Time is now to fight vulture capitalism

I’m currently working on a film and book about disaster capitalism. Britain is currently experiencing a text-book example of the phenomenon. Here’s Seumas Milne in the Guardian with a necessary call to arms:

If nothing else, the spectacular failure of G4S, the world’s largest security firm, to get even close to meeting its Olympics contract should at least bury the fantasy that private companies are more efficient than the public sector. While G4S staff have failed in their thousands to turn up at one Games location after another, the police and the army have had to sort out the corporate chaos.

As even G4S’s Nick Buckles conceded in parliament on Monday, this is a “humiliating shambles”: of epic incompetence, driven by unrelenting cost-cutting and the lodestar of shareholder value above everything. And that from a company which as Group 4 was already famous in the 1990s for its prisoner escapes, and under whose control the Angolan refugee… Jimmy Mubenga… notoriously died two years ago.

The fact that this outfit is already running prisons and Lincolnshire police’s control room, detention cells and administration – and was poised to take over similar roles with a string of forces before the Olympics debacle – is truly alarming. But what has now become a global demonstration of the dangers of outsourcing can also be used to help turn the political tide against it.

Public opinion in Britain has always opposed privatisation. But after the G4S fiasco, even paid-up Conservatives are getting restless. The Tory MP Michael Ellis told Buckles the public was “sick of huge corporations like yours thinking they can get away with everything”. And the Thatcher minister William Waldegrave warned Conservatives in Monday’s Times never to “make the mistake of falling in love with free enterprise”, adding that people who believe “private companies are always more efficient than the public service have never worked in real private enterprise”.

Now they tell us. But of course privatisation failures are nothing new. Jeremy Hunt, the culture secretary, says it’s “completely normal” that private contractors fail to deliver – and he’s absolutely right. The G4S saga is only the latest in a series of recent outsourcing scandals: from the alleged fraud and incompetence of… A4E‘s welfare-to-work contract, to the… “staggering losses” incurred by Somerset council… in a disastrous private-sector joint venture, to the… shipping of vulnerable children… half way across the country to private equity-owned care homes in Rochdale.

That’s not to mention the exorbitant private finance initiative to build and run schools, hospitals and prisons, which, it is now estimated,… will cost up to …£25bn more… than if the government had paid for them directly; or the …£1.2bn of public money lost every year because of… rail privatisation… and fragmentation; or the water shortage achieved in rain-drenched southern England this summer by a privatised water company that had… sold off 25 reservoirs over the past 20 years… while rewarding shareholders with …£5bn in dividends.

The experience of privatisation and outsourcing is that it routinely… reduces service quality while failing to deliver promised savings. And where it does make early savings, it typically does so at the expense of low-paid workers’ wages, jobs and conditions. Meanwhile, the public service ethos is eroded, and administration and transaction costs are driven up, as power slips from purchaser to provider and effective democratic control is lost.

But despite the growing revulsion against privatisation, the coalition is… accelerating the outsourcing drive, while the European commission is forcing countries such as Greece and Portugal to privatise to “promote growth”. The G4S experience is a warning of where all this could end up: will the army be asked, say, to cover for contractors who find themselves unable to provide a full ambulance service?

The danger, as Ajay Bhalla of Cass Business School argues, is that as it devours core services and displaces public knowledge and capacity, outsourcing becomes more difficult to reverse. Difficult, but not impossible. As the failures and costs of privatisation have become clearer in recent years, there has been a… parallel trend to “remunicipalise” services… and bring them back in-house. Power companies in Germany, water in France, transport and other local services in Britain – and much more in Latin America and elsewhere – have been successfully returned to the public sector.

The privatisation juggernaut isn’t unstoppable. Just as energy and water were brought under public control through the “municipal socialism” of a century or more ago, services and industries can be taken into modern forms of democratic social ownership today.


Text and images ©2024 Antony Loewenstein. All rights reserved.

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