Reading this Wall Street Journal story, you’d never know there’s any downside to a government selling off public services to private companies.
Australia and New Zealand are selling off utilities and ports, while considering selling off health insurance companies, the postal service, and student loans.
Ought to be controversial, no? Not to the WSJ:
Their privatization sprees have injected needed cash into government coffers and freed the governments to focus on their core missions while injecting life into both nations’ markets.
Needed cash? I suppose all cash is needed, but know that Australia is only now—possibly—heading into a recession for the first time in two decades. Its net government debt is one of the lowest in the world, at just 11.7 percent of GDP, or about one-sixth of ours.
Australia’s not strapped.
More important, the WSJ talks only to the folks who will make money carving off public assets. Here’s a Deutsche Bank executive (emphasis mine):
“We’ve seen in New Zealand, where the government realizes they are not the best commercial owners of certain assets, privatizations help the development of capital markets in terms of liquidity by attracting greater offshore and domestic participation and encouraging other unrelated listings,” he said.
Here’s an Aussie asset manager:
“The market is positively disposed to privatizations, with the main reason being that businesses often achieve better returns when they’re no longer being managed by governments”…
And a pro-privatization local government treasurer:
The sale or lease of targeted state-owned assets allows the government to focus on core services such as hospitals, transport and schools”…
Where’s the context about the serious potential downsides of privatization or the quotes from union officials or other possible opponents? There is none.
The problem, of course, is that public assets like toll roads, airports and rail systems tend to be monopolies or quasi-monopolies. Any potential benefits of competition are extremely hard or impossible to get. All too often what ends up happening is the government effectively sells its birthright for a pot of stew. It takes short-term gain at the expense of long-term loss—which is why, along with campaign donations, that politicians are so fond of privatization.
In Australia, the privatization of Sydney Airport has not gone particularly well, for instance, which is one reason why Australian voters oppose privatization of public services by a nearly three-to-one margin in one poll.
For Australia, selling off its public utilities may not be the best idea. Here in the U.S., government-run utilities on average charge consumers much less for their energy than private-run ones do.
When a public’s representatives are busying themselves selling off public assets to private investors against popular will, you can’t just print what reads like a press release for Wall Street and the glories of neoliberalism.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum. Tags: Australia, context, privatization, The Wall Street Journal, utilities