Privatisation has failed – it’s time to return to a public alternative


The failed privatisations of water, energy, rail and health have for decades shown worldwide that those promoting privatisation offer false promises.

Elections have been fought and won on promises to keep public services in public hands.

In sectors such as health, education, water, energy and transport, community attitudes strongly support universal public provision.

Yet privatisation and so-called public-private partnerships (PPPs) are returning to fashion.

Many governments are turning to public-private partnerships in the hope that the private sector will finance public infrastructure and public services savagely hit by the financial crisis.

This hope has long run through the World Bank and OECD, but is now emerging in the G20 and the negotiations at the United Nations for the sustainable development goals and the linked financing for development.

If successful, privatisation could become official UN policy.

Why is privatisation resurging when the past 30 years’ experience shows it is fundamentally flawed?

Our report, Why Public-Private Partnerships Don’t Work, demystifies the processes, most of which are shrouded in secrecy, hiding behind confidential negotiations to protect commercial advantage.

In the context of the economic crisis, governments are under increased pressure to find quick answers to hard questions about maintaining public services and funding infrastructure.

The longer the crisis extends, the more pressure mounts to find answers – but so do the risks of forgetting the root causes: greed, deregulation, and excessive faith in private corporations.

Part of the danger of PPPs is the shadowy process, much of which hides behind confidential negotiations to protect commercial secrecy.

There are no public consultations, many false promises, and incredibly complex contracts, all designed to protect corporate profits.

There is also bribery, as privatisation contracts can be extremely valuable.

PPPs are used to conceal public borrowing, while providing long-term state guarantees for profits to private companies.

Private-sector corporations must maximise profits to survive. This is fundamentally incompatible with protecting the environment and ensuring universal access to quality public services.


Powerful corporate lobbies

PPPs are an expensive and inefficient way of financing infrastructure and services.

Regrettably, most politicians and senior civil servants never see serious analyses that are critical of PPPs.

Local and national governments and the UN are heavily influenced by the powerful lobby of the biggest services and financial corporations, global consulting and law firms, all intent on reaping profits from basic public services such as health, water and energy.

It is our job, in alliance with social movements, to raise the alarm, to demand transparency and accountability of our public officials and elected politicians, and to create mechanisms for systematic participation in decision making.

These privatisation policies are linked to the new wave of trade negotiations.

These, too, have been secretive, carried without public consultation, agreed behind closed doors and heavily influenced by business interests.

The trade deals not only facilitate PPPs but will lock them in, making it next to impossible to reverse them, regardless of outcomes.

A further danger is the recent effort by the World Bank, the G20, OECD and others to ‘financialise’ PPPs in order to access the trillions of dollars held by pension funds, insurance companies and other institutional investors.

To access these funds, governments are advised to agree to a number of PPPs simultaneously, to create a pool of assets that can be bundled and sold on to long-term investors.

This is exactly what the financial services companies did with home mortgages at the turn of the century, which brought us the global financial crisis of 2008.

We need to return to the public alternative to privatisation, in which national and local governments continue to develop infrastructure by using public finance for investment, and public-sector organisations to deliver the service.

This provides greater flexibility, control, and comparative efficiency – because of reduced transaction costs and contract uncertainty, as well as economies of scale – and the efficiency gains of more democratic accountability.

Public Services International (PSI) engages with national unions and social movements.

Our work on trade has brought new attention to the issue and provoked a number of serious debates as to the merits of the ongoing negotiations.

In the utilities sector, our work has helped return services to municipalities around the world, most strongly in the water sector.

And our alternative to PPPs, public-public partnerships, based on solidarity not profit, is having an effect in the development community.


This article was originally published on The Guardian’s Public Leaders Network.