The pathology of privatisation

When the head of the Australian Competition and Consumer Commission, Rod Sims said that he was losing faith in privatisation back in 2016 some heads turned full circle. He told the Melbourne Economic Forum that he had, “been a very strong advocate of privatisation for probably 20 years, but, ‘I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales and I think it’s severely damaging our economy’.” Sims discovered late what some of us had warned policymakers about back in the 1980s.

For over 30 years, privatisation has been one of the centre-piece policy prescriptions of neo-liberal economists pursuing their mission to dismantle the post-war social democratic state. Converts to the dogma are now becoming sceptics. Neo-liberal economic ideas had their political zenith in the 1980s, propelled by the governments of Margaret Thatcher in the UK and Ronald Regan in the USA. Ten years later they were awash in our political institutions.

Privatisation became an ideological commodity, packaged up and sold by self-interested consulting firms as a wonder drug, capable of delivering 20-30 per cent in service delivery savings to government. There was no robust independent financial analysis underpinning the claimed benefits of privatisation, nor any fair comparative research on the relative performance of public and private sector alternatives. Only one solution was possible in the minds of the neo-liberals and it was always privatisation. Ideological blinkers sustained this tunnel vision for decades, a legacy that normally would take many years to recover from. How quickly circumstances change.

The coronavirus has disrupted the privatisation narrative, forcing government to rethink the role of the public sector. Don’t forget that privatisaiton has always been deeply unpopular in the community with opinion polls consistently reporting overwhelming opposition to the privatisation of public utilities, health and transport services. Despite this, successive governments, mostly conservative ones, have remained hell bent on pushing privatisation of government business enterprises through our parliaments.

They mostly succeeded, leaving a legacy of policy failures that future generations will have to contend with. Looking back on the impact of the privatisation of ETSA can anyone really say with a straight face that it has been a success? Of course they can’t. It has been a monumental policy failure that delivered higher electricity prices.

We may be at a turning point in history. The coronavirus has forced governments here and around the world to take unprecedented action to help prevent the virus from killing tens of millions of people. We have acted boldly and swiftly, delivering a spectacularly successful outcome by global standards. At the heart of the response has been the mobilisation of our public services, particularly our public health system, community services, income and business support systems and police.

A star performer has been SA Pathology, a service at the front-line of the crisis. The State Government had threatened to privatise the service 12 months ago. Today it is being lauded as one of the institutional heroes of last few months, the driver of a world-leading COVID-19 testing regime. Prior to the crisis it had been accused of poor financial performance by the State Government which launched a review of the service. In the 2018 State Budget, the State Government insisted it deliver a $100 million of savings over three years or face privatisation.

SA Pathology embarked on a cost cutting program in 2019 that was beginning to deliver against the savings target. Premier Steven Marshall said it was on track to deliver cost savings of around $25 million over two years. It was not the only public sector agency under pressure to deliver savings prior to the Covid-19 crisis. What is different now is that it is impossible to ignore the incredibly important contributions that public sector agencies like SA Pathology have made to the recovery process so far.

The strategic value of institutions like this that are focused on delivering universal ‘public goods’ is inestimable at this time in our history. It cannot be captured by narrow accounting exercises that inappropriately benchmark public services with stripped back, profit motivated operations.

The retreat from privatisation of SA Pathology in South Australia helps us understand how crises, events and circumstances shape decisions about the role that the public sector plays at particular points in history. It is a welcome development, creating an opportunity for a much wider discussion about what we expect from our governments and how we might best tackle the many challenges that confront us as we recover from the Covid-19 crisis.

The South Australian and the Federal Government have relied on the public sector to do most of the heavy lifting during this time of need. They have wisely invested in expanding our capability and capacity to manage the pandemic and provide a life raft for thousands of businesses and millions of people who have lost their jobs. The story of how SA Pathology escaped the clutches of the privatisation juggernaut might be one for the history books.

John Spoehr

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John Spoehr is Director of the Australian Industrial Transformation Institute at Flinders University in South Australia.