Privatization: New ways of profiting at public expense

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In the 1980s governments began selling off public assets to private corporations. Government debt and deficits were the excuse. Citizen-owned wealth, held in trust by governments was transferred to profit-seeking companies. Public inheritance was turned into a one-time payment applied to the provincial or federal debt.

This practice was called privatization. It should have been called theft, since it amounted to stealing from the public what belonged to it.

The only way the practice of "selling the house to pay the mortgage" made any sense was if you were the one buying the house.

In 1994 the Saskatchewan government privatized its Potash Corporation for $630 million. In 2010 a hostile bid priced it at $38.6 billion. The bid was considered "insulting low."

The bid revealed that because of the privatization of what belonged to them, citizens of Saskatchewan had been cheated out of more than a 63-fold increase in the value of the Potash Corporation!

As the world price of potash resources rocketed, PotashCorp profits had gone sky high. Money that could have been used to build hospitals, schools, and cultural and recreational facilities left the province, to the delight of the absentee landlord.

The government collected some taxes and charged royalties. But government revenues represented much less than the citizens of Saskatchewan were entitled to as owners of the natural resources.

Ironically, resource rights guaranteed under the Canadian Constitution were negotiated during the patriation debates of the early 1980s because the Saskatchewan government led by Alan Blakeney insisted they be granted to Alberta and Saskatchewan. The wealth below the soil had been denied the two Western provinces when they joined Confederation in 1905. 

Today, new forms of privatization are being introduced. Instead of just selling valuable, revenue-producing assets, governments are turning over the delivery of public services to private companies. Businesses rolling in tax-cut dollars are saying governments can no longer afford to provide public services.

Paying more for less value in basic services is tax cuts at work.

Issues raised by new forms of privatization were laid out and examined at an Ottawa conference held October 28-30 and sponsored by the National Union of Provincial and General Employees (NUPGE) and the Public Services Foundation (as a PSF board member, I chaired several sessions).

Delegates heard OPSEU political economist Randy Robinson reveal the sordid details of the Ornge deal. What happened when Ontario privatized its air ambulance service? It was a spectacular failure: costs doubled, services deteriorated, lives were lost, and the scammer owners ultimately charged with fraud.

Spectacular failure has not deterred the recently re-elected Wynne government from fast-tracking more privatization of public services delivery. As OPSEU president Smokey Thomas told delegates, the Wynne government in Ontario is ready to turn over wide swaths of public administration to private-sector profiteers.

Ontario is imitating practices from the U.K. where investment banks, giant accounting and management firms, and huge law firms all are increasing their bottom line at the expense of the public, and the services they need.

New forms of privatization include promoting private-public partnerships (P3s), contracting out of service delivery, paying for consultant-based audits and evaluations, and hiding the creation of a shadow public service -- which is more expensive and less efficient than the traditional merit-based service.

Governments conceal new forms of corporate welfare, suppressing the truth about how much more this will cost the people of Ontario, and how both the people who deliver the services and the public who count on them will lose.

Corporations and their wholly owned media present economic news from the point of view of the investor, not the worker or the public. Of course privatized public services cost more because profits have to be made, and corporate taxes paid. Adding in borrowing charges bumps up the cost to the private operator of public services of anywhere between 20 to 40 per cent. To reduce costs, companies cut corners on services, reduce wages and salaries, and lay off workers, while they pay themselves more.

Privatized service providers replace carefully regulated workplaces with private sector practices; nepotism, kickbacks, pay-offs and cronyism. Public policy objectives such as employment and pay equity go out the window, trade unions have difficulty in asserting successor rights to represent the workers, and public safety is put at greater risk.

The case against privatization grows as the socialization of losses and the privatization of profits continues. Speaking at the conference closing, NUPGE President James Clancy revealed a plan to protect public services, and pledged to support unions in fight-back situations.

Evidence from around the world of consistent cost overruns for P3 projects, and failure to achieve planned savings in operation did not deter the Harper Conservatives from making public infrastructure grants to provincial and municipal governments conditional on adopting the P3 scam. But no government can ignore public anger and expect to be warmly welcomed at the ballot box. 

The NUPGE Privatization Scam of the Year was awarded at the conference. The competition was tough, as a look at the nominees reveals.

The Government of Saskatchewan earned the Scammie for handing over its liquor store business to the Sobeys empire. As if giving away PotashCorp was not enough.

Duncan Cameron is the president of rabble.ca and writes a weekly column on politics and current affairs.

Photo: Rob Swatski/flickr

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