Neoliberalism, corruption, incompetence, STATE OF DYSFUNCTION!

by Apr 21, 2023All Articles

THABO BESTER NOT ONLY escaped from a privately owned, G4S prison; they neglected to tell us about it for nearly a year. In fact, they only “remembered” when GroundUp unearthed the story. In the UK, in 1989, Margaret Thatcher’s Conservative Party privatised the supply of water. Since then, privatised water companies have paid out billions in dividends to their shareholders while failing to spend money needed for maintenance. The result? Sewage is now being pumped out into rivers and into the sea. Not just every now and again. On average 825 times a day in 2022.

What do these apparently different scenarios have in common? They are the result of privatisation. And, more than any other single factor, it is privatisation that has degraded public services in South Africa and created the current state of dysfunction.

There used to be public services

We live in a world in which it is very common to ridicule the public sector. It is characterised as both incompetent and corrupt. We are fed this story day in and day out, on radio talk shows, on social media, on TV. And when you’re fed a story consistently enough, you tend to believe it. Marx had a way of putting this – “the dominant ideology of every society is the ideology of the dominant class”. In other words, the owning class will tell stories that are in their interests, regardless of what may be factually accurate.

So what is factually accurate? There are those of us who are old enough to remember a time when municipalities had roads departments; public works departments. They employed people themselves to do the work that needed to be done. They may or may not have been efficiently run. (We shouldn’t forget that not all companies are efficiently run. In fact, 5,226 companies were liquidated in South Africa in 2019 alone). But, efficiently run or not, they fixed the roads. And they maintained the water and sewage systems. And they didn’t pay anybody any dividends either.  So there was no leak from the system as British and American shareholders lined their pockets with dividends from our broken infrastructure.

Why has Eskom failed?

Kusile’s broken chimney. We see the broken Eskom now. But how did this happen? Part of the answer is that the capacity of Eskom has been consciously undermined.

Let’s take Eskom as a case in point. Everybody knows the story of Eskom. It’s a state-owned entity that has failed dramatically. The evidence is not far away from any of us. Loadshedding is hardly an indication of success. And we know why Eskom has failed, because we hear it and read it every day – it has failed because it is owned by the state. Nothing that is owned by the state works properly. Look at SAA. Look at Transnet. The state should get out of the business of trying to run things. Its proper job is to provide an environment that is helpful for private enterprise to do this work. After all, they are the ones who know how to do stuff. Civil servants and politicians just make it all worse.

So with Eskom the answer is simple. Privatise whatever parts of it you can –the parts that can be run profitably. Strip out the role of the state until it is only performing the tasks that private capital is not interested in. At the moment that’s a baseload power generation and the transmission system. After all, companies can’t make money from generating power unless there is a grid to transmit it. But it’s unprofitable so the job belongs to the state. This is the system we sometimes call neoliberalism. The stories that buttress it are its ideological foundation.

Eskom’s manufactured collapse

And sometimes stories need to be manufactured. Worth doing if the result is profitable enough. We see the broken Eskom now. But how did this happen? Part of the answer is that the capacity of Eskom has been consciously undermined. The investment that was needed 25 years ago never happened. It wasn’t Eskom’s inefficiency. Eskom’s management repeatedly warned the government that new power stations needed to be built to meet the growing demand for electricity.

So it was the government that gave us GEAR that failed to invest. This was the government that vigorously promoted privatisation. And of course, GEAR advocated the partial privatisation of Eskom: “Eskom should be restructured to operate on a more commercial basis, with parts of the business opened up to private investment.” It specified generation as the function suitable for this privatisation. And it is the generation that has collapsed, as we know only too well.

And it is generation that has collapsed, as we know only too well. When we talk to workers from Eskom power stations, they speak of deliberate underfunding of maintenance. Maintenance windows dramatically shortened. Budgets cut. Substandard spares.

There is no other way to look at it – Eskom power generation capacity has been consciously degraded. It has been deprived of investment, from the Mbeki government onwards.

Privatisation drives collapse

Here in South Africa we see a state which fails to function at the most basic level. It fails to provide water, electricity, functioning sewage systems – the most fundamental utilities. But this is not an accident. And it’s not simply because of corruption. It is the result of a conscious strategy to undermine the public provision of services.

On the face of it, that doesn’t seem to make sense. Why would the government deliberately underfund such a crucial utility? Part of the answer of course lies with so-called fiscal austerity. Reduce government spending and debt levels at all costs. And the costs have been immense.

But when faced with a situation in which people seem to be operating against their own interests, it is useful to see who benefits. And we don’t have far to look. The story of the incompetence and corruption of Eskom has led us to the Independent Power Producers – the profit-making companies becoming the key generators of the next generation of power – wind and solar. And they are not just profit-making companies. Their profits are guaranteed.

Privatisation has been at least in theory opposed by trade unions and community organisations since GEAR. But now privatisation becomes a much more sellable deal. Anything but Eskom is the mantra. Those opposing it become more isolated voices. The line between a destroyed Eskom and the profits of IPPs is clear.

So these politicians, and the private capital they represent, want to open up what have been public services to private investment. They will derive long-term benefit from the degradation of those public services.

But privatisation has failed

And it’s not as though there aren’t enough examples in the world of the failures of privatisation:

  • UK Railways: in the 1990s, the UK government privatised the country’s railway system. This led to the fragmentation of the industry and the creation of multiple private train operating companies. This has resulted in higher fares for passengers (a 40% increase between 2008 and 2018), poor service quality, and safety concerns. And, of course, profits for the companies – an estimated £3.3 billion in those same years 2008 to 2018.
  • Water Privatisation in Bolivia: in 2000, the Bolivian government privatised the water system in the city of Cochabamba, handing control to a foreign consortium. Privatisation led to steep price increases for water. This sparked protests and social unrest. The privatisation was eventually reversed after widespread public opposition.
  • California Electricity Crisis: in the late 1990s and early 2000s, California deregulated its electricity market and allowed private companies to compete with the state’s utilities. This led to a crisis in 2000-2001: the price of electricity in that year increased by an average of 33% for residential customers and 48% for commercial customers.
  • Privatisation of prisons in the US: in recent decades, many states in the US have privatised their prison systems, allowing private companies to run the prisons. This has created a profit motive for mass incarceration and has resulted in poor conditions for prisoners. These include overcrowding, violence, and lack of access to healthcare. But there is an upside – it has generated $3.3 billion in profits for the two largest private prison companies in the US, CoreCivic and GEO Group. GEO group also runs prisons in Australia, Canada, UK, New Zealand and South Korea. And of course in South Africa – it has run the Kutama Sinthumule Correctional Centre since 2005.

We could go on. But the real story, the more factual story, is becoming clearer.

Take back the public sector

Here in South Africa, we see a state which fails to function at the most basic level. It fails to provide water, electricity, functioning sewage systems – the most fundamental utilities. But this is not an accident. And it’s not simply because of corruption. It is the result of a conscious strategy to undermine the public provision of services.

The results are there for all of us to see: privatised services are more expensive and lower quality. They employ less people to deliver these degraded services, so they cost large numbers of jobs. And private companies make big profits from providing them. Anybody who can afford to buy private services to substitute for the dysfunctional public ones – education, health, security, and now electricity.

And the contracts for these outsourced services provide almost infinite opportunities for corruption. The message is clear. A privatised and privatising state is a dysfunctional one. It’s time we all realised that and started fighting vigorously to reverse this strategy.

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