what is the private sector good for?

Private sector – what is it good for?

The collapse of Carillion, which made its money by sucking resources out of the public sector, begs the question: What use to society is the private sector of capitalism, when all is said and done?

Hospital building, road and rail construction sites have halted. Emotions are stirring as the inevitable results of opening public services to commercial, competitive for-profit exploitation erupt into crisis.

Carillion crashed despite grinding its employees and sub-contractors into the dirt because it incurred massive debt buying up other companies, paid big dividends to shareholders, made huge payouts to its top executives, and it won contracts with lowest-price bids forcing its profits down.

But this isn’t just about the public-private mash-up.

The growth in UK retail sales – a telling measure of the health of the economy – went into decline in 2017. Profit warnings from retailers like Debenhams, Mothercare, Moss Bros and Carpetright echo those that foreshadowed Carillion’s liquidation.

It’s no surprise as rising inflation crossed with real incomes squeezed by continued austerity, and pushed personal debt to the limit. People simply haven’t got the money to spend. Hence the rise of the food banks and the massive growth in child poverty.

The idea of public-private partnership is as old as capitalism itself. From the late 18th century onward, the state first created and then developed the framework for private enterprises to prosper. While reforms have benefited workers at times, the main props of capital remain untouched – private ownership of property, of the means of production, the right to hire and fire and to retain profits created by the labour of others.

Private Finance Initiative (PFI) and outsourcing using other forms of public-private-partnership (PPP) funding took this relationship to a new level. The opening of public services to contracts with the private sector was demanded by corporations struggling with low profitability and pursued for decades by teams of lobbyists through every avenue including GATT, the World Trade Organisation and the European Union.

The state took on the risk (of PFI), guaranteeing payments to developers, while divesting itself of responsibility for many services (care homes, prisons, railways, energy etc) which became new areas for profit making.

Private financing of public projects really took off under the Blair-Brown New Labour governments. Many of Carillion’s contracts date back to that period. This was part of the development of a market or competition state needed and loudly demanded by the expanding global network of competing corporations.

The argument was that finance from the supposedly more efficient private sector would lead to better and cheaper services. But the truth is the other way round: the private, profit-making sector, which needed government contracts to survive, is now in such a crisis that not even taxpayers’ cash can help them.

The difficulties experienced by outsourcing firms like Balfour Beatty, Carillion, Capita and Virgin add up to the now all-pervasive crisis of PFI. It’s why the signing of new contracts under that scheme has dropped to an all-time low. So now it’s the NHS that’s about to be opened up to the bloodsuckers.

Under the new Sustainability and Transformation Plans for the NHS, Accountable Care Organisations – an idea imported from the US – will begin to be introduced in April. Critics like Dr Richard Vautry, the British Medical Association’s top GP, warns “that creating accountable care organisations (ACOs) alongside existing competitive tendering regulations carried a ‘risk of widescale privatisation’ of NHS services”.

So it’s time to end the public-private finance delusion and bring to an end the outsourcing of public services which now total £80 billion a year.

It’s good to see Jeremy Corbyn promising to make the public sector the default choice for providing government services.

But Labour needs to go further and pledge to terminate all existing contracts (which together will require another £200 billion in payments by the state through to 2050) rather than wait for them to expire. And it should do the same with the railways, ending the existing franchises as soon as it is elected to government.

Sure, that would need legislation to overcome the finer points of capitalist contract law. But the PFI companies and Virgins of this world have taken enough taxpayers’ money. Public support would be there for laws ending this financial merry-go-round. There may be other options for terminating the PFI rip-off.

But there’s a bigger question. Why do we need a private sector at all? What’s the point of it, except as a parasite that’s eating its host? Inequality is at an all-time high and real wages at an all-time low. Public services like the NHS and education are falling apart for want of investment. Care for older people is a privilege of the wealthy instead of a right of the many.

Who needs the private ownership of productive forces? Only shareholders, hedge funds, speculators and highly-paid CEOs. It is anyway being engulfed by an unavoidable crisis of low productivity, low investment and a declining rate of profit. Leaving it in place, like the flesh-eating disease necrotizing fasciitis munching away at the social fabric, won’t be pretty, to say the least.

Those like Paul Mason wishing for a kinder, more caring capitalism are simply whistling in the wind. What’s the alternative? Corbyn and John McDonnell rightly say the “system” (aka capitalism) serves the few at the expense of the many. So they need to be bold and set out a real, socialist, democratic alternative.

They are suggesting that workers in failing companies should have the right to run them as mutually-owned enterprises. But what about the rest, the Googles, Amazons, BTs, Virgins, Sainsbury and the other corporations that mine our data and dominate our lives?

All workers should have the right to convert these companies to cooperative ownership.

That will bring them into democratic control – by definition. The same goes for the investment banks and other key elements of the financial system.

Don’t just set up a state investment bank alongside the private banks. That will only lead to new crises. Bite the bullet, instead. Take all banks into social ownership and turn them into not-for-profit service providers providing finance for housing, infrastructure, and innovation, and for restoring our ecosystem.

Can it be done, could it be made to work in the UK alone? Of course not. But making an exemplary start would unleash an unstoppable tide behind a Corbyn-led government and be the basis for defeating the inevitable counter-revolution unleashed by a dying system.

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