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Copyright Bruce Nixon 2010. All rights reserved. This electronic copy is provided free for personal, non-commercial use only. www.brucenixon.com Underground refurbishment and many other initiatives have been or are value for money. Similarly extensive out-sourcing (hospital cleaning services for instance), PPPs and PFIs have not been properly evaluated. Government used its majority with the Tories to force things through, often against the advice of cross party parliamentary committees. The New Labour era was characterised by privatisation by stealth. Let’s be clear. A corporation is legally required to serve its shareholders, NOT stakeholders or the public. Directors are good at serving themselves. It is naïve to have other expectation. Therefore, we cannot accept blanket theories that privatisation offers better value. We need rigorously independent evaluation. Underlying it all is making decisions from ideology instead of relentlessly seeking what works. Margaret Thatcher, no doubt with the best of intentions and facing massive economic problems, inflicted unproven theories on the country. In his article, The Biggest, Weirdest Rip-Off Yet, (Guardian, 7th April 2009), George Monbiot exposes the excessive cost and absurdity of PFI schemes, illustrating the propensity to creates ingenious devices to hide the truth. Under PFI, he explains, private companies build public infrastructure - roads, bridges, schools, hospitals, prisons and the rest – then lease it back to the state for 25 or 30 years. Over 800 deals have been signed since the scheme was launched in 1992. They committed the taxpayer to spending around £215bn. For new hospitals built under private finance initiatives, it has been estimated that the NHS in England faces a total bill of £65bn including rising charges of more than 10% of their turnover. He continues, Government argued that because private companies are more efficient than the state, PFI is cheaper than public procurement. But that does not appear to be so. PFI schemes must be tested against a yardstick called the public sector comparator. However, as government underwrites the scheme, the greater part of the risk falls on taxpayers, negating the rationale of PFI. Furthermore because of greater risks during recession, banks backing PFI infrastructure projects increased their margins, in some cases by 500%. The irony is the government now lends cheap money to the banks, who then charge us, very high rates of interest for the use of our own cash. These banks are now mostly or partly owned by us. Taking the example of the M25 expansion financed through RBS, George Monbiot points out that we, the taxpayers will be bailing RBS out twice – providing the bail out and paying the interest rates, bankers’ fees, including salaries and bonuses. RBS – in other words you and me - already has £10bn invested in PFI schemes in this country, for which we are paying extravagant rates. And as PFI schemes are counted as public sector debt, he asks why government doesn’t the just cut out the middleman and fund the project itself. For how such projects could be financed without debt, see Chapter -10- New Money. People are angry and afraid. Almost every business was reporting falling profits. BA’s CEO described "incredibly difficult trading conditions" and “the bleakest trading environment ever”. Unemployment was predicted to reach 3.3 m by the end of 2009. The financial collapse impacts on the savings, pensions and livelihoods of ordinary people and large numbers of people have entered negative equity. Repossessions increased by 71% compared with the same months in 2007. Putting it all into perspective, of 6.7bn people in the world, 1bn are hungry. 60% of humans live on just 6% of the world’s resources. 22m Africans have AIDS. From the perspective of poor and developing countries, the North has shown a callous disregard for the consequences of their greed for the majority in the world. This has been going on for a long time. But by December 2010 the number of people living on less than $1.25 a day will be about 90 million higher because of the far-reaching impacts of the financial crisis. The food price 24
Copyright Bruce Nixon 2010. All rights reserved. This electronic copy is provided free for personal, non-commercial use only. www.brucenixon.com hike over 2005-08 pushed an additional 130 million people below the $1.25 a day poverty line, according to the World Bank. Recent oil price increases pushed an estimated further 25 million into poverty. Markets are efficient; but only to a point. Investing in a sustainable future is not in the short-term interests of directors and shareholders. Free enterprise does not allocate resources according to a nation’s or the world’s long-term priority needs. The market rides roughshod over poor people all over the world. Privatisation has brought refreshing innovation, enterprise and efficiency. It also gave away national assets, paid for by taxpayers, at knock down prices and made a few people very rich. Privatisation, without rigorous strategic frameworks and regulation, leads to short-term gain at the expense of long-term value. It has probably been poor value for money and has accumulated enormous debts for the nation. Paying for public infrastructure investments through Private Finance Initiatives (PFI) and Public Private Partnerships (PPPs) was a device to get round limits set by the public sector borrowing requirement. How much will we ultimately pay under these devices? We were warned. Sir Fred Goodwin or Gordon Brown liked to argue that none of this could have been predicted. There were plenty of warnings. We did not listen. Over the decades, clear-sighted people like Mahatma Gandhi, Albert Einstein, John Maynard Keynes, Ernst Schumacher, Kenneth Boulding, Kenneth Galbraith, Herman Daly, Hazel Henderson, George Soros, Joseph Stiglitz, Peter Hawken and Warren Buffet warned us what would happen. Reagan mocked Carter, when he campaigned about Peak Oil in the Seventies, with an artful “There you go again!” "God forbid that India should ever take to industrialisation after the manner of the West. The economic imperialism of a single tiny island kingdom (the UK) is today keeping the world in chains. If an entire nation of 300 million took to similar economic exploitation, it would strip the world bare like locusts." Mahatma Gandhi, 1928 In 1972 The Limits to Growth report, commissioned by theClub of Rome, warned of the consequences of a rapidly growing world population and finite resource supplies. It used the World model to simulate the consequence of interactions between the Earth and human systems. Five variables were examined: world population, industrialisation, pollution, food production and resource depletion. An updated version, Limits to Growth: The 30-Year Update, was published in 2004. In 2008 Graham Turner published a paper called "A Comparison of `The Limits to Growth` with Thirty Years of Reality". It examined the past thirty years of reality with the predictions made in 1972 and found that changes in industrial production, food production and pollution are all in line with the book's predictions of economic collapse in the 21st century. But most leaders, with their celebrity mentors and compliant economists, were too much in the grip of exciting money making games, technological innovation and the consumer society to heed these warnings. The rest of us were simply managing as best we could, trying to make a living, keep our jobs, bring up our kids, often paying for child care with two parents working, with no time or energy for much else. All of this has happened on a global scale. The behaviour of the richest countries towards poorer ones is scandalous. We colonised and exploited poorer countries for centuries and still do. The globalised economic system, based on sourcing for lowest-cost, is an updated form of colonialism. Transnational corporations are the new empires, their economies larger than many countries. So- called “free trade” is patently “unfair 25
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