Privatization – Why Not?

[Translated from broadcast by Gegenargumente Vienna: March 4, 2003]

The General Agreement on Trade in Services (GATS) is a subject of negotiation and contention among the members of the World Trade Organization (WTO), to which all relevant states with a capitalistic economy belong, including China. Falling under “services,” industries as different as banks, insurance, telecommunications and much that is organized in some countries by the “public sector” or the welfare state, such as health care and education, are negotiated. Against the tendency of the relevant WTO nations to liberalize international trade in these so-called services, the anti-globalization protest movement was formed because, among other things, the liberalization of trade in services presupposes or involves the privatization of the corresponding spheres of business, while state monopolies in the industries concerned must be abolished or at least broken open. A central pamphlet of this campaign by ATTAC (Association pour la Taxation des Transactions pour l'Aide aux Citoyens, or Association for the Taxation of Financial Transactions for the Aid of Citizens) is titled: “McEducation, McWater, McHospital – Everything Private?”

The question to be asked here, essentially and practically, is: privatization – why not? The opponents of GATS sometimes act as if the products of the private sector are necessarily of inferior quality, therefore the “Mc“ – “McSchool,” “McWater,” “McHospital.” But this is not correct. The commercial world offers products in a wide variety of qualities, including, however, every type of junk – as a special offer to people who cannot afford the better, expensive stuff. If education, water and hospitals cost more in the future, then this only means that more wages must be spent on them. And the problem would already be solved! The above-mentioned opponents of GATS constantly assume the poverty of normal people, i.e. those who have to live on wages – and therefore can afford only the “McSchool,” “McWater,” “McHospital,” things of bad quality. They act, however, as if this bad quality is a necessary consequence of private production and not a consequence of the normal poverty. Besides, if the private commercial world offers various goods in cheap varieties, which even normal people can afford, it only takes into “consideration” the poverty of the consumers and its own profit.

National management of education and health care, etc. is endorsed by ATTAC: without changing anything fundamental about poverty, a necessary effect of poverty is to be prevented, and decent education and health care are to be at the disposal of the poor. The demand that wages rise so that normal people can also afford the quality varieties of health care, etc., does not present itself to these critics of privatization and they don’t even want to demand it. They probably regard it as “unrealistic” – which is right, by the way! Because wages are determined according to the needs of those who pay them and not according to the costs of a decent lifestyle for those who must see how they can manage on them. Because the opponents of privatization do not want to talk about poverty and wages and instead peddle the inferiority of commercially produced products, one is reminded here of the fact that there are already private sellers of education and health care products, and that the quality of these sellers' products are usually better than the quality of those of public services: the condition of public education and national health care has long been the implicit basis of contracts for private bidders, for private schools and for private hospitals! Because of “McSchool” and “McHospital,” the better private service provider is popular with those who can afford it. This state of affairs confirms the demand already mentioned: forget about good wages that pay for decent dwellings and cars and a good quality of life. Anyone who now wants to be “realistic” and is sure that “the economy” can not possibly pay such wages, that in these times higher wages are not possible, may make it clear to themselves that the question of the system is on the table: if the producers of the social wealth cannot afford essentials, if working humankind cannot afford nice things due to their shortage of money, or cannot even afford the services which they produce, and by no means does scarcity exist – then this economic system, this mode of production is obviously extremely unhealthy, and one should therefore get rid of it.

Public services vs. the market: ATTAC opens a wrong alternative

But these opponents of GATS do not hold to this realism, which is critical of capitalism, but want to be able to refer to an alternative that conforms to the system:

Public services in danger: by 'public services' one understands social security and basic supply areas such as health care and pension insurance, education systems, public transportation, water supply, rivers, telephone and post office. This basic infrastructure, which we all need each day, is usually made available by public monopolies out of social solidarity. All people can access them, profits are not gained, the market remains outside... With the privatization of public services, they threaten to become more expensive, and to likewise decrease, so universal admission for all will be lost, and the quality of the services threatened. (quotations from a position paper by ATTAC Austria, http://www.attac austria.org)

The cardinal error of this position consists of confusing the state in its character as welfare state or as a supervisor of public services with an alternative to the market and private production. Against this idyllic view – national monopolies make their services available “in solidarity” and “for all people,” the “market remains outside” and “profits are not gained” – some well-known facts should be remembered, particularly in order to correct the picture of the public health and education systems which is drawn here.

The state is not an alternative to the market because it is its author, its organizer and its permanently responsible agent. When the state guarantees property and prescribes a legal currency, either a national or supranational money like the Euro, it gets capitalism going: everyone is forced to buy everything they need, and in order to get money they must sell something. Only by property and money is humankind sorted quite informally into two defining social departments which today one is no longer supposed to call “classes”: into those who must work and others who “give” them work. In this relationship, wages are a very one-sided means for those who pay them: wages are paid only in an amount that guarantees disposal over the work in order to get the aimed at result, which is not the product produced but the profit in it. If this calculation does not work out, sooner or later wages are no longer paid. This purpose of work – work for the user, whose wealth thereby grows – brings about the accompanying poverty of the people who today one no longer calls the “proletariat.” There are nicer names in circulation for this part of class society, such as the “poor” who are dependent on welfare or the “dependent” who are so dependent that they cannot even produce for themselves, but still must find a user of their work, or the “socially disadvantaged” – modern society is full of such paupers and the problems of taking care of them.

This care is available, although somewhat differently than ATTAC makes out. The state, which establishes capitalism, does indeed take care of poverty, however not by an alternative to the market, but by subsidizing it. For example, health care, contrary to assertions, certainly belongs to the sphere of the market, private production and profit: the pharmaceutical industry consists of profit-oriented private companies; the same applies to the producers of medical-technical devices. Doctors are independent private entrepreneurs, and private hospitals are likewise run for profit, exactly like private health insurance. The essential achievement of the welfare state, apart from its subsidy of public hospitals with taxes, is providing solvency to this long-standing health care market and the private sector active in it. For good reasons, the welfare state does not leave it up to the private thrift of modern proletarians – pardon: the “dependent” – who would have to constantly put something aside from their savings in order to be able to pay, in case of an emergency, for an operation, expensive medicine or a prolonged therapy. The welfare state assumes that wage earners living on normal wages, left to themselves, would probably speculate too much on their health remaining durable – and then they could not afford treatment in the certain-to-occur case of medical care, and the health service would have no solvent customers. National health insurance already concerns care: the care of business; so that the business of health care also connects to financially poorly-off customers, a part of wages is obligatorily collectivized by the state into a health insurance pot from which the costs of medicines and operations are taken – with the pertinent profits. Because the poor – pardon: the wage earners – cannot really afford health care as individuals, they are agglomerated by the state into a group and forced to do it nevertheless. The state puts nothing at disposal but its force: it forces people to a precaution, which it does not leave to the free decision of the poor. Of course, the better people are free to insure themselves in supplemental ways or to finance better accommodations in the hospital. Because, in the case of health care, there would be no market and no profit without it – where do the people of ATTAC live actually? – the state organizes not an alternative to the market, but works as its supplier.

It is similar with the other department threatened by privatization, the education system. It is almost an insult when the anti-globalization movement warns of a threatened loss of quality – “McSchool” – by private schools. It seems to have escaped these good people that the state is absolutely the cause of “McSchool,” that it does not simply organize instruction and force children to study, but as the training system serves the noble purpose of selection: gradually, ever more people are excluded from higher education so that a relative few finally end up at the university. It is not only that something is taught to the students and they are examined afterwards to see whether they understood it – examinations are drawn up as a competition, and the weaker ones, those who would need repetition and help the most, are eliminated from any further transfer of knowledge: state selection creates “McSchool” for the larger part of the students! It is also quite well known that if one reads that people who completed normal schooling often can’t even read and write properly and can fill out a payment slip. In addition, that is quite appropriate, because the “care,” which is the state’s concern with the education system, is again care of the market and not an alternative to it: it is about the job market, and it very probably needs a mass of people who graduate with a “McSchool” education. Also, by the way, one notices that a “political organization” does not just try to create a “balance between private economic and public interests,” as ATTAC believes:

National states, countries and municipalities adjust the services provided by private companies with laws, in order to pursue non-economic goals such as environmental protection, health care, job security or regional policy. A political organization of the economy takes place in the sense of a reconciliation between private and public interests.

These are not additional, “non-economic” aims, these are, on the one hand, advance payments to private businesses, and, on the other hand, maintenance measures for the bases of business damaged by business, like health and environmental protection.

In one regard, Attac is certainly right. The proposed privatizations will bring rising prices and degradation for all those who already have problems with the price of quality products now. The experience with privatization in Great Britain speaks for itself. However, the announced raising of prices and the progressive pauperization of the common people is not a reason to glorify the status quo ante in an almost absurd way. It is said that public services cared for “all humans … in solidarity” – as if in former times the public utilities would not have turned off the electricity if someone could not pay their bills, or as if someone could never be evicted from public housing. Or as if there were no labor conflicts in the public service sector, and no performance pressure, no overwork and no sloppiness resulting from it, of course at the expense of patients or receivers of care, or nobody employed in emergency rooms who cannot take a vacation for years on end. All this is naturally well known to the people of ATTAC, but they do not take these democratically caused conditions in public services seriously, not as facts about the actual priorities in a democracy, but only as superficial phenomena which could not really belong to “democracy,” or which could be repaired by “democratization”:

Of course, public services are not perfect. Painful experiences like negligence or treatment beneath human dignity in hospitals or old people's homes, or months-long waiting for the installation of a telephone connection, tarnishes the image of some public services. The introduction of economic thinking – cost reduction and maximization of profit – leads to long lines at the post office, to assaults on pensions and cuts in the education and health system. The solution is however not privatization, but the radical improvement and democratization of public services!

And this bold thesis – according to which, these “painful experiences” with the existing public services can only mean a lack of democracy, against the widely known fact that cuts in public services are programs decided just like pension cuts by democratically elected representatives of the people – refers again to the fact that the people of ATTAC want to hold a conception of a state alternative to the private sector – precisely when they address the substandard condition of public services, which might fail only after privatization.

Benefit vs. harm: A wrong balance for globalization

This dogmatism consists in how the anti-globalization movement notices the distribution of benefit and harm in capitalism, and how it draws or affirms a wrong conclusion about the subjects or “backers” of globalization being private beneficiaries:

Who are the winners of the GATS? The former director of the GATS department in the World Trade Organization, Secretary David Hartridge, expressed this: “if not for enormous pressure from the American financial services industry, from companies such as American Express or Citicorp, a service agreement would have been arrived at.” The large service companies of the USA and the European Union are well organized and systematically lobby for liberalization. The most important groups of lobbies: US Coalition of Service Industries (USCSI), European Services Forum (ESF), Liberalization of Trade in Services (LOTIS), Global Services Network (GSN), International Financial Services, London (I FSL). According to Leon Brittan, the former European Union commercial commissioner and current lobbyist for the financial center of London, “the close connection ... between the European Union and the US industry ... was a substantial factor when the final deals came off.” Apart from banks and insurance, among the winners of the GATT are large water services, telecom, energy, education and health companies. The World Bank and prominent investment houses estimate the worldwide annual market for water supply at 800 billion dollars, that for education at 2000 billion dollars and that for health services at 3500 billion dollars. The European Union commission says openly too: “GATT is ... first of all an instrument in favor of making business.”

Incidentally, contrary to ATTAC’s gesture of “exposing” – what should international trade be about otherwise, if not “openly” about business? Who else should profit if not those who have something to sell? What should “trade” be otherwise? The essential lack of representation in this balance of winners and losers is a relevant figure which is missing among the listed winners, namely: the national organizers of capitalism. Because the democratic state also has an economic “mode of existence,” a cost calculation and a bookkeeping, a national budget, it is constantly concerned with the balance of incomes and expenditures, as is well known. And all national incomes have one source: they are created out of private profit. All state collection is based on private business activity, while every private economic transaction – which only takes place because of profit! – is taxed. Not because the entrepreneurs and their “lobbies” have too much influence on the state, but because public revenues, the state’s total economic power – from which public services are financed – is also based on profit, the democratic state completely promotes in principle private business and private profit. Independent of which party governs at the moment! The jobs of normal people and their wage income, public revenues and social insurance all depend on the fact that profit is won – and all this becomes precarious if profits weaken in a crisis: not only does unemployment increase, but tax receipts also “break off” and less is taken in for social insurance.

Privatization is therefore always an option from the point of view of national cost calculation: because a railway drawn up as a state-owned enterprise costs the national budget something, it requires tax receipts even if fees and prices are charged, whereas a flourishing private company pays taxes and makes social security contributions – therefore the impact of GATS is unnecessary for speeding up the privatization of state enterprises and putting the public sector under constant scrutiny for tidy expenses. Clearly, everything that the state pursues is in deficit and is not locked in immediately – necessary but unprofitable advance payments and suppliers for the market and thus for profit are subsidized, such as public education and highway construction: these are nationally pursued or promoted just because they are necessary for the market and for profit. That is the real criterion for the nationally financed or subsidized “public sector,” and not to supply everything that “we all need every day,” as the ATTAC paper believes. If that's what it's about, the production of all consumer goods would have been nationalized a long time ago!

From the point of view of usefulness for their capital location, states negotiate international trade agreements like GATS. It is well known that it is not companies which argue there, but nations; not entrepreneurs, but politicians and officials. They judge all the demands relating to international trade as tough as nails and unilaterally according to the consequences for their respective national capital location, thus indirectly according to the consequences for their national balances. Against contrary assertions, it is not the dogmatic advocates of liberalization that sit there, but the dogmatic advocates of any free trade that is beneficial to their own nation; the other way around, every nation in the case of harm is certainly an advocate of protectionism, thus the protection of their location from foreign competition. In this respect, it is absurd to regard democracy as a “victim” of GATS, as in the quoted position paper of ATTAC. Mighty, economically powerful capitalistic democracies are the active subjects of these agreements, which are calculated according to the benefits for the investment climate of their locations, and not powerlessly affected persons, even if they present themselves to their citizens as those who are harmed by GATS. Precisely because the states are the relevant authorities of international trade, groups must pursue their “lobbying” and wait on politicians in the corridors of power. Every “lobby” exists because it has something to offer to the politicians, every “lobby” must appeal to the interest of the wooed side and omit their own benefit. If the world market which can be created for the “water supply, education and health services” is estimated to be worth over 6000 billion dollars if it is “approved,” but at the moment is obstructed by state “regulations,” then the offer of the European and American lobbies just consists of conquering a substantial part of this market and in booking the profit in their “location.”

The private interest in profit in the free-market economy is the economically decisive purpose and thus the condition for all trade and exchange – profit must arise, for then and only then are there jobs, just like tax receipts, wages and subsidies, social insurance contributions and child benefits. Therefore the state also subordinates the living conditions of its citizens to private profit. In the democratic market economy, profit is the real general interest. That may sound paradoxical, but the general interest in the modern money economy is determined not according to the number of affected persons, not according to the many use values, also not according to the majority of voters, but according to the material requirements of the famous economic “growth” on which the free-market economy depends. It is not the income of the wage earners that must grow, but private property, by extracting profit from purchased labor – and if the state judges international trade according to this criterion and treats wages, pensions and other social security benefits as costs which it needs to minimize, then that is certainly brutal, but proper. In the system of the capitalistic political economy!