State Owned Facilities: Private Good, Public Bad!

Current economic wisdom by nearly all political parties in Australia is that private is good and public is bad. The current trend is for governments to sell off everything they own or run. At the highest levels this wisdom is being forced on third world countries by the World Bank and the IMF. In Australia most states have divested themselves of their public transport, rail networks, electricity generation, airports, state banks and at the federal level, telecommunications (partially), docks, railways and airlines. Other government activities are out-sourced. This means the provision of the service is contracted to a private company. The latter is not always negative but there are down-sides.

Where state monopolies exist, like telecommunications, this has serious consequences. It is obviously uneconomic to duplicate infra-structure yet this occurs at the micro level. What usually happens is that one or more of the companies concerned goes bust. The public is then left to pick up the consequences in lost money and jobs. Or the monopoly is privatised in total with consequent rises in costs so the company can pay back its loans and make money for its shareholders. Whose interests does this serve?

In an efficiently run public enterprise, the shareholders; everyone, gets to receive the benefits instead of a few. The enterprise is transparently accountable or should be to the public and the service provision is equitable to all taxpayers. (this is exactly why the sale of Telstra is being opposed in Australia). Once a company is privately owned they have no duty to anyone except their shareholders. Un-economic activities will then be either neglected or charged at cost. The losers in this scenario are those who are usually not in a position to afford the service. It is of interest to note that many communities in the US are buying up their utilities for the common good, just as we in Australia seem to be dumping ours. See Public ownership of the Indianapolis Water Company (new window).

More to come.................

Peter Russell
March 2002