The Essential Report Archive Read the latest report

  • Aug, 2012

    , , , , ,

    Garbage In, Garbage Out

    Today’s installment of reality versus fantasy is brought to us courtesy of Barry O’Farrell’s flogging of that tired-old, and entirely false, presumption that the magic of privatization and outsourcing and will cure all ills. It reminds us that the Coalition’s entire economic philosophy is anchored by false, phony and economically bankrupt ideas.

    Here is the news, though, it’s not really news since it simply puts a rubber stamp on the Coalition’s ideologically, non-economically sound, plans. From the Fantasy Review (known to bankers as the Financial Review), another so-called journalist, Michaela Whitbourn, shows the basic flaws in what passes for journalism:

    The NSW public service would be forced to compete with the private sector under the recommendations of a review chaired by businessman David Gonski which pushes for major changes to how the state provides health, transport and other important services.

    The government supported most of the 132 recommendations and said it would use competition to ensure the public sector’s performance kept pace with the private sector.

    “We have to change the way we manage and deliver, and we have to change fast,” NSW Premier Barry O’Farrell said.

    “When suppliers compete to provide a service or a good, they’re forced to improve their efficiency, their quality, their pricing, and customers . . . take back control through the exercise of choice.

    Mr O’Farrell and Treasurer Mike Baird yesterday released the final report of the state’s Commission of Audit, chaired by Mr Gonski and conducted by former Sydney Water managing director Kerry Schott. [emphasis added]

    So, to clear up one obvious point: is it surprising that the “audit” conducted by a former Sydney Water managing director — an organization that is panting to privatize — would advocate for privatization? This is classic “garbage in, garbage out”: you get results based on the bias you go into any project with.

    One of the reasons that these theories aren’t laughed at is simply that the traditional press is lazy and does not understand basic economics. Reporters are not doing their research and so they simply show up, regurgitate press releases or reports, without doing any independent research — not to mention independent thinking. You don’t need to be a deep thinker though. You can rely on that very secret, obscure tool called “Google”. It takes any average person like yours truly about 30 seconds to find evidence from across the planet that privatization does not work. Repeat: it does not work.

    To wit. In the US, just to take one example, the government paid billions of dollars more for privatized services in 33 of 35 occupations. Conclusion, from People for the American Way:

    Some privatization efforts are windfalls that enrich major corporations or politically connected local businesses at the expense of taxpayers. Sometimes the cause is simply a mismatch between the resources and expertise of a public official and a major Wall Street firm.
    “There’s a reason that there’s been so much enthusiasm in the finance community for privatization deals. You are dealing with a less savvy partner,” said David Johnson, a partner in a firm that advises struggling municipalities. “The bigger sucker is always the government.” Privatization can be good business, whether successful or not. When privatization plans fail and government steps back in, politically connected financiers brokers, and law firms can still walk away with millions of taxpayer dollars.

    There is a long history of the push for privatization which has no sound basis in economics but a very solid history in anti-union, pro-business sentiment:

    In recent years, dozens of privatization initiatives have been proposed, passed, or implemented. They are aimed at water treatment, transportation infrastructure, education, prisons and prison services, health care and other human services, government buildings, municipal maintenance, emergency services, and more. Those efforts are frequently promoted by the same Wall Street firms that helped create the recession and financial crisis; by right-wing foundations, think tanks and political donors who are eager to exploit the budget-balancing desperation of public officials; and, of course, corporations eager to tap public coffers and take over assets built with taxpayer funds.
     We could go on and on.

    What’s pretty clear is this: O’Farrell, The Coalition and their other privatization groupies can’t have an actual serious debate about the economics of privatization — because they can’t win on the numbers. So, they make it all up to hide a far more serious agenda: the undermining of wages for public workers, and for society as a whole, in favor of siphoning off more wealth to big business and the elite.