This post is based on the talk that was given at this week's branch meeting. We had a great discussion from this - enjoy!
Why privatisation is
not the answer
The aim of tonight’s
talk is to set out some of the socialist arguments against the
capitalist and neo-liberal arguments for privatisation. Initially I
will set out the case that privatisation is bad for the working class
and leads to exploitation – this will not take long as the
exploitation of workers under a capitalist system is a common topic
of our discussions. The second and major focus of the talk will be on
how privatisation actually fails to offer the economic and innovative
benefits which it claims to offer.
Starting with the first
strand, Marxists are familiar with the argument that under a
capitalist system the labour value of the workers is exploited by the
owners of the means of production. The work produced by the workers
must make profit for the owners of the means of production and so
companies squeeze the share of the value of their productivity which
is paid to the workers – workers are paid less and the capitalist
aims to maximise their productivity and collect a higher proportion
of surplus value. In a recent talk we discussed the example of shop
workers at an apple store – selling several products at a cost of a
few hundred pounds each during the course of the day when their wages
for the day are a fraction of the price paid for one of these.
The exploitation of
workers is particularly highlighted when we look at less skilled and
less well paid forms of employment. As a summer job one year I temped
doing picking and packing in a warehouse. This was not a job which I
particularly enjoyed but I was in a fortunate position that I was a
temp and was paid an hourly rate. Those who were employed directly by
the company were paid subject to the number of picks they made per
hour. This created a competitive and fractured atmosphere with
workers arguing over who had the best pick sheets – everyone wanted
to gain the sheets with the highest number of the same item so that
they could quickly meet their target of a hundred picks per hour.
This sort of pressure and such unpleasant working conditions are, in
many ways, an inevitable consequence of the capitalist system.
This exploitation is seen
as benefitting the capitalist class at the expense of the working
class. The argument seems clear and, when made, often convinces
people that the working classes are disadvantaged by the capitalist
system. And yet, there are many who accept the arguments for
privatisation.
It is valuable to remind
ourselves of the problems inherent in capitalism and private
companies, yet it is also worth addressing some of the misconceptions
regarding the economic value of privatisation.
The first and most common
defence is that private companies are more efficient than public run
organisations. Many of us probably have our own experiences of
working for private companies and I think we would all say that this
myth is easily dismissed based on a few anecdotes from that
experience. From my own personal experience, I could offer a couple
of examples. In another summer university job I temped for a major
bank, the inefficiency was evident throughout the company. I had been
employed to sort out and ensure that the employee files in the human
resources department were up to date and included all of the key
documentation needed in employee files.
My job consisted of
auditing the files and checking off that there was a signed copy of
the contract, proof of address, proof of right to work in the UK and
so on – all exciting stuff! I then had to phone individual branches
and chase employees for missing documentation – most times I did
this it turned out that the employee in question had sent the
documents in a number of times. On further exploration of the
offices, I soon discovered vast piles of unfiled paperwork
accompanied by a tendency of staff who were working on files to keep
them in their desk drawer and leave no indication in the filing
cabinet as to where the files were. There were an army of temps who
had been given no training and were in charge of filing and it seemed
that the unofficial ‘non policy’ was to simply create piles of
documents that had no file and leave them. The vastness of the
company, the trend for hiring in large numbers of temporary workers
with no training, no job security and frequently, as a result of
these things, little dedication to the work, seem to lead naturally
to repeated work and inefficiency.
The scale of these
organisations is one reason why inefficiency creeps in. Yet even in
smaller private organisations there is inefficiency. If we look at
the privatised public services we can see that this trend continues.
Public transport gives us several examples of this sort of
inefficiency. It is not just the internal inefficiency of
organisations, but also the inefficiency of the private model in
general. Competition is often presented as a good for innovation and
economic efficiency, however, if we look at the wider context we can
see that the competition leads to wastefulness and the demands of
profitability within an individual company leads to wider inefficient
utilisation of resources.
If we take public
transport around Derby and Derbyshire as an example we can see
first-hand how this wider economic inefficiency presents itself. With
the privatisation of public transport companies were motivated by
profit and so bus routes and train stations in and to smaller towns
have seen a lack of investment, closures and few services. In the
context of a wider economic system this is not beneficial in terms of
worker’s easy access to their work places or beneficial
environmentally. As one example we can see that some of the villages
in South Derbyshire are served by infrequent and very expensive bus
services. If you were to live in Hatton, for example, most workers
there who began their work at nine would be faced with the choice of
arriving in Derby at 8:05, being 55 minutes early for their shift, or
arriving in the city 5 minutes late for work – the price they pay
for the benefit of this service is over £5 for a return ticket. No
wonder it is more appealing for so many people to drive into the city
for their jobs, using resources inefficiently and having a negative
impact on the environment.
Similarly, the drive to
compete for a fixed market creates a chaotic system in many
instances. Heading from Derby out to South Derbyshire there are two
services run by two separate companies – the x-50, which heads off
to Stoke, and the Villager services which head to Burton. The x-50 is
scheduled to leave Derby 5 minutes before the villager – it stops
at some of the same places but a return ticket on one would not be
valid on the other as we have separate services competing for the
same market. Similarly with the two companies who operate services
from Derby to Nottingham. Whilst supporters of the free market
economy may claim that private companies adapt their practices to
meet the demands of the consumer and will be forced to offer better
services and adopt more ethical practices under the compulsion of
their customers, we see that in practice this is not the case.
Private companies are motivated by maximising their own profit which
leads to a narrowing of services offered. The needs of the community
are clearly not met by these privately run companies.
The economic benefits of
privatisation can also be seen to be a fallacy when we look at the
railways as an example. In January of this year the Socialist Worker
had an article reviewing the last twenty years of privatised rail
networks. It makes an interesting read and was a compelling counter
to the claims that privatising benefits tax payers. It deals with the
cost to individual commuters initially – the rising cost to
commuters is not news to any of us, I’m sure, but it is worth
considering some of the statistics: The average worker now spends 15%
of their income on travel costs, fares have almost consistently
increased above the rate of inflation and a worker in Chelmsford,
Essex, would spend £3,540 a year to commute to London. This is all
familiar news, but the supposed benefits in terms of tax payer’s
money are worth tackling.
In fact, in spite of
saving the treasury money and passing the costs onto individuals, we
now have individual commuters and the treasury paying increased money
for a diminished service. Since privatisation public funding of
railways has more than doubled to £5.4 billion a year by 2009 -
2010. In 2012 the government paid £490 million in subsidies to rail
franchise. The government funded McNulty report apparently noted
these problems but rejected the idea of renationalising, even though
this would save £1.2 billion a year, and suggested, rather, ‘that
further division was the solution’. Similarly, in April the
Guardian published an article headed ‘East Coast rail service costs
taxpayers less than private lines, report reveals.’
The key piece of
information in the article is that:
‘The route has been under
the control of the Department for Transport since November 2009 after
the transport company National Express pulled out.
While about half of all
train operating companies paid premiums to the government last year,
the report shows that passengers on every franchise were in effect
subsidised when money spent on infrastructure was included. However,
the net subsidy for East Coast was 1% of the line's income, compared
with an average of 32%.’
The cost to workers is
higher in terms of personal fares as well as in terms of the amount
of public spending diverted to the rail network and the service is
not improving. Clearly, again, the needs of the community are not met
but the companies are protected from any shortfall in their projected
profits.
The second claim which is
often confidently put forward by supporters of the free market and
privatised economies is that private companies are more innovative
and that without private companies technological innovation and
progress will stagnate. This is simply wrong and if we look at the
innovations and improvements in health care since the establishment
of the NHS we can see just how incorrect these claims are. It is
reasonable to suggest that in the establishment of the NHS its
founders were inspired by what voluntary and community based groups
were able to achieve. As David Hands, visiting professor in Health
Policy and Management, said in a talk in March 2010 delivered to the
Socialist Health Association:
[Individuals inspired by
the development of community groups and outstanding clinicians have
been responsible for innovation in health care.] ‘But the vision of
individuals is influenced by the context in which they work.
The collective efforts of the pioneers stimulated the creation of our
valued social institutions such as hospitals, health centres,
universities, the BBC and the NHS. Those institutions in turn
have created the environment in which innovation and improvement can
flourish.
It is interesting to
speculate whether some of the innovations that we now take for
granted might not have happened had the NHS not existed. It is
beyond dispute that many who chose to work in the NHS have been
inspired by the values and vision of the Service and the comradeship
of shared endeavour.’
In fact, health care has
improved beyond recognition since the establishment of the NHS.
People live longer, infant mortality is down and there has been a
transformation in the treatment and understanding of many illnesses.
Further to this, if we
look at education, since the introduction of the educational reform
act and again since the introduction of the National Curriculum,
there has been a huge development in educational research, innovation
in educational practice and a far greater understanding of how
students learn and how teaching can be more effective. Innovation is
not the preserve of the private sector, where, in fact, positive
innovation is not required for continued success and profitability.
However, this is not to
say that publicly run organisations and services are without the
inefficiencies and stagnation that we have seen present in private
organisations. In another university summer job I worked for the
probation service and there was a particularly amusing and depressing
story of a recent inefficient development in the practice which
perhaps sums up the issues. The managers had decided that the offices
in which the probation officers worked should be made open plan.
The probation officers
themselves said that this would not work as they required offices
where they could hold confidential meetings with their clients. The
changes were brought in anyway at great cost, only to discover that
probation officers were not able to do their core work of holding
confidential meetings with clients in open plan office spaces. As a
result, the offices were returned to their former state.
We have all also heard
various stories of the creation of what can best be termed ‘busy
work’ in Soviet Russia. My own personal favourite is a story of a
Russian worker who retired from his night shift job in which he had
spent his working life turning screws to the right. On the day of his
retirement he met his counterpart who worked the day shift, only to
discover that during the day his job was to turn the screws to the
left.
Now, we probably take
this story with a pinch of salt in terms of reflecting the actual
reality. However, it exemplifies nicely the idea that without
collectivism and the workers determining how their labour power
should be best spent, acknowledging their personal expertise in their
job, then publicly run services succumb to the same models of
management led and top down organisation which creates exploitation,
inefficiency and lack of innovation in the private sector.
However, public companies
are better suited to meeting the demands of the community rather than
seeking profit. At a time when many of our public services are under
threat we must make the argument strongly that inefficiency is not
the result of public organisation but of a lack of collectivism and
the application of capitalist models of business organisation onto
these services.
