Neil Clark writes:
By all rights, the 2008 global financial crisis should have marked the end of the era of privatisation and the return to the more equitable mixed economy model which dominated in the post-war era.
Instead, it only ushered in a new, more extreme phase in the neoliberal project.
To reduce the deficit and get the public finances “in order,” we were told we had to privatise remaining publicly owned assets.
It’s a task that’s been carried out with great relish by the Tories in Britain, aided from 2010-15 by their “Orange Book” Lib Dem coalition accomplices.
In December, it was revealed that Chancellor George Osborne was on course to sell off more public assets than any chancellor for the past 30 years, even more than Nigel Lawson.
By the end of 2015, Osborne had sold off nearly £40 billion of assets — with a further £20bn likely to come before the end of the decade.
The Land Registry, set up in 1862, is in Osborne’s sights, as is the Royal Mint, the Ordnance Survey and the Met Office.
We used to make jokes about neoliberals selling off the weather, but it’s forecast to be happening soon. In other countries too, privatisation is being extended.
In Greece the debt crisis has been used to pressurise the government to sell off important assets.
As part of the onerous bailout deal which the capitulationist Prime Minister Alexis Tsipras signed up to last summer, Greece has had to transfer its “valuable assets” into a special fund, with the aim of raising €50bn.
In December, Greece sold off 14 airports to a German company.
The German government of course was the one putting most pressure on Greece to sign up to the onerous “bailout” deal. Russia, hit by Western sanctions, and low oil prices, is, according to reports, getting ready for new wave of privatisation.
The Financial Times reported earlier this month that Russia is lining up several large state companies for potential privatisation.
Meanwhile in the US, a new Bill in Congress plans to privatise the country’s very safe air traffic control system.
“Dozens of countries have privatised their air-traffic systems, but sceptics question whether private systems would work in the larger, more complex US airspace,” says USA Today.
The question is — who benefits from all of this privatisation?
While states can raise money from sales, more often than not assets are sold at below their market value, as occurred with the sale of the Royal Mail in Britain.
And often privatisation proves to be a false economy as privatised companies receive higher public subsidies than their state-owned predecessors got.
A classic example of this of course is the handouts to Britain’s rail operators which have received up to five times more in taxpayer subsidies than British Rail received in its last year of existence.
On so many levels privatisation makes no economic sense — until you start to look a little deeper into who benefits from this policy.
A new, must-read report The Privatising Industry in Europe, by Sol Trumbo Vila and Matthijs Peters for the Transnational Institute “puts a spotlight on the legal and financial corporate giants making millions out of the new wave of privatisations.”
The TNI finds that “a small coterie of legal, financial and accountancy firms, many based in the UK, are reaping huge profits from the new wave of crisis-prompted privatisations.”
Among these firms are “financial advisory firms NM Rothschild, the UK law firms Freshfields Bruckhaus Deringer, Clifford Chance, Allen & Overy and Norton Rose Fulbright, and the accountancy firms based in London PricewaterhouseCoopers and Ernst & Young.”
The report notes that these firms “actively promote privatisation at the European level.”
Politicians who have worked for these firms have also been among the leading advocates of privatisation. Two men have been particularly important.
In 1988, influential Tory Oliver Letwin published a book called Privatising the World, in which he outlined how barriers to privatisation could be overcome.
From 1986 until December 2009 Letwin worked at NM Rothschild, first in the firm’s international privatisation department.
When he left the company in 2009 he was a non-executive director and paid £145 an hour for his services.
Letwin is now chairman of the Conservatives’ research department and from 2005-10 he chaired the party’s policy review.
Are we really surprised that the Tories are so keen on privatisation with people like Letwin holding important positions in the party?
Another Tory from NM Rothschild who enthusiastically championed privatisation is John Redwood — described on the Conservative Party website as “a pioneer of privatisation worldwide.”
The current MP for Wokingham worked at NM Rothschild Asset Management from 1977-83, first as a manager and then director of “investment research.”
In 1983, Redwood became head of the No 10 policy unit. From 1985-89 he was a director of NM Rothschild. In his book The Official History of Privatisation, David Parker writes:
“Redwood appears to have been instrumental in persuading the PM to appoint John Moore to the Treasury to lead the programme of privatisation in her second government and in encouraging her to believe that such a programme was achievable.”
In 1985, NM Rothschild advised the government to sell the Royal Ordnance to the already privatised British Aerospace for £190 million.
The deal was later criticised by the National Audit Office as being a bad deal for taxpayers.
In 1987, the government decided to sell off its remaining 31.5 per cent stake in BP. And guess who got to handle the sale?
Why, NM Rothschild. The same firm also won the government contract to advise on the sale of British Gas.
But for some, even Thatcher’s sell-offs didn’t go far enough.
In 2011, the website Liberal Conspiracy revealed that in 1988 two “radical” Tories wrote a pamphlet for the Centre for Policy Studies think tank entitled Britain’s Biggest Enterprise: Ideas for Radical Reform of the NHS.
The two Tories labelled the NHS a “bureaucratic monster that can’t be tamed.” You can see the influence of the ideas in the report when you look at the Tories recent NHS “reforms.”
And who were the two Tories were who wrote the blueprint for future Conservative policy 28 years ago?
Oliver Letwin and John Redwood. Redwood also wrote the foreword for Letwin’s book Privatising the World.
Ideas that had been considered on the extreme fringe of British politics in the period 1945-79 became the new orthodoxy thanks to men like Redwood and Letwin.
In the 1980s, privatisation was sold to us as a way of improving “inefficient” post-war economies, economies that really weren’t inefficient at all.
Today, while the “efficiency” argument is still made by neoliberals, the main argument put forward for sell-offs is that we need to get the public finances back in order.
So even if we don’t like privatisation, we still have to do it, “to reduce the deficit.”
But all we have to do is to follow the money trail to see that those pushing privatisation — whether it’s the German government exerting pressure on Greece to transfer its assets into a special fund or British investment banks — are the ones who benefit.
The big losers have been ordinary people, who have seen assets they owned, sold, often for below their true worth and are now charged more for services that were provided more cheaply “in house.”
Not that Redwood or Letwin need to worry unduly about high energy bills or rip-off rail and bus fares.
Redwood had the third-highest outside earnings of any MP in 2014, at £213,852, while Letwin’s wealth was put at £1.6m in 2010.
Promoting privatisation is a good business for all concerned.