By Jennifer Thompson
Prime Minister Paul Keating, Treasurer Ralph Willis and finance minister Kim Beazley indicated their contempt for the rest of the government by not even telling it beforehand about the plan to sell the government's remaining 50.4% shareholding in the Commonwealth Bank. This and other privatisations were rationalised as necessary in order to deliver the budget surplus of $718 million.
In addition to the CBA, to be sold are Qantas (again), federal airports, most of the Australian National Line (ANL), the remaining 80.6% share in AIDC Ltd, Aerospace Technologies of Australia (ASTA) and the Department of Administrative Services motor vehicle fleet (DASFLEET).
A budget surplus is made all important by an economic "rationalist" fairy tale. This claims that the surplus means that the government doesn't need to borrow money; therefore more capital is available to business to fund an increase in productive capacity. This will reduce the call on foreign borrowings and imports and Australia's current account deficit.
But sales of public assets don't increase "national savings". Public sector borrowing requirements are shifted to the private sector, as capital is spent by the privatised industries instead of being invested in new production.
Privatisation is often promoted as a way of making social services more efficient and cheaper through exposing them to competition, but this argument isn't supported by real experience. Most of the efficiencies supposed to accompany privatisation flow from reducing work forces, often with serious long-term social costs, and cutting services deemed marginal (like rural transport services) even though these might be important to large numbers of people.
Privatisation is ideologically respectable for reasons which are not mentioned allowed by its advocates in the major political parties: they provide large and guaranteed profits for big business. What could be more attractive than buying an already profitable social service, carefully corporatised by its government owner to make it run like a commercial enterprise and with an already guaranteed market?
And it's an obvious lie that the sale of public assets enables "all Australians" to have a stake through purchasing shares. At the time of the Commonwealth Bank's first share issue in 1991, one-third of the bank was sold off to around 200,000 people (about 1.1% of the population). When the shares were listed on the stock market in September 1991, a selling frenzy by small investors resulted in $250 million profit for a lucky few.
Privatisation is overwhelmingly about speculation, not productive investment. It doesn't create jobs, and it's more likely to set back than assist economic recovery. For the overall economy, its main effect is to suck in vast amounts of capital, some borrowed from overseas and some diverted from new productive investment. The windfall profits made by smaller investors are spent on consumption, satisfied only by a flood of imports.
The implication of the government's argument is that if public assets were not sold, more cuts to public spending would be necessary to achieve that magic budget surplus. But if that's the case, what happens next year or the year after, when there's no more "family silver" to be sold?
In Britain, the Thatcher government's privatisations sacrificed regular income from its more efficient and profitable public enterprises. These had in effect subsidised other necessary but unprofitable services. To maintain these, the British spent the privatisation proceeds, until the source of profitable assets was gone. The next step was higher taxes — like the reviled poll tax — or higher "user pays" charges, like the charges for water which are now turning poor neighbourhoods in Britain into sinks of disease.