Private Enterprise and the National Good
By LARRY ROMANOFF – October 09, 2020
It needs to be said that there are greater values in life than economic efficiency and unregulated capitalism. Many things we do are decided not by economics but by our social and personal values, and are done for human reasons unrelated to economics or profit. If our activities were restricted to economics we would never have a host of things that are perhaps economically deficient but useful, beautiful, or just fun. A nation's physical and social infrastructure are not primarily, nor in most cases even minimally, commercial undertakings, nor should they be. The generation of electricity, provision of universal communications, an efficient transportation system, are constructed for the national good, and this is even more true for social elements like education, health care and a social security system. All of these and more are fundamental necessities for the well-being of a nation and its people, undertaken not to enrich a few elites but to benefit the population. These, like national defense, are basic responsibilities of a national government, and should in no sense be viewed as commercial opportunities for greedy predators. Having a Goldman Sachs or a Blackstone saying, "Hey, we could make billions from that", is not a reason to let them do it.
American proponents of infrastructure privatisation try to make the case that the profit motive - in other words, greed - will somehow always produce the best result, but that result is inevitably the best for only a small handful of people while 99% of the population and the country's well-being suffer proportionately. The correct measure of a nation's physical and social infrastructure is public utility, not profitability. The measure of a nation's health care system is the increasing overall health and well-being of the people, not the amount of profit a Blackstone or Carlyle can make from owning the hospitals. And to fulfill the responsibility for public utility, the very design of all infrastructure must stem solely from the fundamental priorities of the nation and the needs of its people, not from the greed of financiers. This is not a small point. The proponents of privatisation inevitably claim it will be "more efficient", meaning only that they can suck public money out of a private process, and further that privatisation will "create jobs", deliberately neglecting to notice that any jobs created in the private sector will be more than offset by job losses in the public sector. How can it be otherwise? If we transfer street-sweeping from a city government to a private company, then of course the private company will 'create jobs', but all those previously employed in the same function by the local government will now be unemployed and on the city's welfare rolls.
The "private efficiency" theory has never been proven in experience. There is no credible evidence to demonstrate that private enterprise has ever done better than governments at operating its infrastructure and social services. In fact, the opposite has been consistently true. I know of no examples where American (or other) firms have been involved in a nation's social or other infrastructure and where the result was measurably more beneficial to the nation or the society. These firms preach the mantra of corporate efficiency, lower costs and better service, but in every case I have ever examined, the opposite proves true - higher costs and poorer service. There are almost no examples anywhere of private companies being more efficient than the public sector in providing any product or service, or to demonstrate that private enterprise is any more efficient at any kind of project than is a nation's government. On examination, these claims invariably prove to be misleading, misrepresented or false, with fake studies commissioned by these firms themselves that cherry-pick the data, skew the statistics and eliminate contradictory evidence. Efficiency of privatisation is a self-serving ideological misrepresentation that has never proven true. Private enterprise wants to insert itself in these areas because they involve enormous sums of money and can produce huge profits, but the benefits invariably end up on the corporate side and a nation's society is invariably the loser. Privatisation is an evil, in large part because the progress of this disease and the damage caused thereby, can prove to be almost irreversible.
The sudden appearance of the theory and implementation of privatisation was not an accident, but a plan. Though it has existed in one form or another for perhaps a hundred years, the grand push began as a response to the heavy debt load of Western governments in the early 1980s, which itself was not an accident but a plan. Think of Greece. After the US reneged on the gold standard and the convertibility of US paper money into gold in 1971, and after the resulting inflationary decade and worldwide economic crash, most Western governments found themselves seriously in debt. The solution of the international bankers and business schools was for a government to pay its debts (to the bankers) by selling off all its assets to the same bankers. But a government's assets are social goods that belong to the people of the nation. They are not in any sense corporate assets available for disposal in hard times to shore up the income statement. These social goods are things like highways, airports and railways, schools and hospitals, bridges, electrical utilities, communication, dams, and much more. How can a nation function without control of these essentials? These same international bankers are now ravaging the undeveloped world, extorting ownership of the basic physical infrastructure of developing nations on all continents, as payment in kind of overdue debt. Those nations required the better part of a century to accumulate the few physical assets they possess, and the loss of them now to these vampire bankers will contribute heavily to their perpetual poverty, which was the plan.
We should recall here my comments about the TPP, America's Trans-Pacific Partnership, about the extensive loss of sovereignty entailed in participating in this Satan-designed "partnership", not only for Asian nations but for the European countries as well, and the extensive facts of the European secret government encouraging, often forcibly, all European nations to increasingly sell off all of their national infrastructure to these same bankers and their corporations. The same is being done in all developing nations, losing not only their physical infrastructure but much of their arable land, and accessible water. This is all preparation for an eventual and virtually total disappearance of national sovereignty that will entail the installation of privately-owned central banks and privately-owned physical and social infrastructure, leaving only gutted so-called nations whose governments will eventually be replaced by diktat from these same bankers as were the governments of Greece and Italy - totally without reference to the affected populations. Privatisation is not to be considered in isolation; rather, it is only one part of an overall plan leading to what some refer to as the New World Order consisting of almost eviscerated and powerless national governments with few remaining assets, no independence, a small slate of comprador lieutenants, and only an impoverished lower class of consumers. The signs are everywhere. This warning is not to be taken lightly.
Following the savage FED-induced recession in the early 1980s, the propaganda machine worked 24 hours a day promoting this Harry Potter method of painlessly escaping from under those debt loads by selling the country. And it was effective. During the ensuing idiotic frenzy, nations like the US privatised airports, highways, prisons, hospitals, schools and universities, railroads, electricity generation plants, turning all over to private enterprise on the nonsense principle that private business could do these things more efficiently and at lower cost. The US military has now gone so far as to "privatise" many of its military operations, most especially the illegal ones, using firms like Blackwater (now Xe Services) to outsource off-the-books operations including torture. Earlier in time, in what could only be described as a fit of utter insanity, the US government was manipulated into privatising the country's Central Bank - the FED - so that a private corporation owned by European Jewish bankers led by Rothschild totally controls the US money supply and financial markets. The US government cannot print its own money; it must ask the FED to do this, and must then borrow the money and pay interest on it.
Having achieved some success in selling off assets for debt repayment, the bankers continued with a moral argument that government should not be involved in any enterprise that could conceivably be manipulated to turn a profit, supported by the false argument of greater efficiency. This privatisation consisted in either the outright sale of a public good like an electrical utility, or the contracting-out (for a fee) of the provision of what were formerly national physical infrastructure or public social services. If an electrical utility, for example, is sold to the private sector, the government has lost control of both provision and pricing, and much the same occurs in the contracting-out as of an airport or a toll highway.
As one obvious example from many thousands available, several cities in China, including Shenzhen and Beijing, have contracted with Hong Kong's MTR to build and operate the public transport facilities in these cities. And on what basis did MTR come into China? Listen to what Jin Yongxiang, chairman of the Beijing-based consulting firm Dayue Consulting had to say: "MTR is a public company. It came to China to do business, not to provide public welfare." What else do you need to know? China's cities require public transport for the sole objective of meeting public social needs, with no consideration whatever for 'profit', but MTR will provide it for the sole objective of making as much private profit as possible with no consideration whatever for public welfare needs. The objectives of a government and those of private enterprise are inevitably and by definition contradictory and antagonistic in nature, so what do you suppose will happen with the insertion of MTR into the equation? Of course services will decrease and public fees will rise. How can it be otherwise? Money cannot be manufactured from air.
Privatisation of the public sector will inevitably lead to lower standards of service and higher costs for the public, and will serve only to concentrate wealth in the hands of a minority (and often foreign) elite. Moreover, the privatisation of any kind of government service or public infrastructure will inevitably lead to social dissatisfaction because the objectives and agenda of private corporations never include a social component. They are there for the money, not the people. A government operates a health care service for the purpose of healing the sick at the lowest reasonable cost. A private corporation operates hospitals for the purpose of making as much money as possible. Which do you think is better for China, or for any society? And please don't delude yourself that 'high quality service' can be provided only by secret American 'cutting-edge best practices' that are known only to the Goldman Saches of the world and can be revealed only by the insertion of a private corporation to suck billions of dollars out of the system. That lie was old 200 years ago.
One of Western Capitalism's favorite fairy tales is that governments should not be involved in the economy; everything should be turned over to private enterprise and let "the free market" rein. In large part, this ideology is intended to facilitate the privatization (the sale to private corporations) of many things that properly belong in the public sector (run by the government, for the benefit of all people). This Capitalist propaganda is used to convince people that the so-called government "savings" from selling these assets to private profit-making corporations will greatly benefit the country, neglecting to mention that these so-called 'savings' are a one-time event while the increased costs to the public will be perpetual. Moreover, these 'savings' will be achieved only through the permanent loss of control of those sections of public infrastructure that are most important to the future development of a nation, and that the cash realised from the sales will inevitably be spent on public subsidies to compensate for the reduced services and higher costs. Their real motivation is of course the enormous profits that can be made in controlling a nation's schools, hospitals, airports, railway systems, electricity generation, national health care and other sectors. There is no lack of compelling evidence that these people have no concern whatever in a country's public welfare nor in what is best for a society.
The 'public-private partnerships' so praised by the capitalist segment of American society are mostly fraudulent schemes to feed from the public trough. The 'privatised' American health care system is recognised world-wide as a social and financial disaster, as is the prison system, both being exorbitantly expensive and riddled with corruption. The US educational system is now determined to join them. The FED is widely recognised as a criminal organisation that produces booms and busts mostly to enrich itself and its owners, eviscerating the American middle class and that of other nations in the process, extracting hundreds of billions of dollars from both the public and private purses in each cycle. The mobile phone system in the US is the most dysfunctional, inconvenient and yet the most expensive in the world, run by a small oligopoly who carved up the nation like private fiefdoms to be oppressed and looted.
The Americans and Jewish financiers desperately want to insert themselves into China's housing markets, social security systems, the nation's healthcare and educational systems, and many parts of China's national infrastructure. All of the above are part of China's basic social needs as a nation, but the Americans' interest is the same as that of the MTR - make as much money as possible. But as a great many once-gullible governments have discovered to their dismay, the word 'privatisation' is actually misspelled, the correct spelling being 'piracy'. Privatisation of public assets as practiced by American bankers and other capitalists, is merely a pretext to transfer attractive government assets to private investors at below-market prices while shifting the private liability portions back to the government. In other words, privatise the assets and profits and socialise the liabilities and losses. A brief, but serious, study of the results of privatisation in America, or indeed of any nation, should cure most Chinese of this disease.
Let's take a look at how privatisation of infrastructure works in real life.
In 1999, Canada's Province of Ontario decided to privatise a section of a toll highway which was at the time the busiest highway in North America. It awarded a 99-year lease on the highway to a consortium of international corporations, including unlimited control over the highway and all rights to collect tolls, for a total price of about $3 billion, a figure acknowledged to be far lower than the actual value of the highway, documents later proving the government had spent $100 billion since the early 1970s in land acquisition alone. The agreement also contained a restriction preventing the government from building any nearby freeways which might potentially compete with this now-privatised highway. Of course, two things happened immediately. The consortium fired the staff and shifted all operational costs directly to the motorists, including that of a new electronic and photographic auto identification and billing system. The second was that the tolls increased repeatedly, by almost 250% in the first several years. The government attempted court action to restrict these increases, but the law and the contract were clear: the company needed no permission to exercise their unlimited control over the highway and its toll charges.
When many thousands of bitter complaints about crippling toll increases failed to produce results, resentment finally led motorists to refuse to pay the toll charges, at which point the consortium exercised its contractual right to demand the government suspend the drivers' licenses and deny renewal of the auto license plates until all customer accounts were paid, in spite of the existence of countless billing errors where many motorists were overcharged and bills were sent to motorists who had never used the highway. This private highway had become a luxury few could afford, with so many motorists avoiding it that surrounding arteries were unable to cope with the increased traffic flow. The government was then faced with the necessity to build new highways and widen others (at a cost of much more than $3 billion) to accommodate the traffic that avoids this now-private highway. Unfortunately the non-competition clause in the original contract will force the government to not only pay the cost of the new highways but compensate the toll-road owners for their losses in revenue.
The government claimed a 99 year lease was necessary "to ensure the private-sector operators make a reasonable profit, and to ensure that road users are protected from paying exorbitant tolls". And the result? Motorists obtained no protection whatever and are in fact paying exorbitant and crippling tolls. For their part, the investors more than recovered their capital in eight or nine years and can look forward to another 90 years of continually-increasing and guaranteed profits. In 2010, the company sold a 10% stake in the highway for almost $1 billion, and at the time of writing I was told the sale of another 10% was being considered for more than twice this amount. That implies a value for the highway of perhaps $20 billion - and steadily increasing - meaning the government underestimated the greed of the consortium and therefore the value of that 'free market' lease, by at least $15 billion.
The government virtually gave away one of the most important bits of public infrastructure in the province, at a small fraction of its cost and real value, sacrificing the good of the people in order to benefit a few wealthy individuals. I have no information on which politicians were paid how much money to sign that contract. No thinking person can claim this was in the best interests of the nation or the people, but this is capitalism and privatisation in their true form. I could produce a list of hundreds of such examples. The privatisation of airports, railways, education, medical services and many more infrastructure elements or social services follow this same pattern in every nation that has succumbed to this American capitalist ideology.
The Economist magazine published an article on China's high-speed train system, recommending that the Chinese government privatise the entire system - sell it off to private wealthy corporations. The magazine claimed "China needs to rethink how it spends money on rail", adhering to the Western Capitalist mantra that the permanent transfer of wealth from the public sector (the government and the people) to the private sector (large corporations and wealthy individuals) is "true democracy". The Economist attempted high-sounding justifications for its position, claiming that in Europe, private rail operators are better because they offer "a wide range of fares and discounts", apparently ignorant of the fact that China already has a multitude of train categories, travel classes and fares. Another claim was that "With a free hand, railways tend to squeeze more trips out of their trains, provide better service and make more money." Certainly, private operators would make more money - but all of that will come at the expense of the public in higher fares and reduced service, as well as the loss of countless thousands of jobs.
The Economist claimed, "The evidence from rail liberalisation in North America and Europe suggests that such reforms could actually reduce fares." This claim is an outright lie. If we look at the experience in Europe, the UK and the US, the facts are opposite. Public train travel tends to be quite inexpensive in much of Europe, but the privatised rail fares in the UK are extortionate, in many cases costing more than ten times a comparable trip in China. In 2013 The UK Independent newspaper did an analysis proving that the privatisation of Britain's railways has resulted in the most expensive train fares in Europe and, far from eliminating drain on the taxpayers, has been drawing money from the public purse at increasing rates. Since privatisation, the UK government has subsidised the various private companies that now own the tracks, trains and infrastructure, to the tune of about $5 billion per year for a cumulative public loss of more than $25 billion dollars, while fares have increased almost exponentially. It should be clear that the private owners have gained tens of billions in profits while the public have suffered proportionately, but according to the Economist this so-called public-private partnership has been a "win-win" for everyone.
The Economist even claimed that "poverty .. could be better addressed by targeted subsidies". In other words, the government of China could bring millions more people out of poverty by selling the entire HSR system to private corporations, then use that money to pay for the tickets of all the people who could no longer afford to travel by train. When you have this kind of magical thinking, who needs Harry Potter? And the claim about better service is an outright lie. The UK privatised its rail system in the early 2000s, selling off its entire rail infrastructure including tracks, signals, most stations, tunnels and level crossings, to the privately-owned Network Rail Company, leading to an unending multitude of troubles. In early 2014 the UK railways regulator proposed to fine Network Rail more than US$100 million for consistently failing to have its trains run on time. In 2014 the UK government produced another serious public outrage by re-privatising the London to Scotland rail franchise, insisting the matter had been decided and was "not open to public discussion", this after the line had been once privatised, became a complete disaster and had to be re-nationalised, after which it returned almost $2 billion in profits to the taxpayers in the last several years alone. Having eliminated the massive dysfunction and returned the railway to efficiency and profitability, the government's banker friends wanted another kick at the can, so the bribed politicians agreed to re-sell it, once again far below its market value. Critics complained bitterly of the government's heavy-handedness and betrayal of the public in bulldozing this sale while ignoring both the will of the people and the catastrophic effects of other rail privatisations in the UK.
As part of the capitalist propaganda program and to mask the true intent, the Economist uses the term "rail liberalisation" which implies that railroads have been restricted in some unreasonable bureaucratic or ideological way and are now being set free, but these expressions are deliberately misleading. In real life, 'liberalisation' means the permanent selling off of a nation's assets and sacrificing the greater public good for private profit. The privatisation of other infrastructure services such as the water supply, has produced essentially the same results in all locations in the world where this has been done, with charges for water supplies often increasing by ten times within only a few years. The evidence everywhere is that privatisation destroys the level of service, reduces choice, increases costs, and uses the public as a cow to milk. There are almost no exceptions to this. The US privatised electricity and water supply. The result? Electricity bills in the United States have risen faster than the overall rate of inflation for five consecutive years while water rates have tripled over about ten years.
In 2014, the UK government sold off its post office service, the Royal Mail, to a loud flurry of accusations that the government and some of its banker friends (Lazard and Goldman Sachs; how did we know Goldman Sachs would be involved?) pushed the sale through "without giving adequate consideration to maximising value for money for the taxpayer". That's hardly a surprise, considering other privatisations the UK government has done, all of which indicated a badly-underpriced value placed on the assets sold. In the case of the Royal Mail, shares doubled in market price almost immediately, and when the UK privatised British Telecom the shares jumped by almost 90%, both indicating a substantial underpricing and public loss. The general consensus was that the issue was underpriced by at least several billion dollars, and was especially criticised for the low value placed on several substantial properties in downtown London that may have carried most of the value by themselves. The privatisation was typical in that it carries many serious suspicions of fraudulent dealings, bribery and kickbacks, in the same way as Canada's toll highway. Lazard, the firm that advised the British Government on the sale, was pushing for a share sale price of only 212 pence, when no other firm suggested anything below 330, and several firms believed the issue would sell out at a price of over 500 pence. In the event, the issue was priced at 330 pence, sold out within hours and almost doubled in value on the first day, indicating a badly-underpriced sale.
Moreover, Lazard was paid several million dollars for its low-ball "advice" to the government but made arrangements to purchase for itself a large amount of the issue which it then unloaded within 48 hours at a profit of more than $10 million. A few other people managed to obtain these special rights to purchase millions of shares in advance, including George Soros - and we need to ask why he would be involved. Another quirk that deserved much more public attention than it received was that immediately prior to the Royal Mail being sold, the union was proposing a huge national strike, conjuring images of a lengthy walkout, a substantial revenue loss and, of course, a much less attractive purchase, making investors wary about the company's prospects, and therefore a much lower sale price. But immediately after the privatisation sale, the Royal Mail magically settled the dispute with its union in a labor agreement "that promised a new era of industrial harmony". How convenient. Fate always comes to our aid when it's most needed. The entire process of the privatisation of the Royal Mail simply stinks with corruption, as do most of them. On this one, as on all the others, someone really needs to follow the money.
There are literally hundreds of similar projects with essentially the same results as outlined in the examples above, and there are scores of others that failed with a devastating cost to the governments involved. These cases never receive the media attention they deserve.
In one case a Canadian province contracted with a private company to build and operate an electricity generating station, but with construction and other delays that continued for three years, finally cancelled the project. The company in the meantime had borrowed money from a hedge fund to finance the construction - at 14% interest - but that cancellation decision triggered a default which resulted in the government having to pay $150 million in penalties to the hedge fund which had lent only $60 million and had already been fully compensated. The hedge fund was demanding penalty funds sufficient to equal an annual interest return of more than 60% on its three-year investment.
The US has privatised much of its prison system - the largest prison system in the world - with results as you would expect. Ten years ago, the cost for incarceration was about $22,000 per inmate per year; under privatisation, the cost has increased to $50,000 even though the private system refuses the sickest and costliest inmates. "They are cherry-picking," said one government leader. "They leave the most expensive prisoners with taxpayers and take the easy prisoners." Furthermore, the operators of these private prisons have markedly reduced all prison services, introduced extreme overcrowding and have accumulated a long record of abuse. The private financiers have also assiduously lobbied the courts in many states to levy harsher penalties and longer prison sentences for even minor offenses, because more prisoners mean more revenue and higher profits. The judges and courts have complied, perhaps not least because many US judges and sheriffs are elected and need cash donations for their election campaigns. The private operators of these prisons have spent millions to elect (and to bribe) politicians, police, judges and court officials who will fill their profitable prisons, resulting in enormous social and financial costs.
Today the Americans exert every manner of intense pressure to force China to fully open all social service areas to this same free market, on the basis that it is God's will that Americans apply their so-called 'best practices' and unique talents in 'efficiency' to China's everlasting benefit. But the Americans have redefined 'efficiency' to mean 'maximising profit', which definition is totally unrelated to the real meaning of 'avoiding waste', and which maximisation is achieved through firing staff, cutting services and raising prices. China wants an educational system to meet the future needs of China's citizens and of China as a nation, to produce educated people according to China's own culture, tradition and needs, but the Americans want to build and provide China's education system for the sole purpose of enriching themselves financially. How is this compatible with China's needs, and how will China achieve its rejuvenation and reclaim its rightful place as one of the world's major nations, if the Chinese receive only a substandard American education while the nation's educational infrastructure is designed only to suck all the money out of the country and put it in the hands of a few greedy Americans? These questions need to be answered.
In early 2014 Caixin published an article disparaging China's healthcare system, with snotty comments about how the hospitals, "for all their hard work" may never see a profit. According to Caixin, "Simply breaking even ... is usually as good as it gets". The authors rejoiced in the thought that Beijing was encouraging "a more market-oriented approach" to managing the nation's large hospitals, in other words permitting private owners to heavily profiteer from the illnesses of the Chinese people. Wei Xin, the CEO of Sinocapistar Investment Holding, a privately owned investment firm, was apparently ecstatic at the thought, quoted as saying, "This policy is very attractive. Private investors will soon carve up the public hospitals pie that's being offered." And carve up the hospitals is precisely what they will do. Carve it up like a pig. Caixin was gloating about the "success" of China Resources Pharmaceutical Group in taking a 66% stake in Kunming Children's Hospital, the city's main pediatrics facility, and whose CEO Zhang Haipeng was apparently boasting of a 40% increase in "revenue". Zhang sees public hospitals as "sound investments with good cash flow, stable returns and long-run potential". Well, good for him, but what about the public, the patients who must use this newly-profitable facility? Of course, their medical costs will increase by at least the same proportion as Zhang's profits. In what way is this anti-social process good for the citizens of Kunming? It is precisely this twisted thinking that produces the income disparity all nations but the US want to avoid. With this sale of Kunming's Children's Hospital, millions of families will each pay thousands of yuan to Mr. Zhang, thereby eventually - and totally without justification - forcibly transferring billions of yuan from millions of people into the hands of one or two individuals. In the privatisation of health care, like this hospital in Kunming, all the claims and counterclaims are smoke and mirrors. The only essential truth here is that soon everyone in Kunming will be paying twice as much as before for the same medical treatment. I want someone to tell me why this is a good thing.
This is American capitalism at its worst, because its fundamental tenet is to privatise the profits and socialise the losses. And that means this Kunming hospital will now suck as much money as possible from those with the ability to pay, leaving the lower 80% of society to depend on the government for medical assistance. And that means the private hospitals will drain the bank accounts of those who have money, and will drain the government coffers to pay for those who haven't the money. There is only one winner in this scenario - the private owner of the hospital. In any well-run institution, there is not so much money that can be saved by increasing efficiency, by eliminating waste or needless expense, certainly not enough to measurably change the landscape. Most institutions try to do a good job, and are not recklessly wasteful. For a private owner to realise profits from such a facility, the only options are to reduce services and quality and to increase charges. And that is already happening.
How easy it has been to redefine words, to mask anti-social if not criminal intent, and to so fog the public mind that black is now white. Too many Chinese become mesmerised by these foreign capitalist fantasies and apparently never question the origin of this bizarre new conviction that the measure of a hospital's usefulness is its profitability, that a hospital earns praise according to the amount of its excessive charges to the public. For physical and social infrastructure, the focus must be on public utility, not private profit or some debased definition of efficiency. China needs health care for the good of the Chinese people, for the long-term welfare of the nation, and it needs health care that is available and affordable to ALL citizens. In what way does the insertion of a privately-owned for-profit entity help to accomplish this? We don't need a flood of meaningless ideological nonsense about the implementation of "cutting-edge" management and "best practices" that will create "vibrant communities", as AmCham are so fond of giving us. The harsh truth is that the people of Kunming, like those of Shanghai and many other cities in China, will pay heavily for these virulently anti-social American practices. In the end, this "liberalisation" of China's health care will prove to be the same unmitigated disaster it has proven to be in the US.
But the entire concept of turning public services into profit-making institutions is a mindless fallacy, what one noted economist called "private profit crowding out a public good". The government, the people, in fact, are providing health services to themselves. Why would they overcharge themselves to make a so-called profit, and then give that profit away to an individual? The government funds the healthcare system, like every other public service, from general revenue raised through taxes. If more money is required to operate a service it will resort to tax increases. Targeting the users of a healthcare or any other public service system is viciously anti-social since it serves only to punish those who need it the most, in fact those whom the system was designed to benefit. But the twisted version of American capitalism wants to profit from these needs. It is not for nothing that the US pays twice as much for healthcare as any other developed nation, yet has the world's most dysfunctional healthcare system where half the population has no coverage and the other half are not covered for many critical treatments. The entire American system is designed only to create enormous profits for a few people, and to do that by bleeding the public purse. And this is what China wants to copy? We need to rid ourselves of the foolish idea that just because you can make money at a thing, that is a reason to do it.
In October of 2014, Xinhua reported that China plans to attract more private investment in key sectors of the economy through policy support and a "more fair" investment environment. These areas are to include energy, telecommunications, hydro and nuclear power including the transmission grid, internet broadband, GPS navigation and remote sensing satellites along with agriculture and water supplies and many parts of China's infrastructure. I don't know the details of these plans, but the intent and scope appear troubling, especially if the private investors are foreign. The UK is a perfect example of a country that has lost all control over large swaths of its economy, from precisely such a program. A major issue is that there is no such thing as "private" ownership in terms of widespread public investment in any of these areas. These large-scale investments are made only by a very small select group of extremely wealthy individuals, the same group that ultimately controls the ownership of land and infrastructure all over the world, a condition presenting two very serious considerations that seem inevitably to be ignored in the ideological excitement of privatisation. The first is that the interest of these wealthy groups are anti-social by nature, always diametrically opposed to the best interests of the people and a nation; they are interested in maximising the profits from any revenue stream and have no concern whatever for the public good or the welfare of the people. The second is that one potentially-beneficial master - the government - has been replaced by a second, definitely hostile, master who is predatory and extractive by nature. It is easy to be swayed by the pretty but meaningless words like efficiency, that are used to describe the selling-off of a nation's assets, but one need only read the words and examine the political forces behind the American's new TPP to realise the brutal truths behind private investment in a nation's capital stock. I remain convinced that history will reveal the flood of so-called private investment in social and capital infrastructure as one of the great tragedies of our modern era.
This is a dangerous attitude to adopt from the Americans and the vulture financiers. Securitising infrastructure is only one step in a long-term grand plan to hijack those national assets. This has been done so many times over the decades, but national governments seem unable to do basic research and learn the dangers. There are so many arguments, based on the charm of false economics, in favor of selling off a nation’s infrastructure not to a private investor but simply to list on the stock market. The arguments are seductive – give the people a chance to share in the profit of infrastructure, as is happening now with some of China’s high-speed rail being sold off through listings on the stock markets. But these vultures have 200 years of practice in manipulating a country’s stock markets. The usual practice is to (1) convince a national government to ‘securitise’ important parts of the national infrastructure – like high-speed railroads – by placing shares on the stock market. The vultures then (2) run up the market through a myriad of schemes long proven successful, then (3) crash the market, and (4) buy up the listed railroads for pennies. If China isn’t very careful, this is where the country is heading, by listening to the vultures instead of its own good sense.
In August of 2014, James Meek wrote an excellent and thoughtful assessment of the results of privatisation in the UK, stating that "it promised to turn the UK into an island of small shareholders. It failed: the faceless state bureaucrats have been replaced by faceless (better-paid) private bureaucrats – and big foreign corporations." He documented many of the points I have already made, especially what he called "another incremental step in a 35-year program to shift the burden of paying for infrastructure from the well-off to the strugglers", a sign of the failure of "the vast social and economic experiment conducted on the British people since 1979: privatisation". This process so heavily promoted by Margaret Thatcher is of course is the same process promoted in the US by Ronald Reagan, incited by the same secret governments, and all part of the Great Transformation.
Meek documented something we already knew, that this same process is precisely what was inflicted on Russia and the components of the former Soviet Union. There, under the capitalist banner of charity, efficiency and the will of god, these nations were virtually bankrupted by "the cynical, grasping figures who moved in to take possession of the ruins", and who were not symptoms of the changes but the essence and purpose of them. In other words, massive private wealth for the few, while massive suffering for the population. Meek wrote that as he watched the vultures feasting on the carcass in Russia, he finally began to find the terms to question what had been done to the Western countries by the same people, to see how deeply these few influential financiers and their puppet politicians had forever altered the social landscape, and to realise how wrong it had all been. He said he watched "an expanding tide of consumer capitalism, Reaganism, Thatcherism, Neoliberalism, the Washington Consensus", and realised that the free-market system which considered government "incompetent by default" was becoming entrenched everywhere.
He wrote, "I can't pinpoint the moment when it soured for me. In the first stages of disillusionment, it didn't seem obvious to me to make connections between the extremes of marketisation and privatisation in the former Soviet Union and the partial privatisation of a British economy. In Russia in particular, a small number of individuals quickly became fantastically rich when they took private control of state producers of petrochemicals and metals. They were grotesquely rewarded, and money that should have gone to rebuild roads or hospitals or schools went instead towards yachts, property in London and foreign football teams." At first, he saw little connection between these events in the former Soviet Union and those in the UK and the West, but slowly realised how anti-social were these capitalist developments, caring far more about no taxes than about the survival of pensioners. He said what was most revealing was how many of these "emissaries" of the capitalist system seemed to believe the myth that everything good in the West had been constructed by the free market. In his words, "They seemed to believe that the entire structure of their own wealthy modern societies - the roads, the electricity grids, the railways, the water and sewage systems, the universal postal services, the telecoms networks, housing, education and health care – had been brought into being by individual entrepreneurs driven by desire for gain, and that a bloated, parasitical state had come shambling onto the scene, seizing assets and demanding free stuff." His conclusion, which should have been obvious to all, was that the Washington Consensus was based on a fake history, the same mythical narrative on which most of the US was founded. In other words, all the lovely tales about capitalism and free markets were lies.
In the UK, as in the US and some other nations, virtually everything was sold to "private industry" that promised to hold down prices through efficiency but in fact did much the opposite. Nobody seemed willing to contemplate the obvious inevitability of millions of workers callously being fired in the name of profit maximisation disguised as efficiency. The disposition of a nation's most precious infrastructure assets was impersonally and falsely represented as a sale of surplus goods during financially tight times, ignoring the permanent overall loss to entire nations of people. But it was all a lie. In some Western European countries, socialist governments kept control or took control of large portions of their economies - as China has done - with no threat to either the government system or individual freedoms or happiness. Socialist economies that refused to dispossess their people of the nation's assets proved to be as wealthy, happy, successful - and efficient - as were those capitalist economies that sold all their assets to the vultures at fire-sale prices. Not only that, the socialist publics proved to be far better off due to the absence of malignant greed. Meek realised that this fascist ideal of state capitalism, which is what the US is today, could easily become a corporate monstrosity gorging itself not only on individual bank accounts but on withdrawals from the public trough.
Meek claims that in his investigations of privatisation, all has been a failure, with none of the promised benefits appearing for the people and only a very few individuals enjoying the entire collected wealth of the nation. One of the main results of privatisation, as I have repeatedly claimed, is a hugely increased income disparity, mass poverty at one end balanced by massive wealth in the hands of an infinitesimal few at the other end. If it were true that public enterprises are less efficient, the answer is to commercialise them, not to privatise them, as Meek finally realised. He also discovered, as have so many of us, that private companies are seldom if ever more competent or efficient than state-owned ones, the main difference being that state-owned enterprises are not so insanely driven to suck every last dollar from an economy to the point where they will, like Citibank, beat to death delinquent customers. And in spite of all the pretty words, privatisation has never produced lower costs, better service, or more choices for consumers. It has never done anything but fill the pockets of a very few. The close examination of privatisations will almost inevitably reveal glaring failures for the nation, much as does my example above of Canada's province of Ontario in its highway privatisation scheme. Inevitably, the people lose and the vultures gain, especially at the expense of all those who depend upon their government.
Meek concluded his essay by saying, "What we think we know is wrong." His examinations, as have mine, reveal that government spending has been reduced, as have taxes for the very rich, but this has been more than offset by hidden taxes on the entire population which have increasingly disastrous effects as we move down the income scale. Privatisation in effect produces a whole new flood of what are in fact taxes levied on the population but not identified as such. Governments need to replace the revenue lost from tax reductions for the rich, and they therefore attack the general population with things like new sales taxes that serve to hide the massive drain on the economy caused by the vultures of privatisation. It is no secret that the public in any nation are simply a revenue stream to the rich elites who populate the vulture funds, the so-called "investors" who gobble up a nation's infrastructure. Poorer service and higher prices always follow, as do demands by the investors for government subsidies to inflate their profits even further.
It needs to be noted clearly that involuntary expenses are a tax on the population. Consider banking fees, for simple transactions, for the use of an ATM, and others. The banks already make very healthy profits from the free use of our money, the multitude of "fees" being driven only by greed. This means the banks in every nation have the power to tax the population with even less concern than has the government itself. Bankers needn't appeal to voters nor to have public support for their actions. Privately-owned utilities, educational institutions, healthcare facilities and much more, are all levying taxes on a population and doing so irrespective of their need for revenue. Private enterprise has no need to consider the philosophical nature of public education or healthcare, nor of the provision of water or electricity. It has no obligation to consider the poor or the less well-off, and especially ignores them in services that are mandatory for survival, like healthcare and utilities. In fact, the weaker the population sector, the more valuable to a "private investor". The rich can always support themselves by paying expenses that are mostly trivial to them, while the rest of society is sucked dry by the malignant urge to maximise profits.
This is part of the problem Americans have with China's SOEs, taking great exception to their apparent lack of predatory capitalistic behavior, disparaging them as "revenue maximisers at best, rather than profit maximisers". In Xi'An I visited a school with one of the finest campuses in the world, hectares of green grass, an Olympic-sized swimming pool, flower gardens, lovely condominiums and townhouse residences for the faculty and students. The school was built with surplus profits of a local state-owned tobacco company that wanted to give something to the community. The firm not only built the school but pays the annual operating costs. Such an attitude from a corporation leaves Americans speechless. The American way would be to leverage those surplus profits to buy out, bankrupt or otherwise kill off every competitor in the country. And after increasing their profits at the cost of enormous social disruption with millions of unemployed and huge social welfare expenses dumped onto the government, the Americans would then craft a PR campaign where they would donate a small amount of money to some charity to parade their generosity and moral superiority to the world. A similar example is China's SOEs building low-cost residential housing. The Americans raise every manner of moral and philosophical condemnation of such practices, virtually claiming it is against the will of God for a government to provide public services or social goods at cost when an American firm, if permitted into the arena, could reap billions in profits. I believe the Chinese way is better.
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Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai's Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He can be contacted at: 2186604556@qq.com
Larry Romanoff is one of the contributing authors to Cynthia McKinney's new COVID-19 anthology ''When China Sneezes''.
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Copyright © Larry Romanoff, Moon of Shanghai, 2020
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