Thursday, March 24, 2005

WHY PRIVATIZATION AND DEREGULATION HAVEN'T WORKED

Deregulation and privatization was sold to the public as a means of improving services and reducing costs. This has not been the case. Privatized rail in the UK is a disaster, privatized water has meant increased water-rates. Aside from long-distance phones, deregulation has not worked a whit better. Deregulating of the airlines has meant a sharp deterioration in service, the dereg. of the financial sector in the US gave created the Savings and Loan Scam, one of the biggest swindles in history, costing the tax payer upwards of $500 billion. And then there's Enron and the California electricity deregulation fraud.

What happened? Why did things turn out so differently from the proclamations of the neocons and the vulgar libertarians?

The central concern of any corporation is to make a profit. Anything which interferes with this profit making is eliminated. When this rule is applied to services, most particularly those 'natural monopolies' like electricity, water, rail transport, and 'human services' like hospitals, the results can be highly negative. Profitable, 'high traffic' areas are serviced, while less profitable are not. The wealthy get health care, the poor remain sick. In the old days, rural areas were not electrified because it cost too much. City districts with a lower population were not served with tram ways because it wasn't profitable.

Beginning at the turn of the century, such services as water and public transport were municipalized, and in many countries electricity and rail were nationalized. The motivation was service, not profit. Thus, the profitable areas subsidized the unprofitable. Everyone had access to electricity, water, public transport, and with the exception of the USA, health care.

At the same time people had to endure, among other things, lousy working conditions, pollution, racial and gender discrimination at work, adulterated food, corrupt landlords and dishonest business practices. One possible solution was to do away with corporate capitalism, but this idea was quickly suppressed as dangerous radicalism. Regulation became the necessary compromise if you wish to retain corporate capitalism. Do away with those regulations, without limiting the power of the corporations and you end up back in the very situation that caused the regulations in the first place.

So what happens when a service like water is privatized? The new corporate owners have to pay dividends to shareholders and high salaries to executives. Right away, you have an added expense, since the old municipal water works didn't have to do this. Then, the corporation has a debt, the amount it had to pay to the city for the water works. To pay for this debt, employees are fired and rates increased. Since the industrial users are charged low rates, the people least able to afford the increases, small business and home owners, will pay the balk of increased costs. The consumer and the worker end up paying for the purchase.

Suppose the corporate water system decides to modernize its equipment. They will have to borrow money to do so. More workers will be eliminated, or their wages cut, and rates will increase. Under the municipal system, and this was another reason for its existence, the city would issue bonds, or take the costs directly out of tax revenue. Since nothing comes for free, the public would still pay for these improvements, but it would come in the form of a small tax increase, which wouldn't effect the ordinary person as much as a steep increase in water rates would.

Rail, public transit, electricity generation, water and sewage treatment represent hundreds of billions of dollars of tax payer money invested over the last 90 years. To this figure must be added lands expropriated or given as gifts to build dams and railroads. Privatization hands all this wealth - that we tax payers in theory own - to corporations at a cut rate, for if they were sold at their true cost, no one would buy them.

The policy of deregulation and privatization was never designed to improve services, it was designed to loot. Unable to generate enough profit from 'honest' business, corporate criminals have cobbled together a coalition of political shills and naive free market advocates. These latter are ideologues whose blinders don't allow them to see the corporation as the creation of the state and the greatest single enemy of free markets and private property that exists today.

What is the solution? All privatized services and industries must be expropriated without compensation. Rather than returned to municipal or state ownership as before, a new system should be employed. The expropriated industries should be turned into cooperatives, run by a board of directors elected from the people. This board should be composed of: one third representatives elected from the employees, one third representing the consumers elected from; the cooperative movement, small business, consumer and environmental groups, one third from the community, directly elected from the municipality or region. One half of all board members to be women, and the board to include representatives of historically oppressed peoples who live in the region of the industry. Day to day operations to function under workers self-management as found with the Mondragon Cooperative Movement in Spain.

As for regulations? Let the employees of the deregulated industries come together with the customers and figure out what should be done. Give communities the right to democratically regulate development in their areas. Above all a REAL policy of deregulation. Abolish corporate law, abolish corporate welfare, abolish patents and so-called intellectual property regulations.

Radical solutions? You are damned right! But what has been done to us was also radical. We have to take back what is rightfully ours and make sure this pillaging can't happen again.

1 Comments:

Blogger Ripsy said...

That is possibly the best explanation I have ever read.

2:15 PM  

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