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AUSTRALIAN
MARXIST
REVIEW

Journal of the Communist Party of Australia

ISSUE 41NOVEMBER 1999

Hands Off the People’s Property

These notes were originally published in kit form by the Communist Party of Australia to assist the anti-privatisation struggles of trade unions and community organisations.

Some brief facts about the history of public ownership in Australia

There is a popular belief that the Labor Party was the first to establish public enterprises in Australia. This is false. From 1788 to 1821 the Governor of the Australian colonies was the main employer in the community.

The development of railways, for example, was carried out by governments, even though in NSW a private company was originally given assistance to do so. It failed.

This NSW private company was largely responsible for the building of different gauge railways in Australia.

A conservative government of Victoria also encouraged private ownership of some railway lines but they failed and the task of building railways was resumed by the government.

The Labor Party and public ownership

When the Labor Party was formed in 1891 (more than 100 years after colonisation), it endorsed public ownership and expanded it.

However, it did so not out of any socialist convictions, but because private enterprise did not have the capital and was incapable of running large infrastructure projects such as roads, transport, shipping, education, port construction and communications.

The Labor Party’s objective was to build Australia into an independent capitalist state and the only economic and political forces capable of doing so were the various governments which were able to enlist the necessary capital and expertise.

It was with the same objective in mind that the Playford Liberal Government of SA established the Electricity Trust of South Australia (ETSA), because the up-to-then privately owned electricity generating company was incapable of providing the power necessary for the post-war industrial development of SA.

Commonwealth Bank

Although the Commonwealth Bank has been supported as the “people’s bank”, in practice it has operated in much the same way as privately owned banks and always had representatives of big business on its board.

In 1924 the Bruce-Page Government amended the Commonwealth Bank Act to ensure that a majority of the directors must be “persons who are or have been actively engaged in agriculture, commerce or industry”.

Its Board of Directors is now made up of a majority of persons connected with finance and big business with a token representative of the trade union movement.

The Commonwealth government provided the postal services and telecommunications (formerly the PMG, now Australia Post and Telecom), air services with Qantas and Australian Airline.

Australian National Line

The Australian National Line of ships, originally called the Austral Line, was established by the Labor Government of W M Hughes in 1916 because of the domination of Australia’s export and import trade by the British controlled Conference shipping companies.

This shipping line was scuttled by the Bruce-Page Liberal Government in 1927 but was re-established as the ANL in 1956. It has again been run down and is in the process of being scuttled a second time, but on this occasion, by a Labor government.

Government enterprises were established in ship repair work (Cockatoo Island Dockyard, Walsh Island and Williamstown Dock yard), in clothing manufacture (Commonwealth Woollen Mills and Clothing Factory), in oil refining (Commonwealth Oil Refinery), etc.

State government enterprises

State governments have also established government enterprises: state banks and insurance offices, port authorities, electricity supply, state butcheries and saw mills.

The real objective of Labor governments was expressed in a Queensland State Government statement made in 1918. It said:

Where the Government has entered into the arena of trade, the object has not been to secure monopoly or to squeeze out of business legitimate private traders, but to protect the public by competing with the latter on fair and efficient lines.1

Despite these limited objectives public enterprises have played a significant part in the industrial development of Australia and, in many examples, have demonstrated their superiority over private enterprise.

They have often offered cheaper prices and more efficient services making a lie out of the charge of “inefficiency”. The widespread development of public enterprises showed that Australia’s industrial development would not have taken place if left to private enterprise.

The left has always supported public enterprise as a preferred form of ownership of key economic enterprises.

Publicly owned enterprises are potentially more democratic, have been proven efficient and economically viable in most cases, allow the possibility of greater economic planning and vest control of the economy in the hands of elected governments rather than unelected and, in many cases, unseen and unknown overseas shareholders.

Before they were corporatised and instructed to give priority to “commercial” objectives, they were able to address the needs of people and better serve social goals.2

Serving social needs

The Commonwealth Bank, Telecom and Australia Post (and their predecessors) and other government enterprises and services were expected to meet certain social objectives.

For example, the requirement to provide a universal mail service at uniform rates had social equity goals. It involved cross-subsidisation of services, with cheaper services subsidising more expensive ones.

In telecommunications, rates did vary according to distance, but there was still considerable cross-subsidisation with many services being provided below cost.

Social objectives

The Commonwealth and State Banks were expected to meet certain social objectives (e.g. to keep costs down and to provide affordable housing loans).

This emphasis on social and equity goals (through such means as cross-subsidisation) has, in the case of Telecom, been outlawed. It is also being phased out in Australia Post.

The priority of these corporatised and partially privatised (so far privatised through private competitors taking over much of their work) services is now profit and more profit.

The change in the obligations of public enterprises is well illustrated in the annual reports of Australia Post as the concepts of “commercialisation” have been imposed on public enterprises by State and Federal governments, irrespective of whether they are Liberal or Labor.

Australia Post’s 1985-86 annual report listed as its first objective “to operate Australia’s postal services so as to best meet the social, industrial and commercial needs of the Australian people.”

Second came its obligation to “raise sufficient revenue to cover operating expenditure and to fund at least half of its capital expenditure.”

In 1989 Australia Post was corporatised and these priorities were reversed.

Its 1992-93 annual report listed its obligations as “sound commercial practice, provision of a universal standard letter service, provision of service on an equitable basis”, and finally, the “social, industrial and commercial needs of the Australian community.”

Equal performance

Australia Post’s 1994 annual report boasts:

In financial terms, the Corporation achieves a profit per formance equal to the best of private sector enterprises.

In 1985 postal revenue was $1,211 million. This more than doubled by 1994 when it stood at $2,568 million. In the same period the number of full-time Australia Post employees fell by 3,081 — from 34,211 to only 31,130.

The advantages of public ownership

In our society, public ownership of an enterprise, facility or institution, means ownership by a government on behalf of all the people.

This is an alternative to ownership by an individual or a number of shareholders, that is, private ownership.

Whether public enterprises serve the interests of the people, or the interests of private enterprise, is determined by the democratic struggles of the people and the political and economic policies of governments.

Profitable publicly-owned enterprises are a source of government revenue. Public ownership has provided over many decades, necessary services such as education, health, transport, etc.

Capital costs have been met by governments although on many occasions private capital is accumulated for government use by way of the sale of government bonds on which interest is paid. Employees and managers are paid by the government.

Some services by their very nature cannot be profitable at the same time as meeting universal provision and equity goals.

In such cases the cost of these essential services is met from government revenues — education, for example. Public transport facilities, such as railways, have been subsidised but are an essential public service.

Private enterprise, being motivated solely by the profit motive and operating on a “user pays” basis, cannot offer the same quality of service or provide them on the basis of universality and equity.

PAYE, company taxation and other forms of tax, help fund the public sector. With a progressive taxation system, the bigger earners pay more.

Statutory authorities, (such as Ombudsmen) accountable to parliaments are usually available to the public in the event of complaints or disagreements about the level and nature of the services provided by public hospitals, education bodies and transport systems, for example.

The finances of statutory bodies are regularly investigated and reported on by the Auditor-General or a Public Accounts Committee.

On the other hand, private companies, such as a private hospital corporation, are not accountable to the public or to parliament and any complaints can only be taken up by recourse to the courts which is lengthy and costly and usually beyond the means of the ordinary citizen.

Trade union membership is usually higher in the public sector and public sector working conditions have in the main been in advance of those in the private sector.

Public ownership can open the way for worker representation on management boards, allowing more democratic forms of management.

The expansion of public ownership can weaken private capital ownership and control of the economy. Control of key sectors of the economy can give the government greater control over the economy as a whole, making forms of economic and social planning possible.

Successful publicly-owned enterprises show by example that an alternative form of ownership is available and is capable of providing better services at lower charges than could be provided by privately-owned enterprises.

A largely privately-owned economy places great power in the hands of the unelected private owners who are not accountable to the community and are in a position to sabotage the economy in times of political struggle and can exercise control over popularly elected bodies and, by pressure, determine their policies.

How privatisation is being introduced

Privatisation means the transfer of ownership or operation of an enterprise, facility, institution or service from the public sector to the private sector.

This is being carried out by both Liberal and Labor governments in various ways.

Outright sale

The assets of publicly-owned enterprises such as buildings, machinery, market access, intellectual property (research knowledge), are being sold off in whole or in part, to already existing private companies or are being turned into private companies with shareholders — the shares being sold on stock exchanges.

When this happens they cease to be the property of the public (through the government) and become the property of the private shareholders.

Contracting out and outsourcing

Increasingly, various aspects of public enterprises and institutions are obtaining goods and services through contracts let to private sector providers instead of the work being performed by the department.

Examples include school cleaning; hospital services (Xrays, pathology, catering), in the defence area, (training, catering), legal services, printing, data banks and other information technology services.

Many government departments are encouraging their professionals to set up their own businesses and then contract their services back to the same government department which formerly employed them.

Government is spending about $3 billion a year on contracting out, that is, buying information technology services from private companies, not to mention other services and goods previously supplied by government enterprises, institutions and services.

Public subsidy of private enterprise

This frequently occurs with the private development of public infrastructure, in which tax concessions are given to the private developer.

In many privately developed public infrastructure projects, the private developers contribute little, obtaining subsidies or cheap loans from government revenues, but receive the revenues earned by the project.

NSW taxpayers will pay $4 billion for the so-called "private sector funding" of the Sydney Harbour tunnel.

With little risk to itself, the private Sydney Harbour Tunnel Company obtained an interest-free loan of $223 million from the NSW Government. The Government will lose $1.15 billion in interest on this loan over time.

This is a classical example of the way by which governments transfer public revenue to the private sector, thereby, robbing the public of the benefits of the resources it provides to governments through taxation.

The trend is shown by the following figures:

  • Public infrastructure investment has fallen from 9 per cent of GDP in the 1960s to 5.5 per cent of GDP at the end of the 1980s. It is now the lowest in 40 years.
  • Federal government capital grants and advances to the States have also fallen from $6.79 billion in 1975-76 to $2.2 billion in 1989-90.

De-regulation and competition

Governments are deliberately fostering private enterprises in particular areas in which strong public enterprises already exist.

An example is the creation of Optus in the telecommunications field to compete against Telecom. To facilitate Optus, the Government forced Telecom to grant favourable concessions to Optus. If it were not for these concessions granted to Optus it would not have been able to survive.

In NSW the State Government is facilitating the building of privately owned hospitals on the same grounds on which public hospitals already exist. The obvious intention is to ultimately eliminate public hospitals altogether and turn the public hospitals over to private ownership.

Another aspect of the breakdown of government services and responsibility is the policy of deregulation.

Health, food, safety and cultural standards, which were subject to government regulation and inspection have been undermined.

These regulations and controls had been introduced, not to do away with private enterprise, but to limit the damaging social and political consequences of unbridled exploitation, planlessness, incompetence, lack of safety and health measures and other anti-social policies of capitalism.

Deregulation means that these responsibilities are handed over to companies under a policy of “self-regulation”.

In practice these necessary standards are subject to the priority of profit and are being increasingly ignored.

Corporatisation

Whereas a public enterprise supplies goods and services to the public on the basis of need, universality and equity, a corporatised enterprise, even if it remains publicly owned, operates on a profit-and-loss basis.

Unprofitable sections of the enterprise are either cut out, greatly pruned, or their services made available on a user-pays basis. Corporatisation is often the first step towards the privatisation of a publicly-owned enterprise

How governments attempt to justifythe destruction of public enterprises

Freedom and choice

These catch-cries are widely used by politicians and business leaders to justify their assertions that public ownership restricts the “choice” available to the people and that only private enterprise provides the opportunity for the free expression of the individual.

Essentially, capitalist freedom means the freedom of a private capitalist to exploit the labour of other members of society.

Breaking up monopolies by competition

It is claimed that competition will lead to efficiency and better services at cheaper prices for the community. However, these claims are made mainly when referring to the public sector.

Monopolies have existed for years in the private sector such as in steel.

In other fields in which several large private companies exist, price fixing cartels have been established and little has been done to break up such anti-social, price-fixing agreements.

The call for competition which is directed specifically against public enterprises has the objective of weakening public sector enterprises or eliminating them altogether.

In practice competition leads inevitably to the re-creation of monopolies as the weaker enterprises are taken over or are bankrupted.

Efficiency

It is implied that public enterprises are, by that very fact, inefficient, while private enterprises are efficient. This claim is repeated time and again in the mass media which is, apart from the ABC and SBS, privately owned.

This claim is not true. It cannot be claimed with any justification that publicly-owned enterprises such as Qantas, Australian Airlines, Telstra, electricity and gas suppliers, public schools, universities, water and sewerage suppliers, government departments which provide many services, or the Commonwealth Bank when it was a publicly-owned bank, are inefficient.

This is not to say that there are no instances of inefficiency.

Many private enterprises are also efficient but there are other examples of big businesses being bankrupted as a result of inefficiency or corruption.

Profitability

It is argued that public enterprises are not profitable whereas private enterprises are. This is also untrue.

In the past, enterprises such as Telecom (now Telstra), Qantas, Commonwealth Bank and Government Insurance Offices have paid millions in dividends and taxes into government coffers.

In some cases, governments are required to provide essential services in inevitably unprofitable areas — areas which private enterprises refuse to undertake because they are unprofitable.

Cheaper prices

It is argued that competition and private enterprise lead to lower prices. Overseas experience shows that it is not true. In Britain, water prices rose by 55 per cent in the first four years after privatisation.

Competition that might exist is soon replaced by private monopolies and collusive price fixing. New layers of profit-making are proliferating in the railways.

Private profits are being made on the maintenance of rolling stock, ticket machines are serviced by another private company for profit, security on trains is provided by a private company for profit, printing of tickets by another private outfit, etc, etc.

All these layers of profit will be built into the cost of a train ride.

Public enterprises sold off cheaply

It is claimed that if existing public enterprises are sold off, governments will then have funds to reduce their deficits, thereby balancing their budgets. At best, this can only be a short-term gain.

The sell-off of existing public enterprises is taking place by lowering the sale price of the government assets as the profit needs of private companies demand that they buy cheaply.

Private companies have to pay company taxes and other charges whereas public enterprises are exempt from many of these taxes and charges.

This is another reason why private companies demand a low price when buying a publicly-owned asset.

On the other hand, when selling to the government, private enterprise charges the highest price.3

Reducing the Budget deficit

The implication is that budget deficits are inherently bad.

Budget deficits can arise because of heavy social welfare expenditure (pensions, unemployment benefits), provision of other necessary services and building infrastructure projects from which revenues will flow in subsequent years.

Given that public enterprises generally provide budget income for governments, the loss of income has to be weighed against any capital gain.

To meet these expenditures, there are better ways to raise revenue than by selling the farm. For example, by increasing taxes on big corporations and the wealthy, by eliminating tax avoidance and by job creation which increases tax revenue and eliminates unemployment payouts.

Reducing the National Debt

Money from the sale of public enterprises can be used to reduce the national debt but it is short-sighted and overlooks the fact that the greater part of the national debt has been incurred by private enterprise borrowers.

The overall growth of the economy, the expansion of public enterprise rather than its restriction and a more equitable taxation system which takes revenue from those with wealth is a better way to reduce the national debt.

The myth of people’s capitalism

By spreading the number of shareholders in a private company, it is claimed that this makes the company more democratic.

By heavily promoted campaigns many people have been persuaded to buy shares in the Commonwealth Bank, government insurance companies, and other enterprises being privatised.

A similar campaign is to be launched to sell off the remainder of Qantas. This was also used as a justification to privatise the NRMA.

It is asserted that a company with many shareholders turns a monopoly into a democratic economic organisation — people’s capitalism. This is an illusion.

Votes in companies are based on the number of shares held. There is no such thing as one shareholder one vote.

Share-holdings of as little as 15 to 20 per cent of the total shares are all that is needed to control the election of the board of directors and hence, the direction of the company.

Furthermore, meetings of shareholders usually only take place once a year which means that shareholders have no say whatever in the day to day running of a company.

None of the arguments used to justify privatisation hold water. They are used to obscure the real objective which is to hand every possible aspect of the economy over to private capital in the era of the transnational corporations. It is they, and they alone, which stand to gain from privatisation.

They fear even the limited existence of public ownership.

Just so long as it exists, it remains as an example of an alternative and better and more democratic form of owning property.

Furthermore, it excludes some areas of the economy from their control and from the making of profits which could go into their pockets.

What the privateers don’t tell you

Privatisation and corporatisation in readiness for privatisation, mean thousands and thousands of job losses. A few examples of job cuts:

  • Since 1988 in NSW, the Sydney Water Board has shed 3,300 jobs, State Rail 21,000, electricity generation 10,000 and State Transit 3,200 jobs.
  • Telecom cut 20,000 in NSW in the 1985-95 decade. Over 20,000 jobs will be lost with the proposed partial sale of Telstra.
  • Victoria’s State Electricity sacked 12,000 since 1990 and Melbourne Water cut 46 per cent (2,315 jobs).
  • South Australian TAB cut 41 per cent (227) in the last three years while revenues rose seven per cent.
  • Port of Melbourne Authority cut 385, Roads Corporation 1,773, Gas & Fuel Corporation of Victoria 1,202.

TNC dictatorship

We are living in the era of the transnational corporations, of globalisation and internationalisation of production.

Associated with these developments is the destruction of the sovereignty of nations, the welfare services of the state and popular democracy.

“Rolling back the state” is the expression used by the Organisation for Economic Co-operation and Development, the think-tank of the TNCs.

Radical changes are underway in the functioning, financing, role and purpose of governments in Australia and around the world.

Unless stopped, we are entering an era of TNC dictatorship.

From the perspective of the TNCs, the differing state taxation laws, customs regulations, health, safety and environmental standards, corporate laws, accounting requirements and legal systems are barriers to their “free” operation.

They hinder their demands for the highest possible profits.

That is why, on their behalf, the OECD calls for the “rolling back of the state”. It means the elimination of these barriers.

Sovereignty surrendered

Already, many governments have surrendered aspects of the sovereignty of their nations by joining such organisations as the European Union, NAFTA and other trade blocs.

The Australian Government’s vision for APEC is not just one of free trade, but of military and political co-operation in the interests of the most powerful economies and countries in which the TNCs rule.

Overall supervision will be provided by the World Trade Organisation, arising out of the GATT agreement.

TNCs not accountable

Behind the European Union, NAFTA, APEC, the World Bank, the IMF and now, the World Trade Organisation, stand the TNCs whose interests they serve.

These bodies are not accountable to the people of any state and their activities are out of the control of any democratic institution. Their controlling bodies are not elected democratically.

The TNCs doubled their combined revenues between 1982 and 1992 from US$$3 trillion to $5.9 trillion.

Their share of global GDP rose from 24.2 per cent to 26.8 per cent in this ten year period.

The policies of the government of Australia and other countries have facilitated the growth of the TNCs and their considerable domination and internationalisation of economic life.

Privatisation and the lifting or easing of restrictions on foreign investment, deregulation of the financial sector and other liberalisation measures are further strengthening the grip of the TNCs.

Imperialism

The investment of capital in a foreign country, the exploitation of its labour and resources and control over its government are the hallmarks of imperialism and the domination of one country by another.

Far from imperialism having ended, it has been greatly strengthened by the actions of many governments which are prepared to bow to the dictates of foreign capital and betray the national interests, the independence and sovereignty, of their own countries.

Public ownership — barrier to TNCs

A barrier in the way of the TNC objectives is the existence of publicly-owned enterprises, utilities, institutions and services.

In the previous period, postal services, telecommunications, electricity supplies, water, sewerage, housing, port facilities, central banking and a number of others were accepted as state functions — to be conducted, none-the-less, in the overall interests of the monopolies.

It was also accepted that the state provided a number of welfare services.

The vast growth in the wealth and power of the TNCs has made it possible and desirable for the TNCs to take over public enterprises singly or in TNC joint ventures.

The TNCs now want to control these strategic infrastructure enterprises and utilities themselves. Hence the attack on the public sector and the various regulatory functions of the state.

However, governments are not “rolling back the state” when it comes to suppressing workers’ struggles or equipping and training the military.

Private sector policing

But the private sector is also moving into these areas.

There are more than double the number of people employed by the private sector than by the public sector, to carry out policing and security functions.

Even public sector agencies, such as the NSW police, are receiving corporate sponsorship.

In the past the state exercised substantial controls over the financial sector through state bank regulations and control over currency exchange and interest rates.

Many of these controls have been abandoned as the financial sector was handed over to the “market forces”.

Hence the privatisation of the Commonwealth Bank and various state banks.

Although not yet privatised, the Reserve Bank Board is made up predominantly of representatives of the corporate sector and its operations are becoming more and more independent of government.

For national independence, democracy and public ownership

The CPA opposes the present privatisation drive by both Labor and Liberal governments and calls for the extension of public owner ship, not its restriction or elimination.

The CPA’s Program says:

To achieve planned, balanced, crisis-free economic development, all existing enterprises above a certain size in manufacturing, building, resources, transport, finance, commerce, energy production, mining, the media and communications would be taken over by the government, together with the working people and conducted as publicly-owned enterprises.

The capital needs of publicly-owned enterprises would come from the accumulated profits of such enterprises, from taxation, through government loan raisings and from funds contributed by the public.

Public ownership of industry and resources, their democratic control and comprehensive planned development which must necessarily take into account environmental factors, is the basis for the satisfaction of the justified demands of workers and environmentalists and the future needs of all humanity.

The CPA is for the preservation of the independence and sove reignty of Australia with governments whose first priority is the interests of the people of Australia and not the demands of the TNCs.

Independence and sovereignty are not inconsistent with international co-operation based on the mutual benefit of co-operating countries when entered into on an equal basis.

The CPA is for the maintenance and extension of democratic rights in the economy and in the political field.

The present situation calls for worker participation in manage ment of enterprises, the preservation of public enterprise as a potentially more democratic form of ownership and worker control over health and safety conditions of work.

The CPA is against the sacrifice by governments of the power to determine, regulate and control all aspects of the economy and political life in the interests of the people. The CPA is against TNC dictatorship.

  1. From a pamphlet called Socialism at Work, page 5, published by the Government Printer, Brisbane, 1918.
  2. Acknowledgments to The Story of Government Enterprise in Australia by L Sharkey and E W Campbell, published by the Communist Party of Australia, 1945.
  3. See Journal of Australian Political Economy, Number 34, December 1994 “Privatisation: A Re-Assessment” by R G Walker.

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