Privatization failed. Australia must ditch the rhetoric of ‘incentives’ and just spend money on the things we need | Richard Dennis

Daniel Andrews’ plan to reinstate a public electricity commission is not only proof that privatization has failed, it is proof that the Politics of privatization have failed.

It’s no coincidence that the Victorian Prime Minister is using a brand name from the past for his investment in the energy generation of the future. And it’s no surprise that he’s focused on providing an essential public service during an election campaign. The Australian public has never loved privatization as much as its politicians.

Andrews is not alone in seeing the economic and political benefits of nationalizing the key infrastructure on which Australia’s economy and community rely. Malcolm Turnbull created Snowy 2.0, Barnaby Joyce is immensely proud of the state-owned Inland Railway, and the Queensland Government – having failed in previous bids to privatize its power generators – recently announced $62 billion new public investment in renewables through its state-owned power companies.

Economic theory provides no clear rule of which assets are best owned by the government and which are best owned by the private sector. The simple fact is that different governments, in different countries, at different times in history, have made very different decisions about what governments should own, manage and sell.

Just as there is no solid economic argument for determining what assets governments should own, there has never been solid economic evidence that privatization brings benefits to budgets either.

While governments keen to sell the assets accumulated by their predecessors always focus on reducing public debt in the short term, they rarely talk about the long-term impact of lost revenue streams in the decades to come.

In the 1990s, Jeff Kennett sold Victoria’s electrical assets for $23.5 billion, but it’s estimated that last year alone the electricity industry made $23 billion in profits from consumers and businesses in Victoria. Whoops.

The productivity gains from privatization are equally sketchy.

While the rhetoric of privatization revolves around greater innovation, efficiency and discipline in private sector spending, the reality is that since the start of the privatization trend, the growth of middle managers and salespeople in the sector of public services in Australia has been extraordinary. For example, between 1997 and 2012, the energy, gas and water sector – where most privatization took place – saw its sales force drop from 1,000 to 6,000, its numbers in business, human resources and marketing rose from 2,000 to 9,000, and the number of general-purpose managers exploded from 6,000 to 19,000. The number of technicians and trades workers, on the other hand, did not only increased by 28%.

Although the high prices and low quality of privatized services are widely understood, one of the least visible but most important damages associated with the change in ownership of public assets is the impact on learning and skills.

Before economic rationalism and neoliberalism entered the minds of Australian politicians, state-owned enterprises employed tens of thousands of young apprentices each year, most of whom left to work in the private sector upon completion of their current training. of employment supported by training in public “technical colleges”.

Nowadays, most state-owned enterprises and public technological colleges have been replaced by private ones, but perhaps unsurprisingly, the privatization of training has not led to an increase in its quality, but a so-called skills shortage.

Given that companies like the Grill’d burger chain were the biggest beneficiary of the former coalition government’s ‘starting apprenticeships’ wage subsidy scheme, and that privatized training schools were to be banned from offering free iPads to entice vulnerable people to enroll in inappropriate courses, It’s no surprise that despite record spending on training, Australia has to look overseas to provide workers with great variety of skills, including electricians, bakers and masons.

Privatization has damaged Australia’s vocational training system. But Andrews’ plan to create new “tech schools” to introduce more students to more jobs before they leave school is proof that governments are beginning to believe that economics and politics of Old-fashioned government spending is a better way to solve problems.

Direct public investment in essential services through old-fashioned entities like the Victorian Electricity Commission and our school system allows governments to directly solve many problems at once. Not only can the Andrews government directly invest in the renewable energy that the low-carbon economy clearly needs, but it can play a direct role in shaping the wages, conditions, training and gender balance of its workforce. Likewise, it can ensure that physical investments and workforce training are located where they make the most economic, social and environmental sense.

Governments cannot and should not do everything. But after decades of privatization, deregulation, outsourcing and the creation of private markets to replace public regulation, it is positive to see a state government not only investing directly in public solutions, but also being public and proud in the process.

Let’s hope the federal government abandons the rhetoric of building a “green Wall Street” to fund environmental protection and its “agreement” with pension funds to build public housing and instead spends money on protect wildlife and build houses. It’s not high finance, but it’s much cheaper and more efficient.

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