Thursday, February 25, 2010

Tony Judt: the moral hazard of privatization

A remarkable lecture by British professor Tony Judt on the ongoing worldwide privatization of the commons. In simple words, he lays down the theoretical framework of the neoliberal silent revolution and how it is dissolving the structure of human society.

If you need a theoretical refresher on why you should personally resist BC's energy privatization scheme, this is it.

Available as

From Judt's lecture:

[The] “disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition…is…the great and most universal cause of the corruption of our moral sentiments.” Those are not my words. They were written by Adam Smith, who regarded the likelihood that we would come to admire wealth and despise poverty, admire success and scorn failure, as the greatest risk facing us in the commercial society whose advent he predicted. It is now upon us.

The most revealing instance of the kind of problem we face comes in a form that may strike many of you as a mere technicality: the process of privatization. In the last thirty years, a cult of privatization has mesmerized Western (and many non-Western) governments. Why? The shortest response is that, in an age of budgetary constraints, privatization appears to save money. If the state owns an inefficient public program or an expensive public service—a waterworks, a car factory, a railway—it seeks to offload it onto private buyers.

The sale duly earns money for the state. Meanwhile, by entering the private sector, the service or operation in question becomes more efficient thanks to the working of the profit motive. Everyone benefits: the service improves, the state rids itself of an inappropriate and poorly managed responsibility, investors profit, and the public sector makes a one-time gain from the sale.

So much for the theory. The practice is very different. What we have been watching these past decades is the steady shifting of public responsibility onto the private sector to no discernible collective advantage. In the first place, privatization is inefficient. Most of the things that governments have seen fit to pass into the private sector were operating at a loss: whether they were railway companies, coal mines, postal services, or energy utilities, they cost more to provide and maintain than they could ever hope to attract in revenue.

For just this reason, such public goods were inherently unattractive to private buyers unless offered at a steep discount. But when the state sells cheap, the public takes a loss. It has been calculated that, in the course of the Thatcher-era UK privatizations, the deliberately low price at which long-standing public assets were marketed to the private sector resulted in a net transfer of £14 billion from the taxpaying public to stockholders and other investors.

To this loss should be added a further £3 billion in fees to the banks that transacted the privatizations. Thus the state in effect paid the private sector some £17 billion ($30 billion) to facilitate the sale of assets for which there would otherwise have been no takers. These are significant sums of money—approximating the endowment of Harvard University, for example, or the annual gross domestic product of Paraguay or Bosnia-Herzegovina. This can hardly be construed as an efficient use of public resources.

In the second place, there arises the question of moral hazard. The only reason that private investors are willing to purchase apparently inefficient public goods is because the state eliminates or reduces their exposure to risk. In the case of the London Underground, for example, the purchasing companies were assured that whatever happened they would be protected against serious loss—thereby undermining the classic economic case for privatization: that the profit motive encourages efficiency. The “hazard” in question is that the private sector, under such privileged conditions, will prove at least as inefficient as its public counterpart—while creaming off such profits as are to be made and charging losses to the state.

The third and perhaps most telling case against privatization is this. There can be no doubt that many of the goods and services that the state seeks to divest have been badly run: incompetently managed, underinvested, etc. Nevertheless, however badly run, postal services, railway networks, retirement homes, prisons, and other provisions targeted for privatization remain the responsibility of the public authorities. Even after they are sold, they cannot be left entirely to the vagaries of the market. They are inherently the sort of activity that someone has to regulate.

This semiprivate, semipublic disposition of essentially collective responsibilities returns us to a very old story indeed. If your tax returns are audited in the US today, although it is the government that has decided to investigate you, the investigation itself will very likely be conducted by a private company. The latter has contracted to perform the service on the state’s behalf, in much the same way that private agents have contracted with Washington to provide security, transportation, and technical know-how (at a profit) in Iraq and elsewhere. In a similar way, the British government today contracts with private entrepreneurs to provide residential care services for the elderly—a responsibility once controlled by the state.

Governments, in short, farm out their responsibilities to private firms that claim to administer them more cheaply and better than the state can itself. In the eighteenth century this was called tax farming. Early modern governments often lacked the means to collect taxes and thus invited bids from private individuals to undertake the task. The highest bidder would get the job, and was free—once he had paid the agreed sum—to collect whatever he could and retain the proceeds. The government thus took a discount on its anticipated tax revenue, in return for cash up front.

After the fall of the monarchy in France, it was widely conceded that tax farming was grotesquely inefficient. In the first place, it discredits the state, represented in the popular mind by a grasping private profiteer. Secondly, it generates considerably less revenue than an efficiently administered system of government collection, if only because of the profit margin accruing to the private collector. And thirdly, you get disgruntled taxpayers.

In the US today, we have a discredited state and inadequate public resources. Interestingly, we do not have disgruntled taxpayers—or, at least, they are usually disgruntled for the wrong reasons. Nevertheless, the problem we have created for ourselves is essentially comparable to that which faced the ancien rĂ©gime.

As in the eighteenth century, so today: by eviscerating the state’s responsibilities and capacities, we have diminished its public standing. The outcome is “gated communities,” in every sense of the word: subsections of society that fondly suppose themselves functionally independent of the collectivity and its public servants. If we deal uniquely or overwhelmingly with private agencies, then over time we dilute our relationship with a public sector for which we have no apparent use. It doesn’t much matter whether the private sector does the same things better or worse, at higher or lower cost. In either event, we have diminished our allegiance to the state and lost something vital that we ought to share—and in many cases used to share—with our fellow citizens.


Thursday, February 18, 2010

Wilderness Committee crashes Private Power's Party

Bute Inlet. Photo Wilderness Committee

From Gwen Barlee, Policy Director at the Wilderness Committee:

I just wanted to report back on an information picket the Wilderness Committee held outside of a General Electric and Plutonic Power event in Vancouver last Sunday.

Last Friday we received notice that General Electric, one of the largest multinationals in the world, along with their Canadian partners Plutonic Power, were holding an invitation-only open house to feature their new energy projects in BC - including numerous river privatization projects.

GE, worth an estimated $48 billion, epitomizes the public concern around the loss of control of BC rivers to massive corporations. As one of the largest companies on the planet, the US-based GE has a checkered history involving large-scale air and water pollution. Amongst numerous environmental transgressions GE is linked to scores of Superfund toxic waste sites in the United States, pollution of the Hudson and Housatonic Rivers and the release of as much as a million pounds of highly toxic PCBs.

Standing outside of the heavily guarded event was interesting. Corporate investors, BC Ministers, Assistant Deputy Ministers, selected media, bigwigs from Plutonic Power and GE including Donald McInnes, CEO of Plutonic Power and GE Services CEO Alex Urquhart were amongst the high-profile insiders who were ushered into the event. Interestingly, Tzeporah Berman of Power Up was also at the GE/Plutonic promotion.

Occasionally, a bemused investor would wander outside to see what the fuss was about. In several discussion with investors what became clear was the fact that public good, high environmental standards, proper planning and public power were foreign concepts; instead, private profits and closed-door meetings were considered the norm and something we, the public, would need to accept. In fact we were told if we weren’t “so negative” we would have been invited inside.

This information picket was interesting on many levels - the public outside picketing, while government insiders and powerful CEOs were inside busily trying to divvy up BC’s rivers.

The transformation of GE from corporate polluter to environmental savour was complete when Tzeporah was quoted in the Globe and Mail the next day saying,  “The climate challenge requires us all to reevaluate our priorities... We’ve seen that in the environmental movement’s struggle to move from focusing on wilderness politics and place-based campaigns, to be willing to stand up for solutions that require development.”

For the record the Wilderness Committee would rather stand up for BC’s wild places than allow scores of rivers to be put into pipes to enhance the bottom line of one of the largest corporations in the world. We also don’t want to see our public utility, BC Hydro, run into the ground. We can, and will, stop the give away of BC’s rivers to corporate interests.

Stay tuned.  In the next few weeks we will be announcing events being held in Victoria, Vancouver and Campbell River to help save the wild rivers of Bute Inlet from GE and Plutonic’s massive industrial proposal. Together we can make sure clean energy is done right: in a way that puts the public good over corporate profits and includes high environmental standards and proper planning.

Just as all of us stopped environmentally damaging and poorly planned private power projects in the Upper Pitt and at Glacier Howser in the Kootenays, we can keep our rivers wild and our power public throughout BC.
Gwen Barlee | Policy Director
Wilderness Committee


Sunday, February 7, 2010

Olympic resistance - schedule of events

Okay people, it's crunch time. The Olympics are here, and whatever reasons you have to oppose them, the time has come to get your voice heard.

I am posting below the schedule of events put together by the admirable people of the Olympic Resistance Network.

The rally on Friday February 12 at 3 PM at the Vancouver Art Gallery is a must-attend. I hear it will be peaceful, fiesty, family-friendly, creative, fun -- and BIG. If you can only attend one event, this is it.

The Los Angeles Times has captured the historic meaning of the olympic resistance movement in Vancouver when it recently wrote:

While past Olympics have been magnets for protests over issues such as aboriginal rights in Australia and oppression in Tibet, the Vancouver Winter Games are preparing to host one of the biggest displays ever of organized opposition to the Olympics themselves.

Vancouver is starting a new global movement, one that will continue in London and all other Olympic-plagued cities after that. A movement that says: we don't want the Olympics corporate franchise anymore, anywhere. We just want it abolished, period.

Make sure you're part of history. See you there!

Friday, February 5, 2010

Prosecute Marine Harvest now

The pacific wild salmon, a keystone species. Photo Isabelle Groc, Tidlife Photography

To: Todd Gerhardt
Senior Crown Counsel
Public Prosecution Service of Canada

Dear Mr. Gerhardt,

I understand from a recent correspondence with Alexandra Morton that you are pondering whether or not to prosecute the matter of Marine Harvest's alleged illegal possession of wild pink salmon in the Broughton Archipelago in 2009.

One of the questions you are pondering, Ms. Morton reports, is whether such a prosecution would be in the public interest.

For what it's worth, my answer to you is Yes. We, the public, are interested in seeing this matter prosecuted for at least two reasons:

1. Reason of ecology. The pacific wild salmon is a keystone species on which the entire coastal ecosystem of British Columbia depends. Any interference with the well-being of our salmon must be diligently prosecuted, to ensure that both the salmon and the natural and human communities which heavily rely on them receive full protection under the Canadian law.

2. Reason of justice. The alleged defendant in this matter is not your average Joe Doe. It is Marine Harvest, a multibillion transnational corporation with considerable financial, economic, and political power. If Joe Doe had allegedly poached on pink salmon, he would have been swiftly prosecuted and the question of public interest would not even have been asked. To allow Marine Harvest to walk away without being properly prosecuted for its alleged actions, would send a clear message to the public that the Marine Harvests of the world are above the Canadian law.

I'll be forthcoming with you, Mr. Gerhardt. My confidence in the ability of our legal system to protect the public against powerful corporations is weak, to say the least. I feel that the independence of our legal system has been compromised, that it has become an instrument of domination in the hands of powerful private interests. I will venture further to say that my sentiment reflects that of a large portion of the general public today.

Nothing would fill me with more joy than to be proven wrong on this point. I want to - and I will - change my mind if I am given tangible reasons to do so. I challenge you, Mr. Gerhardt, to prove me wrong. Compel me to revise my harsh opinion about the dismal state of our legal system. Prosecute Marine Harvest now.

Yours very truly,

Ivan Doumenc
Vancouver, BC


Thursday, February 4, 2010

Alex Morton: demand prosecution of Marine Harvest now

From Alexandra Morton. 

Note: Alex is making a call for action at the end of her email. She is asking us to write to Todd Gerhart of the Department of Justice, and tell him that we believe it is in the public interest to prosecute the matter of Marine Harvest's illegal catch of wild fish.

Read on and write your letter.

On February 2, lawyer Jeffery Jones and I were back in court with my charges against Marine Harvest for illegal possession of wild pink salmon by-catch.  On the previous date (January 4) Judge Saunderson instructed the Department of Justice to inform the court on this day as to whether they will be assuming conduct of this case.

However, Todd Gerhart of the Department of Justice was only prepared to tell the judge that he would make his decision “soon.”  When the judge asked for a specific time, Gerhart did not answer. In response the judge stood the issue down and recalled us later in the day.

Marine Harvest used this opportunity to request disclosure of the “in camera” process hearing. This was a closed-door meeting between myself, a witness, my lawyer and the judge wherein the judge reviewed our evidence and decided the charge could move forward. The Marine Harvest Lawyer, Chris Watson held up some case law.   Although the precedent he offered was from a different situation, we have nothing to hide and agreed.  The Marine Harvest lawyer asked that I bear the cost of transcribing the process hearing, but Judge pointed out it was already transcribed.

Finally, Marine Harvest requested an arraignment date in April and so that is when we will learn if the Department of Justice will assume contact of this case.

I felt disappointed that DOJ couldn’t give us a decision sooner, despite the previous court order.  Spring is coming to us again and with it all the young wild salmon and herring that can be entrapped, detained, destroyed, fed artificial food or even preyed on in salmon farm nets.  However, I have learned the courts cannot be hurried and we should take heart that while this may be slow, at least it is not going backwards.

Mr. Gerhart might decide not to assume this case. Or he could decide to take it over and stay the charges. Or he could decide to conduct a trial and bring the resources of the Department of Justice and our substantial evidence in support of the wild fish that are being removed by fish farm by-catch.  Mr. Gerhart appears to be very concerned with fairness and the public interest and has two decisions to make.

  1. What is the likelihood of conviction? – On this point I can say we have: witnesses, samples of the wild juvenile salmon, and written admission from Marine Harvest that they had wild salmon in their possession.
  2. Is this in the public interest – So I put this to you. Are you interested in seeing the laws of Canada applied to Marine Harvest to prevent them from taking wild fish without a licence or any record of quantity?

Mr. Gerhart says he is still willing to review new information about this case regarding the public interest. I look forward to providing further information to Mr. Gerhart to help establish the public interest in this prosecution. If other people feel the same way, Mr. Gerhart can be contacted directly at:

This may be a critical time to demonstrate once and for all to the Canada’s Department of Justice how important wild fish are to the people of British Columbia.

Alexandra Morton