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Issue #1477      20 October 2010

Capitalism worn out (Part 2)

The privatisation agenda

Anatoly Kaletsky, editor-at-large of The Times magazine put forward what he calls a new version of capitalism in an article entitled “Old certainties are worn out”. It was published in the The Australian Financial Review (10-09-2010). In the article he stated that “States can no longer satisfy an advanced society’s complex demands for health care, education and personalised retirement planning.” In part one of this two-part series, the reasons he gave for his telling indictment of capitalism were analysed. This week, the real reasons for his claims and the agenda behind his article are examined.

Kaletsky’s reference to health, pensions and education as constituting the “commanding heights of the future economy” exposes the real reason he is promoting the withdrawal of the state from these areas.

Countries such as the US, UK and Australia lost much of their former industrial base following the lifting of tariffs under World Trade Organisation (and GATT) trade liberalisation treaties. They cannot compete with China, India and other third world countries in the area of manufactured goods. Their agricultural sectors also have suffered. They are looking for new avenues of investment and profit generation.

Privatisation of pension savings through such schemes as superannuation funds has not only provided the finance sector with a steady stream of profits (management fees, etc) but increased its power with the large and ever-increasing capital base at its disposal to invest and speculate with. They are on a great wicket - the profits are theirs and the risks, as seen in the financial crisis, are taken by workers whose savings they exploit.

Health and education are two essential services which offer new opportunities for private profit-making. Those who can afford it will be able to purchase the highest quality services, and those on low incomes will be condemned to sub-standard services.

Repackaged neo-liberalism

Kaletsky is nothing more than an apologist for neo-liberalism. He is using the present crisis to push for the next steps in the neo-liberal agenda. Government pensions are already well on the way to privatisation through individual retirement schemes, such as superannuation in Australia.

The neo-liberal agenda, as it relates to social policy, is centred on privatisation. State and federal governments have over the past two to three decades been gradually privatising public services and government enterprises. Some privatisations have been more obvious such as the sell-off of Telstra, the Commonwealth Bank, state insurance offices, energy, water, ports and the contracting out of public transport.

In other areas the process has been more gradual (and not always noticed), such as partial privatisation of unemployment services, corrective services, postal services, public housing, policing, local government and hospital services by such means as contracting out, public private partnerships (PPPs) and pitting the public sector in competition with private enterprise.

Privatisation by stealth

An ongoing ideological war has seen opposition to privatisation whittled down. The barriers between private and public have been blurred by the gradual phasing in of private sector involvement.

The process of privatising education began at the tertiary level, then TAFE, with the introduction of fees and the extension of government subsidies including HECS to the private sector. The aim of the federal government’s “education revolution” is to put public and private schools on an identical footing in relation to governance, hiring of staff, determination of salaries and working conditions and state funding. Public schools will be independent, free to charge fees and state governments will be able to sell them to private corporations.

A similar process is taking place in the public hospital system. The government is working towards an “output” (procedures and tests carried out) model as the basis of funding which could be extended to all hospitals – public and private. Its hospital reforms are also setting up public hospitals to fail and mechanisms are being put in place to measure performance. Their “failure” will be addressed by privatisation.

The privatisation process, so far by stealth, will have to be out in the open when schools or hospitals are sold off. This is where Kaletsky’s agenda comes into play. His role is to provide the “justification” for the state to withdraw from these areas.

The fundamentalists of the neo-liberal doctrine are working towards a model where income taxes (company and personal) are wound back and possibly even abolished. Governments would rely on indirect taxes such as the regressive GST which the corporations do not pay. They would continue to subsidise private enterprise and carry out remaining functions such as governance, law and order, industrial relations and the military.


No more “paternalism” or “nanny state”. Individuals would be expected to be “self-reliant”, to fund through special savings schemes their own education, health care, and income during unemployment, sickness and retirement. These schemes would be similar to the compulsory superannuation guarantee scheme which has the aim of eventually phasing out the age pension. Those on low incomes would receive government contributions to their savings schemes, as occurs now with superannuation, to help boost them.

As government withdraws from its role in social security the philanthropists (church and private) and corporate sponsors will move in to provide a “safety net” and take over essential services.

Fundamental principles that underlie the responsibilities of the state for such things as social security, the relationship between state and church, and public ownership of basic utilities have been rolled back. The trade union movement, under social democrat leadership, abandoned its opposition to privatisation and failed to give various movements against these developments the support they needed.

The ideological war that weakened resistance to and awareness of the privatisation process continues, preparing the way for the next stage – what Kaletsky calls Capitalism 4.0.

Kaletsky hides behind claims about ageing populations, health and education taking up too large a percentage of budget spending. At the same time he does not reject the role of governments and central banks in taking measures to bail out or bring stability to the capitalist system. Central banks will be expected to intervene, as they do now, to contain inflation within certain limits.

Kaletsky’s article serves the purpose of laying the ground work for the next steps in education and health “reforms”, selling an idea which is politically and socially unacceptable to the majority of the population. Watch for more Kaletskys as the ride on the economic and financial crisis to push their neo-liberal privatisation barrow under new guises. 

Next article – FBI raids activists’ homes in sinister COINTELPRO replay

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