The statutory authority model, employed at the state level for power, water, housing, and various infrastructure services, was extremely effective over most of the twentieth century.
Statutory authorities used boards that were independent of direct governmental control and chosen to represent a diverse range of community interests, including employees and customers.
These authorities were generally expected to cover their own running costs and make enough profits to fund future investments. And for the most part, they achieved these aims.
However, the neoliberal reform wave that began in the 1980s ushered in an assault on the statutory authority model. These neoliberals believed that private enterprises should provide all market services.
The reform process generally consisted of corporatisation first before progressing to partial and total privatisation.
New infrastructure spending was also pushed off balance sheet via Public-Private Partnerships (PPPs).
As David Hayward – a professor of public policy at RMIT – noted in 2018, “fully one-third of Victorian Government debt is now accounted for by borrowings entered into with private parties to build, own and operate public assets”.
“Even more remarkably, almost half of the Government’s interest bill is accounted for by private lease payments”.
“From trains, trams, and buses to prisons and even electricity and gas, the one thing that is common is the lack of transparency in performance measures”, Hayward noted.
“It is quite striking that in the case of Victoria — Australia’s most ardent privatiser over the last three decades — there is no evidence of user charges falling, or government spending abating”.
“This is what you’d expect were the privatisers to deliver the promised efficiency gains”, Hayward said.
John Quiggin from the University of Queensland last week explained that “politicians saw privatisation and private infrastructure as a way to get access to a big bucket of money, which could be spent on popular projects without the need to raise taxes”.
“This was a fallacy, refuted many times over, but resurrected just as often in zombie form”.
“Either the government hands over the right to collect revenue to private operators, as in the case of toll roads, or the public forgoes the earnings of government business enterprises, as with asset sales”.
Quiggin went on to argue that “the era of privatisation is nearly over”, but “cleaning up the mess left behind will take years, or even decades”.
Quiggin cited several examples where governments are trying to unscramble the egg and wrestle back control from private monopolists, including:
- The NSW government’s attempt to take back control of Sydney’s toll roads following gouging from Transurban.
- State and federal government attempts to re-enter the business of electricity generation, storage and transmission following widespread failures in the National Energy Market.
- The NSW government’s attempt to take back control of the state’s privatised prisons.
- Abandonment of plans to privatise the NBN.
The list of failures from marketising and privatising public services is long and includes:
- Utilities (electricity, water, and gas)
- Telstra
- Vocational Education and Training
- Universities
- Employment services (the CES)
- Airports
- Ports
- Childcare
- Public transport
- Roads and infrastructure
- Aged care
- Private health insurance
- NDIS
- Superannuation
Despite decades of privatisation and marketisation, there is little evidence of lower user charges, reduced government spending and lower taxes, or reduced government debt. If the neoliberals had delivered on their promises of increased efficiency, this is what you would have expected.
Instead, Australia’s privatisations have delivered anti-competitive outcomes and embedded private monopolies, harming consumers, taxpayers, and the broader economy.
The vast pot of money available through marketisation and privatisation has created a diverse range of rent seekers, resulting in exorbitant compensation for senior executives, rorting and fraud, high user charges for subpar services, waste, and overall unsatisfactory outcomes.
We have also seen extraordinary growth in middle managers and salespeople in Australia’s privatised utility sector, as ridiculed by Clarke and Dawe seven years ago.
The neoliberal fixation with marketisation and privatisation has become one of the most significant policy errors of the last 30 years.
The problem with neoliberalism is that it eventually has nothing left to sell-off and leaves citizens as nothing more than renters of their own country.
This is why we are witnessing the growing global disillusionment with free markets and unadulterated capitalism.
