
I have worked in the public and private sectors and have seen examples of good and bad in both.
Public inefficiencies can be controlled using good management practice. At the very least laws can ensure minimal secrecy. Private corruption is much more difficult as there is no clear line between legitimate profit and criminal profiteering. (The very concept of profiteering is anathema to neo-con, wacky-Right. (My) profits are God-given after all!)
Even without natural monopolies, the "competition driving efficiency" theory assumes a couple of things: ie. You need *at least* two companies to compete. So competition involves duplicating marketing, research, management and finance arrangements. Is the management really at least twice as good?
In situations where the government is politically unable to allow failure (the "natural" market response to a poor company), such as Private insurance, Private schooling, Private childcare and Private banking, the situation is as we see it now: Profits taken by capital investors over last 10 years now need to be supplanted by Public funds. Not only are we paying for multiple implementations, but we then prop-up the losers too!
(Jonny Howard hated Dole-bludgers and made life hard for them, but it didn't stop him bailing out his brother's failing company did it? This is typical of him.)
Some economic theory: Utility in a system is maximised only when profits are minimised. Competition works *because* it minimises profits, thus allowing capital to flow to where the maximum utility is gained. Any wonder that we face a crunch after 10 years of record profits? Like a crop stored badly or an engine left to rust, wealth evaporates when kept and stored badly.
To the "Privatise at all costs" brigade: I wonder which we would rather: Australian Government owned backbone, or "private" backbone owned by China?

I commend the author and the OLO editors for having published this excellent, thoughtful and timely article.

No, wobbles, I don't consider that the privatisation debate is over. It is obvious to all but a blind obstinate ideologue that the public interest has been almost immeasurably harmed by the policies of deregulation and privatisation of the past three decades.

Those who bought about this situation should be held to account for what they have done and made to pay if that is at all possible.

---

Rhian complained of Tristan attacking a 'caricature' of neo-liberalism. Anyone who had read Naomi Klein's "The Shock Doctrine" would understand that the reality of neo-liberalism is more grotesque than even the most imaginative cartoonist or satirist could have come up, whether in Australia or overseas.

An instructive example (not covered in Klein's book), of course is their clamouring for the NSW Government to privatise its electricity assets throughout 2008 even though it was opposed by 79%-86% of the public and by a vote in the order of 700 to 100 of the May 2008 NSW state Labor conference had been rejected explicitly in the 1999 elections and Iemma and Costa had promised not to privatise before the 2007 elections.

In what way could anyone hold that privatisation in these circumstances against the expressed wishes of the owners any better than theft?

(For more information, see http://candobetter.org/NswElectricity and "NSW power without pride" at http://forum.onlineopinion.com.au/thread.asp?discussion=2103&page=0)

The same is true of the privatisation of Telstra in 2005 at a time when 70% of the Australian stood opposed to the sale. I have written of this in my open letter to commend Greens Senator Scott Ludlam at http://candobetter.org/node/963/#DemocracySubverted and in "Coalition victory - a mandate to privatise?" of 31 Oct 2004 at http://citizensagainstsellingtelstra.com/content/4/elections-2004-outcome.html

Whilst in Australia the neo-liberals have been able to achieve many of their anti-democratic and sociopathic goals behind a fig leaf of Parliamentary process, in many other countries they dispensed with it altogether. As described by Klein, this began in 1973, when acolytes of neo-liberal Godfather Milton Friedman advised Chilean dictator Augusto Pinochet of how to implement their program of stealing public wealth and impoverishing the poor whilst opponents of the program were killed, jailed or tortured.

This pattern has since been repeated in many other countries across the globe including Argentina, Uruguay, Brazil, Russia, China and Iraq. In a good many others such as South Africa, Poland, Britain, Bolivia, South East Asia, the United States, Thailand, Sri Lanka and New Zealand and, of course, Australia, it has been accomplished behind the barest facade of Parliamentary process.

Neo-liberals, including even Friedman himself, have even stooped to exploiting natural disaster and human tragedy to achieve their ends as they did after Hurricane Katrina in 2005 and after the Boxing Day 2004 Tsunami in Sri Lanka, Thailand and the Maldives.

So, as I wrote above, the reality of neo-liberalism is worse than any caricature that Tristan or anyone else could conjure up.

Bravo Daggett! Well said.
the Neo-Lib method has actually been tried for most of Human history:
Law of the jungle.
Wealth is built by the intelligent/hardworking, controlled by the manipulative, and destroyed by the combative.
Neo-Libs are just the combatants dressed up as management. "Contractors" that are really "mercenaries".

Only a violent fool calls an efficient community a Bad Thing.

Dagget,
I'm on your side. My remark about the debate being over meant that it's too late for many industries and they can never go back into Public hands.
I recommend the book "Privatisation -Sell off or Sell Out?" by Bob and Betty Walker for an excellent perspective on the Australian experience.

"Australia is a world leader in the privatisation of government assets and services. It is second only to the UK in dollar terms, and second only to New Zealand as a percentage of GDP. Australia has gone further than other countries in financing infrastructure development through off-budget financing deals and is steadily contracting out service delivery in many traditional areas of government activity."
"... privatisation in its various forms, is leading to an erosion of public accountability and, by default, a radical change in the role of government in Australia. The authors believe that there is merit in privatising certain government activities. But they have severe reservations about how privatisation has proceeded without detailed and critical analysis of:

• Financial implications of selling off government enterprises
• Deals worth billions of dollars without parliamentary scrutiny
• Economic "thinktanks" using flawed assessments of the performance of government enterprises because of unusual accounting methods
• New financing schemes which obscure the financial exposure of governments
• Impact on the quality of services provided to the community

Rather, the debates about privatisation have been based on rhetoric, sloganeering and flawed financial analysis. Misleading descriptions of benefits, like preservation of credit ratings and reduction of debt and interest costs, have been repeated uncritically by consultants, public servants, politicians and the financial press."

I also agree with the slogan "Private ownership = Public squalor" when it comes to essential utilities.

Water - as well as electricity - will be the next big one to watch out for.

I'm glad to see that I've managed to spur debate - and at least that there is a body of opinion which supports my arguments...

Most notable, I think, was the question of the debate being 'resolved' in favour of privatisation '20 years ago'.
(see Wobble's earlier post)

Always - all the way through the 80s; on through the Keating years - and under Howard - most Australians never supported 'selling the family silver'.

This was reflected in successive polls through this period. Ordinary people took the mixed economy as being 'natural', and both progressives and instinctive conservatives felt uncomfortable with the agenda of privatisation.

For a more recent example see:

http://www.smh.com.au/polls/politics/form.html

(scroll through for the power privatisation poll)

The privatisers always were motivated either by an ideological agenda - or otherwise by even more cynical and potenitally compromising goals. (for example - PPPs)

The 'mixed democratic economy' appeals both to conservative instincts for strategic natural monopoly - and other progressive or radical projects for industrial democracy - eg: tax breaks and low interest loans for co-operative entreprise and mutual societies...

More of that later, though...Running out of space here

There is am essential role for competitive private markets-to the extent to which those markets drive innovation and response to market signals...So the role of markets is always core for social democrats such as myself...

But even then-there are cases where services and infrastructure comprise'natural monopoly'.For instance-the National Broadband Network ought be a publc monopoly-as the savings from reduced cost structures are passed on to the entire economy...

Other cases include public transport,roads,energy,water,education, health...(with exceptions-see below)

Competition is anti-intuitive for many people here...It need not apply EVERYWHERE - eg: roads... Private monopoly, here, can be abused-and consumers are made to pay...

Support for 'home-grown' defence industries might also be considered a matter of 'national security'...

Take the example of the Desal plant in Victoria...Ken Davidson has shown that a pipeline form Tasmania would be far more effecient... Why is the Vic govt ignoring some options? All the while prices were set to rise by over 200%...PPPS are inherently open to abuse...

In other areas Government Business Enterprises can ENHANCE competition - negating collusion thorugh oligopoly...(eg: banking, insurance, lotteries)

And if national export industries-eg:mining/minerals - operate in INTERNATIONALLY COMPETITIVE markets - why not socialise?(as the benenfits of competititon remain in the dynamics of the world market - but dividends could be a massive boon to the social wage for all Australians)

Finally - Education, Health, Aged care - Government ought provide directly or subsidise these areas - so that all have access to the services they need...

Sometimes private charities may have a 'culture of care' that warrants state subsidy... But no vulnerable Australian should be denied the best quality services simply because they are poor...

While there are arguments for (reasonable) subsidy of private (faith-based) schools, hospitials,etc-it should not be in the spirit of 'private affluence, public squalor'...A strong social wage is core - going beyond essential liberal rights - to provide for social rights for all...) Again-dividends from GBEs also - have a core role is sustaining the social wage-without in such cases depending only on taxation...)

Hi Daggett,

Privatisation is often unpopular when it’s proposed (though seldom afterwards – there’s no public clamour to buy back once-public assets). But sometimes governments have to make decisions that are unpopular. Your argument that privatisation without majority support is never legitimate is interesting (I disagree, but I can see where you’re coming from). But it has little to do with the case for and against privatisation on its economic and social merits, which is what the article argues.

This article by Ross Gittens spelled out the mainstream economic case for the proposed NSW electricity privatisation. He doesn’t seem like a sociopath to me:

http://business.smh.com.au/business/iemmas-reasons-for-privatising-electricity-20080316-1zsa.html?page=2

I agree that genuine natural monopolies need to controlled by government, whether directly owned or private but regulated doesn't much matter. But parts of the market that can support sustainable competition should be open to competition. And, as Gittens says, government stewardship of public funds should include regard for opportunity cost – what could the money be spent on if it wasn’t tied up in public utilities.

Rhian's claim that privatisation somehow enjoys popular support because "there's no public clamour to buy back once-public assets" is a breathtaking leap of logic.

Of course no polls have ever been taken to ask the public what the public think of privatisations after the event and it is not hard to imagine why the pro-privatisation corporate newsmedia does not bother to commission such polls.

However, in the absence of such polls, I would suggest that public opposition to planned privatisations would be a very good indicator of their attitude towards previous privatisations. If previous privatisations had been so beneficial, then could Rhian explain why was the NSW public so resolutely opposed to privatisation throughout 2008?

I would have thought that there are other more obvious reasons to explain the lack of an overt "public clamour". The obvious one is that, with the rare exception of articles such as this one by Tristan Ewins, the issue is rarely covered in our heavily pro-privatisation biased newsmedia.

The other reason is the fundamental weakness of our democracy, that is, when a minority stand to gain immensely at the expense of the majority, they will act with far more determination to subvert the will of the majority. As those representing the interests of the majority are rarely paid for their time and have to fight these issues in their own (increasingly limited) time and at their own expense, it is much harder to keep political movements in the public interest on track long enough for them top succeed.

Nevertheless, I believe this needs to be done if we to undo the damage caused by those who inflicted the privatisation of Telstra upon us and to prevent them from doing further harm.

---

Whilst Ross Gittins can write intelligently on occasions, his article on privatisation at http://business.smh.com.au/business/iemmas-reasons-for-privatising-electricity-20080316-1zsa.html?page=-1 is garbage.

It's interesting that, like Rhian, he accepts that politicians are entitled to lie to a public that they presume to be too stupid to know what's in its own best interests:

(tobecontinued)

(continuedfromabove)

"For a start, experience teaches that the arguments politicians advance publicly aren't necessarily those that persuaded them to try to push through an unpopular measure. They choose the arguments the punters are likely to find most persuasive and least offensive, not necessarily those that make sense to economists."

However, Gittins inexplicably failed to notice that "the punters" did not find the "(false) arguments" any more "persuasive" and any less "offensive" than what Gittins insists are the true arguments in favour of privatisation that the politicians decided to keep from the public.

It's interesting that having accused opponents of privatisation of attacking straw men, Gittins, himself, then proceeds to erect and then demolish a number of his own straw men:

"Retain the electricity businesses and borrow hugely to finance their future needs? Sure, why not? Borrow heavily to finance all other infrastructure needs? Sure, why not?"

"In reality there /are/ limits. ..."

Well, why not cross that bridge when we come to it?

However, Gittins anticipates this by claiming that it is not possible to know until after the event whne limits have been exceeded, which I consider nonsense.

Of course, having a Treasurer seemingly incapable of giving timely advice to the NSW public of the true of the true state of NSW's finances as Costa failed to do would not help, but any competent Treasurer should have managed to do that.

Gittin's nonsense is further demolished at http://johnquiggin.com/index.php/archives/2007/12/12/nsw-electricity-privatisation-a-quick-look/

---

The justification that money invested in supposedly "non-core" areas such as telecommunications would be better invested elsewhere is rubbish and often used hypocritically as most proponents of privatisation are opposed to the government are opposed to providing any services whatsoever.

If this was the case, then why is NSW in such a poor financial state after having undergone so many previous privatisations? This was noted in a Financial Review article "Bits and pieces won't fetch $1 billion" by Tracey Ong on 24 September and I commented upon this in "How decades of privatisation has impoverished NSW" at http://candobetter.org/node/823

(tobecontinued)

(continuedfromabove)

In any case, what better way for the government to serve the public than to provides as cheaply as possible broadband to all sectors of Australian public?

The Liberal Opposition rightly criticised the Rudd Government for failing to take account of broadband connections to schools when it announced its plans to provide a laptop to every high school student. However, they forgot to mention that if they had not privatised Telstra, then schools would not have to incur the costs of providing shareholder profits and paying the bloated salaries of Trujillo and his Three Amigos, no-bid contracts, overseas junkets etc, etc.

Telecom had planned in the 1970's to give every Australian access to fibre optic broadband network connections before the turn of the century. Unfortunately the 'free market' ideologues have since got their grubby hands onto Telstra/Telecom and we are now paying the price.

Hi daggett

I don’t believe, and haven’t argued, that privatisation is popular. What I have argued is that the reality of privatisation seems less unpopular that the anticipation – people oppose it in advance, but get used to it very quickly, because it’s seldom as bad as its opponents expect.

I think you’re mixing two separate arguments – the argument that a thing should not be privatised because it’s unpopular, and the argument that it should not be privatised because it doesn’t deliver net social and economic benefits. The first is essentially a political issue, the second is an issue of economic and social policy.

My post concerned the merits or otherwise of privatisation based on its economic and social consequences. I believe that depends mainly on the nature of the market and its capacity to support competition. There are certain goods and services which only governments can provide, or which only governments can ensure are distributed fairly to the whole community. And, there are natural monopolies that need to be either government run or regulated. I believe that, by and large, governments should stick to these activities and not get involved in supplying goods and services the private sector can deliver perfectly well.

You falsely accuse me of believing it’s ok for politicians to lie. I do not. But I do think Gittens is right that politicians will tend to put the most positive spin on the policies they try to promote. To name something is not to endorse it.

I have acknowledged the political issue of governments doing things that the community doesn’t approve of. But we live in a representative democracy, not a majoritarian one. Sometimes governments implement policies that do not have majority support, for a great many reasons. Whether and when they should do that is an interesting question, but it is not the one I was addressing.

You say “most proponents of privatisation are opposed to the government are opposed to providing any services whatsoever”. Do you really believe this? What is your evidence? It seem preposterous to me.

Rhian, firstly, I withdraw my accusation that you think it is OK for politicians to lie and apologise for having said so.

However, as I have demonstrated that a good many of those who imposed privatisation upon us clearly misled the Australian public I trust you will be forthright in acknowledging that.

---

Rhian wrote, "... people oppose (privatisation) in advance, but get used to it very quickly, because it's seldom as bad as its opponents expect."

In what way did you mean to suggest that the results are not "as bad as its opponents expect(ed)"?

The Financial Review Story "Telstra Raises stakes with job cut plans" of 15-Jan-09 reports that Telstra intends to increase its already savage job reduction plan to cut 12,000 jobs by 2010, even though it's ahead of schedule. This is partly to pay the cost of Trujillo's failed gamble to bully the Australian government over the National Broadband Network (NBN).

In 2005, the Howard Government willingly handed over control of our vital telecommunications infrastructure to this man, who seemed to be devoid on any useful talent other than cunning and ruthlessness.

Trujillo had largely ruined the US telco <a href="http://en.wikipedia.org/wiki/US_West">US West</a> which he left in 2000 and secretly negotiated a severence package totalling US$72million with the company <a href="http://en.wikipedia.org/wiki/Qwest">QWest</a> which bought out US West, apparently in return for shifting the takeover date forward in order to avoid US West's responsibility to pay out hundreds of millions of dollars in dividends to its shareholders. (see http://news.sbs.com.au/dateline/sol_trujillo_on_the_line_130713 of 20 Sep 2006 and http://www.citizensagainstsellingtelstra.com/resources/2/dissent-trujillo-aug05.html).

In spite of swindling US West shareholders, even QWest suffered as a result of the deal so bad a state had Trujillo left the company in.

The man should have been put behind bars and not placed in charge of Telstra.

The Howard Government evidently gambled that by the ruthless shifting of costs onto Telstra's workforce and the broader Australian community and by gouging its customers, Trujillo would be able to lift Telstra's profitability.

... and he couldn't even do that. (See "Sol Trujillo's use-by date at Telstra is near" at http://www.theaustralian.news.com.au/business/story/0,28124,24945099-30538,00.html).

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No-one's mixing arguments. If the Australian people truly wished to hand control of Telstra across to Trujillo and the Three Amigos, then those opposed would have had to respect those wishes.

However, as I have shown, it is the proponents of privatisation, who refused to accept the public verdict against privatisation.

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Rhian wrote, "But we live in a representative democracy, not a majoritarian one. Sometimes governments implement policies that do not have majority support, for a great many reasons."

Rhian, the pattern of supposed 'democracy' in Australia for at least the last three and a half decades has been that elected representatives have repeatedly acted in defiance of the public will on critical questions. If it happened only very occasionally, then it just might be acceptable, but not when it happens almost all the time.

How can you possibly defend the deceit of the Australian public over Telstra during the 2004 elections? How can you possibly defend the behaviour of Iemma and Costa throughout 2008?

Rhian asked if I truly belived that "most proponents of privatisation are opposed to the government are opposed to providing any services whatsoever"?

Yes, I do.

Why don't you check out Michael Moore's movie "Sicko" (http://www.michaelmoore.com/sicko/)? It should be in your DVD store.

When the private health insurance companies thwarted Hillary Clinton's attempts to introduce universal health care in the US back in the 1990's, they deliberately brought about a situation which would cause the deaths of many Americans unable to afford health insurance and even many of those who could.

The health insurance companies employ people, whose job it is to find any excuse to refuse funding for life-saving treatment. There is more than abundant evidence of the unconscionability of proponents of the 'free market' system in Moore's film and in Naomi Klein's "The Shock Doctrine" and many other places.

BTW, I have republished this article with Tristan's kind permission at http://candobetter.org/node/992

Possibly some may choose to also post comments there if they find OLO's limits too restrictive.

Job shedding is a common and appropriate feature of industries where rapid technological change is driving strong productivity growth. I expect you’ll disagree, but I believe that taking decisions about staffing levels in utilities out of the hands of politicians is one of the benefits of privatisation.

I didn’t follow the NSW privatisation debate in detail, but would not be in the least surprised if Gittens is right that the arguments used were not the real reasons motivating the proponents of privatisation. The same can be said for a large number of public policy positions, both good (acting to avert climate change) and bad (extended detention of asylum seekers). Thank you for acknowledging that I do not approve of this common feature of public debate.

The example you quote from the USA may show that private providers acted from self-interest in attempting to prevent loss of business to the public sector. But it emphatically does not show that “most proponents of privatisation are opposed to the government are opposed to providing any services whatsoever.” To prove your point you would need to show them opposing government involvement not only in health but also in defence, law and order, education, infrastructure services, etc. Which of course you can’t.

I challenge you to quote any Australian business leader, association, think tank etc saying that government should provide no services whatsoever.

Rhian wrote, "Job shedding is a common and appropriate feature of industries where rapid technological change is driving strong productivity growth. ..."

Trujillo is and was notoriously technologically incompetent, as was Ziggy Switkowski before him. So, what makes you presume that there was a technological justification for job shedding?

As I showed, Trujillo, ruined US West. Recently he bungled the NBN bid through bloody-minded bullying brinksmanship and now, as a result, has caused even his hand-picked loyal Operations Manager Greg Winn to resign. Futhermore, from 2000 to 2003 he ruined Graviton:

... Between late 2000 and early 2003, he was the CEO and Chairman of a technology company called Graviton. The company was housed here in this building at La Jolla - San Diego's Silicon Valley. Investors believed its cutting-edge technology promising enough to pour US$60 million into the company. Graviton hired Sol Trujillo to take the company to the next level.

REPORTER: And how did he perform?

RUDY FISCHER, FORMER HEAD OF HUMAN RESOURCES, GRAVITON: I'd say he performed dismally. It was kind of a shame because we had a lot of very bright research engineers working very hard and developing new technology and I think were making some progress.

(For more read http://news.sbs.com.au/dateline/sol_trujillo_on_the_line_130713)

Rhian wrote, "... I expect you'll disagree, but I believe that taking decisions about staffing levels in utilities out of the hands of politicians is one of the benefits of privatisation."

As I have shown, the broader Australia also emphatically disagrees.

The only plausible reason that anyone could prefer corporate thugs, rather than people who are ultimately accountable to the Australian people to make decisions about staff numbers is a lack of any abiding commitment to the principle of democracy.

As you should well know the principle reason for job shedding was not because of new technologies, rather it was to improve Telstra's short term bottom line, and I expect you understand the difference.

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It was to improve Telstra's profitability by ruthlessly eliminating services that were no longer deemed profitable, by shifting the cost of obtaining skills onto the broader community as they did when the world class telecommunications technicians' schools were closed in the 1990's and, more recently, linesmans schools were closed and by a 'race to the bottom' shifting of jobs to the Third World.

Rhian wrote, "I challenge you to quote any Australian business leader, association, think tank etc saying that government should provide no services whatsoever."

Perhaps Australian business leaders are more astute to state that openly and may not be able to. However, for me, the proof is in the outcomes of decades of policies enacted to pander to their selfish interests:

Massive hospital waiting lists, homelessness whilst waiting lists for public housing are also massive, mentally ill people dumped on the streets to fend for themselves, the shambolic state of aged health care, Howard's despicable axing of the Commonwealth dental health program back in 1996, affordable dignified funeral services totally beyond the reach of many. etc, etc.

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Regarding NSW electricity privatisation, I will give you URLs more specific than http://candobetter.org/NswElectricity when our webserver is back online.

Daggett

If these data point to a secret conspiracy for government to provide no services, then the conspiracy must have been deeply unsuccessful.

If it had succeeded there would be no such thing as a public housing waiting list, because there would be no such thing as public housing. There would be no public hospital waiting lists, because there’d be no pubic hospitals. Also, there’d be no public sector teachers, nurses, police, fire service personnel, social workers, aged care workers, or general public servants. Yet in fact employment in all of these categories has grown steadily since the Howard government’s election in 1996 (ABS catalogue number 6248.0).

You can’t presume to know what other people “really” think without reference to their words and actions, especially when you propose a view as preposterous as "most proponents of privatisation are opposed to the government are opposed to providing any services whatsoever."

Privatisation means there are now fewer public sector employees in sectors such as communication than there once were. But for all your hyperventilating about job losses, total employment in this sector has grown at an average rate of 2.6% a year in the past 10 years, significantly faster than the 2.1% growth in employment across the economy as a whole (ABS catalogue number 6202.0).

Firstly, Rhian, you have not responded to my points which refute your nonsense that the only possible explanation for redundancies at Telstra was necessity caused by technological change and you ignored my point about how cost-shifting is employed to dishonestly portray privatised enterprise as more efficient than publicly owned enterprises.

Instead, it seems you want to lead this discussion off onto a tangent.

Of course it would be difficult to prove conclusively that right wing neo-liberal idelogues and the wealthy elites they serve intend to destroy all public services and I don't intend to, but the evidence that that is where they wish to lead us seems conclusive to me.

Rhian wrote, "... in fact employment in all of these categories has grown steadily since the Howard government’s election in 1996 (ABS catalogue number 6248.0)."

Garbage!

I would sure like to see the statistics.

In fact this was a topic of discussion on John Quiggin's web site:

"I have a sister that has been working in the public sector for 30 years. No new young people are coming in or being hired. Yet older people are taking redundancy and coming back and double dipping by taking contracts which get rolled over." (http://johnquiggin.com/index.php/archives/2009/01/15/short-and-sharp-2/#comment-226354)

"That's the point I am making. John Howard made it possible for those in positions of control in the public sector to effectively 'retire' enter redundancy, take their superannuation, and then come back on contracts (you can work as long as you want) which simply is stopping new young people entering the public service and effectively one person is being paid a double salary, whilst another is prevented from being employed at all." (http://johnquiggin.com/index.php/archives/2009/01/15/short-and-sharp-2/#comment-226388)

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"You are missing my point. I was counting the physical number of jobs in the public sector then and now. I am not suggesting we immediately hire another 100,000 public servants if they are going to get dressed up in suits, pay themselves in excess of 100,000 and sit on a committee inventing new key performance indicators for underfunded overcrowded understaffed under-resourced hospitals. But by all means - hire nurses, teachers, road construction crews, bus drivers (and add the capital to replace the worn out bits). The government has abrogated its role to actually run in total (not PPS style disasters) decent services and its historically important role as an employer." (http://johnquiggin.com/index.php/archives/2009/01/15/short-and-sharp-2/#comment-226405)

In fact I lost my research programmer's job back in 2004 largely thanks to Howard's miserly penny-pinching and friend with a PhD and worked as researcher at a University now works as an aged care worker, thanks to Howard.

If the public service is so large, then why can't I find a job as a public servant?

Rhian wrote, "But for all your hyperventilating about job losses, total employment in this sector has grown at an average rate of 2.6% a year in the past 10 years, significantly faster than the 2.1% growth in employment across the economy as a whole (ABS catalogue number 6202.0)."

And we could also increase employment opportunities by making the economy as inefficient as we possibly can. No doubt a good deal of these new jobs are due to the duplication of effort and all the ridiculous inefficiencies that imposing a supposedly competitive model on a natural monopoly has brought about. And how many of these jobs are interesting, and have decent pay, conditions, training and career paths?