The issues involved in, and the consequences of, electricity privatisation
The economic arguments advanced for electricity privatisation by Mick Costa, Morris Iemma and Ian Macdonald are completely unsound. They’ve been thoroughly refuted by the veteran public infrastructure economists, Bob and Betty Con Walker.
The Walkers have pointed out that the electricity system in the 2006-07 financial year returned a profit of $1.542 billion, or between 25 and 30 per cent of equity, which in any financial terms is pretty good, and explains a bit about why private interest want to get their hands on these public assets.
Mick Costa started out a few months ago saying sale of the electricity system would realise $15 billion, but the figure most often cited now is more like $10 billion. In a few months, this vital asset has quietly been discounted by 30 per cent, and who knows what cozy deal would eventually be cooked up behind the cloak of commercial confidentiality?
Today, even the industry lobby group, the National Generator Forum, asserts confidently that the figures cited by Costa and others, for the likely proceeds of the sale of the electricity assets are completely fanciful.
In current market conditions, with the international slump, and with the looming costs involved in the reducing greenhouse gas emissions, to which all Australian governments are committed, the amount realised in any sale wouldn’t be anything like the tasty figure dangled at us by Costa.
In addition to the mad economics of the sale in current conditions, there’s quite an ugly record of public-private partnerships in big infrastructure projects in recent times. The Cross-city Tunnel, the Lane Cove Tunnel, the Port Macquarie Hospital public-private partnership and the white elephant railway to Sydney airport have all involved guarantees of compensation to the private investors, which were usually big banks involved in speculation, should the ventures fail. The ventures cited above have failed, or partly failed, and as a result the taxpayers of NSW are shelling out millions of dollars to cover these guarantees.
Why would the sale of the electricity assets be any different?
What’s involved, really, is passing over another of the people’s assets to the most speculative and shadowy commercial entities at the big end of town, with the likely end buyer being the municipal government of a province in south China. It’s a well-known fact that the government entities and big capitalist businesses in China are notoriously the playthings of the bureaucracy that runs China.
These business operations in China are notoriously engaged in highly speculative ventures and aren’t subject to even the limited scrutiny to which such entities are subject in Australia. It’s a macabre piece of irony that the assets of the people of NSW are being touted for sale to big speculative enterprises interlocked with the Chinese government and the unrestrained business practices that prevail these days in China.
It also must be said that nothing like real trade unionism exists in China. The interlocking big business ventures, comprador capitalists and the Chinese government don’t allow trade union agitation as we would understand it in Australia.
As a lifelong supporter of the Chinese Revolution in its better days, it’s a cruel irony for me to have to assert these facts of political life, and I do it without an iota of racism. Costa’s cynical accusation of racism against John Robertson for pointing to this reality just underlines Costa’s political bankruptcy, and he was no doubt grinning at the picture of his hero, the neoliberal economist Friedrich von Hayek on his office wall, as he said it.
The likely consequences of this privatisation
We only have to look around us at the effect of the various privatisations in the past few years. I run a small business and I rely on the telephone for an important part of that business. Since Telstra was privatised the universal experience is that it’s much harder to get a fault in the system fixed quickly because of the cost cutting.
When you ring up about a fault, the poor operator on the Telstra switch is programmed to be evasive about giving any time frame to fix a fault, but immediately you ring up about a fault, that seems to trigger a series of phone calls, which tend to drive you mad, offering a multitude of incomprehensible new plans to get you to spend more money, but the fault often seems not to get fixed for a long time.
One of the results of electricity privatisation in Victoria was that, after a recent natural disaster many electricity consumers were blacked out for a whole week because of the privatised utility’s cutbacks on maintenance.
Privatisation always means a diminution in services and a continual attempt to screw more money out of working people and small business people, and everyone knows this, which is why it’s on the nose with most of the population. No amount of spin doctoring from the big corporations, the media and assorted politicians is as powerful as people’s own experience of privatisation.
Another good example is the sale of the Commonwealth Bank. King O’Malley and the people who founded the Labor Party would have turned in their graves at the sale of the Commonwealth Bank, which was conceived, as were the state banks, as sources of cheaper finance for working people and small business, and as a check on the depredations of the private banks. Again, it’s the cruelest irony that the Commonwealth, as a private bank, is usually the first to put up its interest rates.
It’s also a supreme irony that we’ve just managed to get rid of Howard and the tories and elect a Labor government federally, but all the new Labor treasurer can do, it seems, is go along slavishly with the commercial desires of the private banks.
Because of the wildly speculative practices of the new generation of shadowy financial sharks globally, quite a number of shonky banking structures have gone bust. That, we are told, has pushed up the cost of credit, because the remaining banks don’t trust each other and “the market” dictates, you see, that we must have much higher interest rates.
That’s the sort of conventional bourgeois economic madness that was peddled by the ruling class at the start of the Great Depression, against which Jack Lang, and E.G. Theodore in a different way, quite properly revolted, but all you get from Labor governments these days is that the market must prevail.
Right now, that kind of mad capitalist world market is going down the gurgler at a rate of knots, and it’s in that situation Costa and Iemma are trying to flog the NSW electricity assets for the very small amount they’re likely to get.
Costa and Iemma are proposing to throw good assets and money after bad into the very hungry maw of the crumbling speculative financial system, at the centre of which are the creaking pirates who they’re trying to get as agents to on-sell the assets to the bureaucratic caste in China.
The ideeological dimension in Labor politics
Mick Costa keeps attacking the Labor rank and file, saying we’re ideologically driven in our opposition to privatisation. What a hide this man has: an ostensibly Labor treasurer who decorates his office with pictures of Hayek and says another neoliberal, one of the darlings of John Howard, Milton Friedman, is his bedside reading. (These comments on Costa are based on Imre Saluszinsky’s interesting and candid profile in the Weekend Australian a couple of weeks ago.)
Well, there is an ideological aspect to this battle. The Labor Party that I joined in the midst of the Great Split as a kid of 17 in 1954 did have a lot of ideology, and really had two wings: a secular, socialist wing, which I soon joined, and a moderate Catholic wing, which I knew a fair bit about because that was my personal cultural background.
These two wings, in retrospect, despite the fact that they fought for hegemony in the Labor Party, in practice had a surprising amount in common, ideologically. The secular socialists looked to a rather hazy socialist future, but were preoccupied with day-to-day battles to improve, expand and defend the public sector. That kind of approach was at the core of left social democratic Labor ideology.
The Catholic wing was more moderate in tempo, but its core ideology, based on papal encyclicals, also favoured public ownership of what they called natural monopolies, such as water, electricity, railways and banking.
The whole of the Labor Party, the secular socialists and the Catholic wing, had been enthusiastic supporters of Chifley’s attempt to nationalise the private banks a few years before, which unfortunately failed in a fiercely fought referendum campaign.
The active Labor people of those times, both right and left, would literally have lynched anyone in the party who tried to privatise electricity. Both the left and the right of those times had no problem describing themselves as socialists, as embodied in the Labor membership pledge. Our tribal ancestors, in my view, would be turning in their graves at the picture of modern leaders of a Labor government proudly proclaiming themselves as economic conservatives.
The Labor Party of those days, and for the next 40 years or so, as I experienced it, was firmly based on the hegemony of the unions in the party. Both left and right had a strong base in the unions, which were often the terrain of big struggles for control. This was the case even in the Great Depression of the 1930s, when union density fell to about the same relatively low level that it has reached today. Union membership increased again when the depression lifted.
The activists, both left and right, from whom I learned in a long political apprenticeship, would have thought that anyone in the Labor Party who wanted to remove union influence was a political traitor to Labor, and quite mad as well, from a practical point of view.
So, yes, Mick Costa, there is an ideological dimension to this struggle over electricity privatisation, and all the other privatisations that are waiting in the wings, and it’s the conflict between the ideology of the ruling class and the traditional ideology of the labour movement – of defending workers’ interests, a goal shared in the past by both left and right.
Mick Costa, Ian Macdonald and ideological issues in the labour movement
I’ve known Ian Macdonald since he was an extremely left-talking Maoist-inclined leader of Students for a Democratic Society in Melbourne. I rubbed shoulders with him in the Vietnam antiwar movement. I didn’t like him much, as in those days I thought he went in for a certain amount of ultraleft demagogy. I’ve been a bit fascinated by his evolution from that network of political positions ultimately into the Labor cabinet and now into the most energetic advocate of privatisation, ostensibly on the left of the Labor Party.
I first encountered Mick Costa a little later, in the mid-1970s, when he was an angry young high-school kid in Leichhardt. At that stage he was also a pretty angry ultraleftist. He came to a couple of meetings of a small socialist group with which I was associated, but we were a bit too stodgy for him, as we were mainly concerned with unions and the Labor Party, and he rapidly moved on the most left-wing thing he could find, a group called the Communist League, which joined later with what is now the Democratic Socialist Party.
As a youth, Costa was a kind of classical ultraleftist with an extremely mercurial temperament, which we now know has a certain organic basis. One thing that pulled me up abruptly in Saluzsinsky’s profile of Costa was his bald assertion of contempt for both of his parents. When he was younger he seemed proud that his father had been an active socialist in Cyprus. It has always seemed to me that paying out on your parents is a pretty strange thing to do, particularly in a political context.
Many of us in the workers movement have labour movement political activists in our ancestry and we’re usually rather proud of that, but apparently not Mick Costa, these days. He pays out on his socialist father from Cyprus, and has replaced him with other authority figures such as Friedrich von Hayek and Milton Friedman.
Mick Costa accuses his opponents of being ideologically motivated, but his own preoccupation with electricity privatisation is very largely ideological. It marks his personal transition from left to right.
The electricity system of NSW, the family silver of the labour movement, is too important a public asset to fall victim to Mick Costa’s rather mercurial shift from ultraleft to ultra-right.
From a traditional Labor point of view, having Costa, the admirer of Hayek and Friedman, as treasurer of NSW worries me considerably. It’s quite possible, it seems to me, that we could wake up some Sunday morning to find that he may have quietly sold the hospital system, or perhaps the water board, the state railways or even Parliament House, to the government of North Korea, Burma or Zimbabwe, with Macquarie Bank taking a rake-off as agent for the sale.
He’s quite capable of doing something like that without telling the Labor Party until after the deed is half-completed, in the way he has tried to present electricity privatisation as a fait accompli.
The shadowy influences operating in these privatisation proposals
As this business has proceeded, a number of things have emerged fairly clearly that tend to outrage a lot of rank and file Labor people and the overwhelming majority of active trade unionists.
Some business operations appear to be kicking around in the shadows behind these proposals. For example, Bob Carr is an adviser to Macquarie Bank and Paul Keating is international president of Lazard Carnegie Wylie, a company that specialises in privatisations, and both of these former Labor politicians are presumably very well paid for their services to these companies.
There’s a new breed of speculative entity in the financial markets that are at the cutting edge of the current meltdown in the global financial system. Their activities are usually shrouded in secrecy, and they seem to be driven mostly by the necessity to find further investment to overcome the problem that many of their existing investments are so speculative that their liquidity may be questionable.
The current financial problems globally arise partly from the fact that such entities seem to be falling over like ninepins in a bowling alley.
The Iemma-Costa government, it emerges now, gave a firm guarantee to the Electrical Trades Union and other unions before the last election that there would be no privatisation of electricity. The leaders of the government now try to argue that they were elected to lead the state and therefore they can defy the unions and the Labor Party.
The polls suggest, however, that the people of NSW didn’t elect Labor to privatise electricity, because 80 per cent oppose the privatisation. So where is the imperative coming from for the leaders of the government to defy economic common sense in the current economic climate?
Even the Liberal politician, Malcolm Turnbull, himself a privatiser, pointed out this week that commercially this is not the time to try to flog the NSW electricity infrastructure. The conclusion that most of the ranks of the labour movement, political and industrial, pretty well inevitably draw, is that many Labor politicians seem to want to follow the path blazed by Carr and Keating into lucrative jobs with big-end-of-town speculators.
We badly need a writer like Frank Hardy to write a new version of Power Without Glory, fictionalised to avoid any problem with libel, based on politics in NSW.
We want the ALP back!
In this context it’s worth considering where we’re holding this Labor Party conference in the inferior location of the Darling Harbour Convention Centre.
The circumstances surrounding this change of venue are instructive. We’re told the Sydney Town Hall is being renovated. That in itself is pretty strange, since in 1992 we had what was said to be the definitive restoration of the Town Hall, and a pretty good job was done. Why is it happening again so soon, other than to make lucrative business for construction companies?
The Darling Harbour location is pretty symbolic. In the 1980s psychiatric hospitals and inner-city hospitals were closed with the very serious consequences that are now very evident, particularly in relation to the psych hospitals. Those closures mainly happened after a very big industrial battle, particularly with the nurses’ union, in which some of my friends were involved.
The story then was that the money was needed for hospital beds in the western suburbs and to build the convention centre and other facilities at Darling Harbour, which was to be a state-of-the-art tourist attraction.
Many of the beds never made it to the west, as we know. NSW hospitals are still desperately short of beds and there’s still a crisis in the health system. Darling Harbour was built, at very considerable expense, with relative massive subsidies to big business. The problem was that the business plan for the project had very limited success.
The shopping centre was a commercial disaster and the Convention Centre was only marginally successful. We’re now told that after a fairly short time Darling Harbour is out of date and a big new scheme is proposed to knock down most of it, including the Convention Centre, and start again, with further massive subsidies to big business.
Who’s to guarantee that business plan won’t be just as commercially disastrous as the previous one? But you can bet the different commercial entities involved will be guaranteed, from the public purse, against possible failure.
A couple of months ago Labor Party head office announced the new venue for the state conference, in the Convention Centre, and not even in the most appropriate part of the Convention Centre, which was already booked.
My first reaction was that there might have been a conspiracy of some sort, but I put that aside. It’s more likely to be a bureaucratic cock-up than an outright conspiracy. Given a choice between cock-up and conspiracy, the cock-up is usually the more likely.
The practical bottom line, however, takes the following form. Initially head office said no branch observers could watch the conference because the limited space at the back was needed for paying business observers. When a number of members made a fuss, that was modified and provision was made for about 100 observers, but any number above that would have to sit in a ridiculous room down a corridor watching a television feed.
To my mind, this symbolises the direction in which Iemma and Costa are pushing the Labor Party. Members take third place to corporate interests. That’s not the Labor Party I joined 53 years ago.
The first conference I attended was also the first held in the Town Hall, in 1954. Conferences at the Town Hall became a big political event, the galleries were often crowded with members watching, there was coming and going of delegates and alternate delegates to talk to branch members in the galleries, there were left and right conspiracies beneath the stage and in the councilors’ rooms at the side, and everyone gathered for a cup of tea and a pie at Johno Johnson’s pie shop.
In the foyer, Johno Johnson flogged his puddings and raffles for Labor funds, I ran a labour movement bookstall in the corner for which I paid rent to the party, and delegates were credentialed and other Labor organisations also had stalls in the foyer. There were substantial demonstrations outside the Town Hall on the issues of the day.
The conference involved the delegates and active members of Labor Party branches. The odd corporate donor was rather incidental to this big political process. At moments of great tension and heat, demonstrations would take place in the gallery and people would hang banners over the side.
The Darling Harbour venue is ideally designed to destroy this political process as far as possible. How can the branch members and delegates interact in these circumstances? As a 50-year member of the Labor Party I want the Town Hall back as the proper venue for a gathering of 850-odd delegates and many additional branch observers.
What do we do now?
Barring some enormous U-turns at the last minute, which appear unlikely because the unions and the Labor ranks are fighting for our political lives and our right to influence events in the Labor Party, come Monday morning we will face a political crisis of the sort we haven’t seen for a very long time in Labor politics.
The best intelligence I can get is that the right and left tickets for the administrative committee contain a comfortable majority of people committed to oppose privatisation. Conference will probably carry, by a comfortable margin, complete opposition to electricity privatisation and will make that opposition part of the party platform.
It will also probably authorise the incoming administrative committee to take any steps necessary to ensure that the Labor caucus carries out this policy in the parliament.
It’s at this moment that the behaviour of the left ministers in the cabinet becomes a critical factor. I’ve been rather disappointed, as a long-standing leftist in the Labor Party, at the behaviour of the left ministers so far and their tendency to shelter behind the manufactured story that caucus and cabinet solidarity requires them to be relatively silent on the internal battle over privatisation.
It’s quite clear that cabinet solidarity does not exist in the rules of the ALP, and caucus solidarity applies only to votes in the parliament, not battles in the Labor Party.
If opposition to privatisation is written into the platform, the question becomes one of an apparent conflict between two principles: Labor Party solidarity expressed in the platform and caucus solidarity in the parliament. All Labor Party history suggests that the platform and party solidarity are the superior principle. At this point, party solidarity has to to prevail.
If the left ministers in the caucus have the courage to defy Iemma and Costa and lead the fight in the caucus to ditch the privatisation, they will redeem themselves mightily in the eyes of the labour movement and caucus will probably go the right way.
Whatever happens in caucus, and subsequently in the parliament, the anti-privatisation majority of the administrative committee should steel themselves to take the necessary organisational steps against any Labor MP who votes for the privatisation in the parliament in those circumstance.
The spectre being raised by some supporters of Iemma is the precedent of the Labor Party forcing Labor policy on Premier Vince Gair in the 1950s. In the subsequent split, Gair’s breakaway retained a large number of Labor seats, but that’s unlikely to happen in the current circumstances in NSW.
The Iemma government is in deep trouble anyway, and the privatisation is overwhelmingly unpopular with the voters. The appropriate analogies are the split over conscription, the Lang split and the split with the Groupers in states other than Queensland in the 1950s, in which Labor lost government but wiped out the breakaways. That would also happen in NSW.
It need not come to that kind of split if Iemma gets wise counsel not to defy the Labor Party, or if the left ministers defy Iemma and rally a majority in the caucus.
The left ministers are actually in the situation that the only way they may prevent a split is to defy Iemma and Costa, and Costa is reported to have indicated that he intends to leave politics soon, in any case.
In Labor politics, as in politics generally, nothing is ever certain. Lots of permutations are possible, but in my view the only thing to fear is fear itself and the fight for proper Labor policies is more important than any personal considerations.