Home > Economic policy > The uselessness of privatisation “safeguards”

The uselessness of privatisation “safeguards”

March 1st, 2014

Telstra is lining up behind Qantas for the removal of restrictions on foreign ownership. It’s worth mention that these annoying “restrictions” were marketed to the public as “safeguards” when these enterprises were privatised in the 1990s. As I said at the time

Based on past experience, it seems unlikely that restrictions on foreign ownership will ultimately be effective. The effect of the ‘safeguards’ in the Telstra (Dilution of Ownership) Bill will be to reduce the sale price obtained by taxpayers while obscuring the fact that the ultimate outcome of privatisation will probably be either a foreign-controlled monopoly in telecommunications or a duopoly consisting of two foreign-owned firms.

Current and recent proposals for the sale of state-owned electricity assets have been pushed with safeguards of this kind, which achieve nothing. If it’s OK to privatise a business, it’s OK, and indeed obligatory, to sell it to the highest bidder. For obvious reasons, this will usually a foreign multinational in the same line of business.

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  1. Hrgh
    March 1st, 2014 at 17:14 | #1

    I think the implication of this is that as the assets were sold at a discount, investors should pay the Government for the removal of foreign ownership controls.

  2. Michael
    March 1st, 2014 at 17:42 | #2

    John, the logic extension of your “sauce for the goose, sauce for the gander” argument, is that we may as well list Australia on the international stock exchange, and sell all to the highest bidder. At what price our sovereignty?

  3. bjb
    March 1st, 2014 at 18:29 | #3

    @Hrgh

    Hrgh – I like you’re thinking :)

    It probably won’t happen, but it would be good if someone in the MSM media dug up some quotes from politicians at the time pontificating on why these “safeguards” were a good idea, and ask the current crop of pollies why their predecessors are now wrong.

  4. Megan
    March 1st, 2014 at 18:53 | #4

    @Michael

    Or perhaps the logical extension is: since the purported safeguards are useless then the assets shouldn’t be sold.

  5. John Quiggin
    March 1st, 2014 at 19:32 | #5

    @Michael

    Our sovereignty is gone if we sell it, whether the buyer is Gina Rinehart, Rupert Murdoch or the global financial market. Restricting the sale of our common assets to a particular Australian, or group of Australians, makes no difference.

    So, what Megan said

  6. Michael
    March 1st, 2014 at 19:44 | #6

    Thanks Megan and John,
    I’ll use a modified version of this in the IQ2 debate on Tuesday – been looking for some pithy one liners ;)

  7. Megan
    March 1st, 2014 at 20:06 | #7

    @Michael

    Maybe you could work a one-liner out of this:

    We could have killed the goose that laid golden eggs, but instead we sold it and contracted to buy the golden eggs back in perpetuity from the new owners at a price of their choosing.

  8. March 1st, 2014 at 20:55 | #8

    I grew up when water, electricity, gas, post, telephones, some insurance companies, some hospitals, prisons, employment offices, some banks etc etc were owned by governments. When they were all privatised, I tried to figure out why they had ever been government owned in the past.

    Now I realise its pretty simple. Governments in the past had more common sense.

  9. Megan
    March 1st, 2014 at 21:33 | #9

    @John Brookes

    Governments in the past had more common sense.

    Not the ones that allowed all those things to be given away to private interests.

    As a result, we now have governments that don’t have “common sense”. Not because we don’t have people available with common sense, but because the same private interests now largely determine the makeup of our governments.

  10. Matthew James
    March 2nd, 2014 at 07:03 | #10

    @Michael

    @John Brookes
    The more I look into it the more I hate privatisation. While I’m sure there are bits and pieces of ‘value’ to it, when I stop watching and reading all the economists pontificating on it the overall picture to me is one big money making scam that the public is put to the task to feed. But there is nothing worse than allowing parasites to get rich off funding for a nation’s health care system and Bupa are been set up to move in on Medicare. Bupa are the worst of a very shady pack that make up the for profit private health insurance industry. What is especially sinister about this is how protected these vial thugs are from the media. And why sell off Medibank?? At the moment their profits go back into the public purse but once its sold, they will just disappear into the Stock Exchange. Why?? who benefits? Why is this happening when it is so obviously doomed to fail? The US says it all, doesn’t it?? Its all happening above the law and its Investment Banker types given god status who are ramming it through and it has to stop.

  11. Ikonoclast
    March 2nd, 2014 at 10:18 | #11

    This seeming final triumph of capitalism is consistent with Marx’s overall analysis. He predicted that capitalism would subsume and consume all else and extend to every corner of the globe at its height. The social-democratic Keynesian years (about 1935 to 1970) marked a temporary reversal for both pure Capitalism and Marxist theory of it. The next reversal against social-democratic fortunes and the re-emergence of the power of the capitalists since 1970 has validated and vindicated Marxist theory once again – at least to this point.

    Of course, history isn’t finished yet. Neither is history narrowly deterministic. There is no guarantee that Socialism will arise. Marx predicted either Socialism or Barbarism. Capitalism itself will definitely fall. That is now made inevitable, if not by internal contradictions then by the contradiction between endless growth (inherent in technological capitalism) and the finite environment.

    The problem is that few people today understand the real possiblities and varieties of socialism. With the final triumph of capitalism no other system is imaginable. As one wag said, “It is easier to imagine the end of the world than the end of capitalism.” However, when capitalism’s final problems come to the fore (the fact that it is generating the end of the world) then the absolute necessity for something different will make it possible once again to imagine (and then perhaps implement) other systems.

  12. March 2nd, 2014 at 13:31 | #12

    @Ikonoclast

    When you think about it Ikonoclast, we always have some form of socialism, and the sort we used to have was one with government control or ownership where it made sense, either to run obvious monopolies, or to keep the bastards honest by competing with them.

    But we have collectively gone nuts, rushing headlong for massive inequality.

  13. Ikonoclast
    March 3rd, 2014 at 08:12 | #13

    In the US, you see the results of the privatisation of the prison system. There is a need to feed a given number, or rather an ever greater given number, of prisoners into the system to keep up profits. The US has the highest number of prisoners in absolute terms, not just per capita terms, of any country in the world. On this measure, it is the least free country in the world.

    In Australia, we are starting to see the results of privatising asylum seeker incarceration. There is again a need to incarcerate ever higher numbers (for profit margins) in extra-territorial prisons (the Pacific Gulag or Pacific Guantanomo).

  14. Matthew James
    March 3rd, 2014 at 21:44 | #14

    Its really starting to frighten me, John and Ikonoclast. Its ideology over outcome in reverse. And for profit health insurance is just the same as too much is never enough, they just want more. In the US, probably the most evil firm is Kaiser HMO (health maintenance organization). Oregon a few years back relaxed their Euthenasia legislation, probably due to it as a state been somewhat more liberal than the others. But you know what happened? Kaiser started head hunting doctors who worked their, not because they had this growing need for doctors to put their ‘patients’ down legally, but because they ran/run the business almost like a cult where they top down goad the doctors into murdering their policy holders that are starting to cost them money. There has ben a lot of documentation on this, the more I scour the internet, the more I find. They obviously thought the Oregon MDs would be more use to the idea to start with! All the other insurers are just as bad, its just that Kaiser has more control of their hospitals and this becomes the logical conclusion, and it all starts with these useless do nothing Private Insurers, society would be much better off without them. Good to see and economist who isn’t into infinite growth BTW John.

    http://horror.kaiserpapers.org/julianpadilla.html

    There is another one, poor Glenda. It has photos of her murder and demise, very disturbing

  15. March 6th, 2014 at 17:29 | #15

    Rachel Nolan (ex Qld ALP MP – Ipswich) has an opinion piece up at brisbanetimes.com.au

    She’s furious with the ETU for taking a consistently ant-asset-sales position regardless of whether the ALP or LNP is in power.

    She manages to accept that asset sales lost the ALP government in 2012, but somehow weirdly blames the ETU (at least partly) for campaigning against asset sales and against the ALP for selling them when most Queenslanders were against it and the ALP never took it to an election.

    This is in a nutshell the ALP across Australia – “We know you don’t want us to do this, but we’re going to anyway and you should still vote for us because otherwise you’ll get the LNP.”

  16. Matthew James
    March 7th, 2014 at 02:45 | #16

    @Megan
    What is That Megan? Its ideology over outcome. And its the ALP, like you said not been a labor party, but been a mini LNP party and not even bringing it up! If you oppose sell offs you are automatically a far left socialist. And its exactly the same when it comes to slamming the corrupt Private Health Insurance Industry we have here. Its a media no go zone, almost. Got to do something about this people. I’m sure your all feeling pretty powerless agreeing with ourselves on a forum, people (not that there is anything wrong with this website mind you).

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