This is a final version submitted for publication. Minor editorial changes may have subsequently been made.
Imagine a nation gaining independence but allowing the nation that colonised it to continue to own its infrastructure, its electricity networks, roads, telecommunications networks and water supply system. The coloniser might claim that it can run these services more efficiently and offer them more cheaply, being more experienced, and that might be true. Yet what nation would voluntarily cede control of its essential services to a foreign government, even if it were paid to do so? Even if it were just for 99 years?
Imagine a homeowner selling off the water pipes in the house and the network of electrical wires, in order to pay for an upgrade of the driveway. Even if the buyer promised that it would not cost them any more over the next five years, wouldn’t s/he be worried about how much might be charged after that and how long it would take to make any necessary repairs?
How different is it to be selling off the state’s poles and wires? Does selling only more than 50 percent of Endeavour Energy and Ausgrid give the government any more control than selling 100 percent? Can citizens be reassured because it is only a 99 year lease? Can regulation ensure the same level control as public ownership of a government run enterprise?
People might find comfort in the idea of regulation but the federal government has already signed a number of free trade agreements that give foreign corporations the right to sue the government if they can make the case that government regulations interfere with their expectations of future profits.
Investor State Dispute Settlement (ISDS) provisions were included in the free trade agreements with China, Korea and Japan (and an earlier Hong Kong free trade agreement) and will be included in the Trans Pacific Partnership (TPP) agreement with the US, Canada, Singapore and 9 other nations.
Corporations from these nations are likely to bid for NSW’s electricity network. Two of the largest electricity companies operating in Australia are based in Hong Kong: Energy Australia, owned by China Light and Power (CLP), and Cheung Kong Infrastructure (CKI) owns the South Australian poles and wires as well as PowerCor, Victoria’s largest electricity distributor.
ISDS provisions enable foreign investors to challenge a government's health, environmental and other regulations and policies in international tribunals made up of three private lawyers. These lawyers, who are often on the boards of transnational corporations, have the authority to order governments to pay unlimited amounts of taxpayer money in compensation to the investors, with no right of repeal. These secret tribunals can penalise nations for regulations made to protect the public interest and upheld by the nation’s courts.
There are three motivations behind the imperative for privatisation of essential services. The first is the prevailing neoliberal ideology that private business is able to run services more efficiently than governments. Even if this were true it does not necessarily translate to lower prices in the case of electricity infrastructure. Given that there is no competition because these are monopolies, the price has to be set by the government, whether ownership is in public or private hands, so any efficiency gains will go to shareholders and executives and to cover lobbying expenses.
The second motivation is the reluctance of governments to raise taxes to pay for the expansion of services demanded by the public and the ideological reluctance of governments to borrow money for this purpose. The sale of public assets is a short-term, expensive, short-sighted, substitute source of capital.
And the third driver of privatisation is the surplus capital around the world seeking the safe and profitable investment opportunities that private ownership of essential services generally provide. This has created a powerful lobby for privatisation.
Privatisation of services not only transfers publicly-owned assets into private hands but also into the hands of fewer and fewer companies. The buyers of government assets and services have mainly been large transnational corporations that, over time, have bought up or squeezed out their competition with little interest in the welfare of local citizens.
Today energy, water, telecommunications and other service corporations are so large that they are often far more powerful than the local governments they contract with to supply services. This makes it very difficult for those governments to enforce terms of contracts relating to performance or to say no to rate increases without fear of retaliation. Investor State Dispute Settlement provisions lend further power to these corporations.