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How decades of privatisation has impoverished NSW

A short article in the The Australian Financial Review of 24 September 2008 leaves the reader wondering what exactly was the point of NSW's extensive program of privatisations going back to the 1980's.

The article, "Bits and pieces won't fetch $1 billion" by Tracey Ong purports to show what options are available to the NSW government in its planned mini-budget to cover the claimed $1 billion-plus shortfall in its budget.

The article states, "The problem for Mr Rees is that the once-rich government asset portfolio has been depleted after two decades of reform." This 'reform' left, according to the article, apart from the electricity assets, the sale of which is now politically impossible, "only a handful of assets... worth offloading."

This surely begs a question from those who have held out privatisation to us as the panacea for all of our economic ills: Exactly what of enduring benefit has been achieved by past waves of privatisation?

Two of the principle justifications given for privatisation have been:

  1. It would free up government money in order that it could be spent on 'core' government responsibilities; and
  2. It would make the whole economy run more efficiently.

So what then happened to all the money 'freed up' from past privatisations? Why is it, as we are told, that NSW faces a financial crisis? If privatisation is supposed to make economies run more efficiently, how is it that NSW's economy has contracted?

The article lists the "prize assets" already sold: "TAB, State Bank and the Government Insurance Office (GIO)". Other assets that the article failed to mention are the Government Printing Office Printing, the Homebush abbattoir and the State brickworks, privatised by Greiner and FreightCorp privatised by Carr in 2002. In addition, large numbers of government buildings, housing stock and land were sold off, beginning from the time of the Wran Labor Government. That process was accelerated by the Greiner Liberal Government which came to power in 1988.

Much of NSW's roads have also been privatised and turned into toll-ways since the time of Unsworth under the different guise of "Public Private Partnerships", including the infamous Cross-City Tunnel that Carr inflicted upon the Sydney public.

This all begs further questions: How much longer can the process of privatisation continue, and what should the NSW government do to balance its budget once all the remaining assets are gone?

Typically, the article only proposes further privatisation to solve NSW's financial crisis. Other possible measures such as raising loans or obtaining additional revenue are not even contemplated.

Ong gives a list of assets which she tells us could be sold off immediately:

Asset Value Operating Revenue
Forests NSW AU$3.1billion $AU280million
Sydney Ferries Unclear AU$119million
WSN Environmental Solutions AU$203million AU$18.5million
State Lotteries AU$553million AU$50.3million

Others ruled out as politically too difficult include: Ports, Landcom, the four water corporations and, of course, electricity.

The article points out, even if any of the assets were sold, they would be sold at firesale prices.

Canadian Ronald Wright in A short history of progress (2004) wrote of economic neo-liberalism which demands privatisation of publicly owned assets:

"After the Second World War, a consensus emerged to deal with the roots of violence by creating international institutions and democratically managed forms of capitalism based on Keynesian economics and America's New Deal. This policy, although far from perfect, succeeded in Europe, Japan and some parts of the Third World. ...

"To undermine that post-war consensus and return to to archaic political patterns is to walk back into the bloody past. Yet that is exactly what the New Right has achieved since the late 1970s, rewrapping the old ideas as new and using them to transfer the levers of power from elected governments to unelected corporations -- a project sold as 'tax-cutting' and 'deregulation' by the Right's courtiers in the media, ... The conceit of laissez-faire economics -- that if you let the horses guzzle enough oats, something will go through for the sparrows -- has been tried many times, leaving ruin and social wreckage."(pp126-127)

NSW's record seems to confirm that privatisation is, indeed, just old-fashioned plunder as practised by the Conquistadores, Vikings, Mongols, etc. Revenue generating assets paid for over previous decades by taxpayers have apparently been sold off for no better reason than to line the pockets of private investors, bankers and stockbrokers.

The rightful owners of these assets are the public of NSW, who have paid for them through taxes and hefty bills, and no Government has the right to "offload" these assets without their informed consent. Whenever they have been consulted they have rejected it overwhelmingly. This, and not the failure to get the Labor Party's support, as the article implies, is the principle reason why electricity privatisation was stopped.

Whilst it is true that "domestic and overseas players lining up to get a slice of the action" were disappointed, given the harm already done to NSW by these parasites the NSW public surely owes them no more favours.

To the extent that the alleged NSW financial crisis (as opposed to the global financial crisis) is real it should be fixed by the raising of loans or by finding other fair and equitable means to raise revenue. It should not be "fixed" by selling off yet more family silver.

This article was originally posted on 20 Sep 2008

. It was revised on 1 Oct with the help of Sheila Newman, editor of The Final Energy Crisis (2nd edition).

See also: "Media contempt for facts in NSW electricity privatisation debate" of 19 Sep 08.