Neoliberalism: dangerous myths and/or frightening realities? Part 4

A blog in four parts by Paul Kennedy: MMU Visiting Research Fellow and formally Reader in Sociology – with Kevin Albertson

Part 4. Pondering the imponderables

In our series of blogs [1, 2 and 3] we have questioned the sustainability and efficiency of the Neoliberal socioeconomic approach, discussed whether anything truly worthwhile can result from pure greed and attempted to sort those individuals who gain from Neoliberalism from those who do not. Here, we consider the costs and benefits of the privatisations which often result from the national embrace of Neoliberal doctrines.

Private assets, public goods

The privatization of public assets has been a notable and frequent Neoliberal policy practised by Western governments. Though begun several decades ago and continued by the last Labour government, Britain’s Conservative Coalition since 2010, for example, has pushed downsizing, selling-off and outsourcing almost to an art form. Recently this even included selling the nation’s Royal Mail at a shamelessly undervalued price.

According to Owen Jones, writing in the Guardian, in 2012 alone, the British government spent £4 billion on paying Serco, G4S, Atos and Capita for “servicing” a number of Britain’s public agencies from prison management to administering and distributing a number of welfare benefits including to disabled people. In effect, according to Jones, much of Britain’s public sector has ‘become a funding stream for profiteering companies’ (ibid.) . However, there is mounting evidence that the companies involved in this process have often conducted their business practices shoddily, inhumanely and above all without producing much ‘value for money’.

The official justification for these policies is the importance, especially at a time of national indebtedness, of reducing the tax burden on citizens while cutting out the unnecessary and inefficient practices that were allegedly rife when these services were publicly owned. Some have suggested these inefficient practices included: the wasteful process of paying decent, living wages to workers while providing permanent work and reasonable pension prospects – and this at a time when many private sector employees must make do with zero-hours contracts .

Despite the savings in labour costs (not including the salaries paid to managers and CEOs, dividends to shareholders, payments to PR advisors, marketing and advertising companies, various consultants and all the other necessary adjuncts of private enterprise) neither the quality and effectiveness of the services provided nor the cost gains to the exchequer seem to square with the promises. Is it possible, then, that some additional or alternative agenda is at work? Here are a few possibilities readers might like to ponder.

1. Keeping the Neoliberal faith

Despite the damage inflicted both on society and on capitalism itself – given the rise in indebtedness and therefore the risk of further financial chaos plus the problem of under consumption as wages fall – ideological zeal, even a quasi-religious respect for the virtues of the (so-called) free market, leaves Neoliberalism’s believers precious little wriggle room for policy flexibility. Privatisation is what they “do”. And one must do something if one hopes to run a nation.

2. Easy capitalism

When former public sector services are contracted out to private corporations the latter are provided with a soft and almost guaranteed market because this involves work which is funded out of tax revenue and which governments are legally and democratically bound to carry out in any event (at least for the time being – see below). Out-sourcing offers Neoliberal governments an excellent opportunity to hit several birds with the same stone. They can: foster and subsidize the wonders of the market, shrink the dreaded state – though not its spending needs – and create comfortable capitalist niches for old and new business partners, including, perhaps, some pals of the political, media and bureaucratic elites who run the country.

We might suggest that any government that was genuinely serious about strengthening the long-term national economic base would be struggling to encourage investment in a cluster of far more complex and large-scale projects. Re-establishing a range of advanced manufacturing industries, building infrastructure for the twenty-first century on a vast scale and investing in the industries and wider practices associated with developing alternative energy sources would facilitate a return to sustainable growth. However, this would require a quality of entrepreneurial leadership, joint collaboration, scientific expertise and massive long-term investment commitments which would

  1. require a parallel range and depth of government support that is anathema to Neoliberals and their political supporters and
  2. be as far removed from the kind of soft business activity of out-sourcing and contracting as the ecology of a garden fish pond is to the Pacific Ocean.

3. The end of public service

A third possible explanation is that the long-run intention of many governments and political parties, including the British Tories, is to engage in much deeper attempts to down-size the state through privatizing far broader swathes of the public sector. It is possible, for example, government obligatory services, including the NHS, might not only be put out to private tender but might be sold off entirely to private capital. At a stroke, such policies would reduce government spending and create new arenas available to the market. But at the same time, if current experience is any guide – including the story of private medicine in the USA – such privatization of public services will mean citizens end up paying a lot more in private insurances, fees and prices than they ever paid in tax. The role of government cannot simply be to reduce its own spending. If that were its sole goal, why have a government at all?

If services such as the NHS are privatised, many of the least well-off will be unable to afford such services, therefore inequality will spiral out of control even more rapidly than during the last twenty years. There will be knock-on effects throughout the economy: many citizens will have far less money to spend on other goods and services; this will hurt some branches of business even while it profits service providers.

Since many economists, business leaders, politicians and their advisors are aware of the likely crowding out of private consumption by the need effectively to subsidise private health care, it is not clear why such a policy might be pursued. Perhaps the intention to go ahead with mass privatization regardless of the damage it may inflict on society and large parts of the capitalist economy is seen by its protagonists as just too ideologically ‘right’ to ignore. Or it may simply be that many of the political class have links to private medical corporations. To believe in Neoliberalism one must, after all, believe in the pursuit of self-interest.

4. You’re all in this together

But there is another possible explanation. In theory ‘real’ privatization will genuinely allow tax cuts to be implemented, especially if welfare benefits continue to be ruthlessly reduced at the same time. If welfare is not reduced, those financially disadvantaged by privatization might require support, which would drive government spending up again.

For the average citizen, as already indicated, the financial gains of tax cuts will likely be more than outweighed by rising prices of the privatised service. But what about the rich and super rich? They can already afford to pay for their own family’s health, educational, old age and other needs out of private wealth and high incomes – and many send children to private schools, use private health practices and nursing homes &c. The main portion of government spending from which they benefit directly relates to facilities such as national defence, the police and fire service, road maintenance and so on. For them, therefore, ‘real’ privatization would translate into a considerable increase in their personal income streams: taxes will decline, and the quality of public services will decline, but then again, perhaps they did not enjoy public services anyway.

But if this particular aspect of Neoliberal policies are directly beneficial to the wealthy – we are surely entitled to speculate whether much of the Neoliberal policy discourse is little more than a smokescreen designed to divert our attention from the interests of the rich while seemingly deepening existing inequalities and protecting those who benefit most from this.

To conclude

Those who have the gold make the rules, so it is said. Suppose you had both the gold and the power to make the rules – which rules would you make? Which policies would you promote with your gold? Policies to get more gold perhaps. Certainly, in the marketplace for ideologies, Neoliberalism is going to provide a good return on investment. Perhaps that explains its long lasting appeal – to some.

Please note that blog posts do not necessarily represent the views of other authors on the blog or of the Manchester Metropolitan University

This entry was posted in Uncategorized. Bookmark the permalink.