One of the more revealing elements of the Greek bailout discussions is not that the IMF and European finance ministers want another round of austerity from Greece before providing funding, and not even that banks are being urged to take haircuts or engage in restructuring to accommodate the Greeks. It’s that other element – privatization of state assets – that is the tell here. This is the real extraction from the Greeks, the real shock doctrine scheme at work here. Greece essentially must sell the family silver – their ports, their state-run water supply systems, their utility company, their telephone company – to get out of the mess created largely by the financial crisis and the Great Recession. This deal was already done back in May, and clearly was the most important piece of the puzzle for Greek creditors.
Prime Minister George Papandreou announced an immediate sale of state assets on Monday evening, including its shares in the telecom operator OTE and the ports of Piraeus and Thessaloniki.
Following a cabinet meeting, Papandreou announced 1.6 billion euros ($2.3 billion) in savings along with the privatization measures.
“Last year, through our decisions and the sacrifices of the Greek people, we avoided bankruptcy,” Papandreou was reported by the news agency ANA as having said to his ministers.
“Now we take the necessary decisions to avoid the danger once and for all, and to change the country,” read his statement.
Change the country is right; change the world is a better description. Because all over the world, from Spanish airports to California parks, corporate interests are engaged in a full-court press to privatize state assets, to acquire contracts for state services, to take over the business of government and make it unaccountable to the average citizen. And in a shocking number of cases, they have been successful, mainly because cash-strapped cities and states will make deals with the devil in order to stay fiscally solvent and acquire some short-term cash.
Though other issues may predominate in the headlines, privatization has been a key driver of most, if not all, the economic and political debates since the Great Recession. I’ve already mentioned the Greek debt crisis. In Wisconsin, where the main conflict appears to be over an attack on labor unions, privatization is playing a major role as well.
In his January 2010 “state of the county” speech, (then-Milwaukee County executive Scott) Walker called for more privatization. “We will continue to streamline county government by contracting out for services, consolidating departments and enhancing the use of technology.”
During his tenure as county executive, Walker proposed privatizing park maintenance, the county zoo, psychiatric staff and other sectors [...]
The labor unions have been some of Walker’s biggest foes at both the state and local level, aggressively pushing back on his privatization plans. Lee Saunders, secretary-treasurer of the labor union AFSCME, said what Walker is doing is “a power play, pure and simple.”
“They want to diminish the power of public sector workers,” said Saunders. “They want to diminish the power of the unions representing public sector workers, and one of the ways to do that is to limit collective bargaining, which they’re trying to do in a number of states. Another way to do is to threaten to privatize services and reduce the number public sector workers on the job.”
As Amanda Terkel notes, this happens on a variety of different levels. Proponents want to privatize physical assets of the state, pieces of infrastructure like roads, or parking meters, like what was done in Chicago to disastrous results. They want to privatize state-run assets, like Amtrak or state lotteries or energy assets like utilities. They want to take contracts for public services, like road and bridge construction (an entire span of the San Francsico/Oakland Bay Bridge is being built in China and shipped here), or Medicaid programs, or social welfare enrollment services, or education. In Indiana, the private sector took over the state’s public assistance program, and as a result, seniors have seen their benefits suddenly curtailed or erroneously cut.
This all has turned into a bonanza for private contractors, who make more from denying public services than providing them, and who have little accountability to the public they now serve. They lure in government with the promise of up-front money and then make billions over time acquiring the assets at a sweetheart price.
Perhaps the best example of a successful privatization scheme is in the private for-profit prison industry. A new paper from the Justice Policy Institute shows how the private prison industry influences public policy to maximize shareholder benefit.
At a time when many policymakers are looking at criminal and juvenile justice reforms that would safely shrink the size of our prison population, the existence of private prison companies creates a countervailing interest in preserving the current approach to criminal justice and increasing the use of incarceration.
While private prison companies may try to present themselves as just meeting existing demand for prison beds and responding to current market conditions, in fact they have worked hard over the past decade to create markets for their product. As revenues of private prison companies have grown over the past decade, the companies have had more resources with which to build political power, and they have used this power to promote policies that lead to higher rates of incarceration.
For-profit private prison companies primarily use three strategies to influence policy: lobbying, direct campaign contributions, and building relationships, networks, and associations.
As Matt Stoller writes, the power of the private prison industry perpetuates the war on drugs, draconian immigration policies and other misguided “tough on crime” actions, with little public interest involved. Investors are told about private prisons as social infrastructure, and they are keen to reap its yields. Stoller looks at some prospectuses for CCI and GEO Group, two of the larger private prison corporations. The business model is successful because they create their own market – changing policies to increase the prison population, and then providing the services to manage them.
The American Legislative Exchange Council, or ALEC, is one of the prime conduits between corporations seeking privatization and legislators. They build legislation that conservative lawmakers then replicate in states all over the country. Their Publicopoly fake board game is a road map to how to privatize seven different government sectors: government operations, education, transportation and infrastructure, public safety, environment, health and telecommunications.
Dick Durbin, who saw first-hand in Illinois the horror of privatizing Chicago parking meters, is trying one of the first push-backs to this mad rush to privatization. He has introduced legislation that would slow down the privatization of public assets in the states and municipalities. They would have to repay any federal funding used to build or maintain those assets before leasing them to private companies. I’ll let Durbin explain it:
Having billions of dollars immediately available to plug budget holes without raising taxes is very appealing. And to the delight of Wall Street investors, state and local governments often fail to ask the important questions or consider the long-term impact [...]
The Protecting Taxpayers in Transportation Asset Transfers Act would require full disclosure of the terms and conditions of any privatization of an asset that was built with federal tax dollars.
The bill would attach a lien to existing federally funded major transportation projects that have received more than $25 million in federal funding or have a value over $500 million. The lien would only be removed after state and local governments repay the depreciated value of federal funds used to build and maintain the asset.
Instead of incentivizing quick, short-term decisions, the federal government should be asking the tough questions when governments turn over publicly funded transportation assets to for-profit operators. This legislation will make sure those questions are answered before we sell our public assets.
Almost immediately, Durbin faced a counterpoint from his fellow Senator from Illinois, Mark Kirk, who put forward legislation encouraging MORE privatization. This is obviously going to be a bitterly protracted fight. But it’s an incredibly important one. Private sales of physical assets are changing the very nature of sovereignty in a 21st-century world.