tag:theconversation.com,2011:/uk/topics/public-ownership-20437/articles
Public ownership – The Conversation
2022-10-24T05:32:13Z
tag:theconversation.com,2011:article/193091
2022-10-24T05:32:13Z
2022-10-24T05:32:13Z
Labor’s love lost: the tide is turning on private ownership of electricity grids
<figure><img src="https://images.theconversation.com/files/491249/original/file-20221024-13-pzklh7.jpg?ixlib=rb-1.1.0&rect=0%2C214%2C5742%2C3077&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The promise by the Andrews government to reintroduce public enterprise to Victoria’s electricity industry, through a revived State Electricity Commission, is something of a shock. </p>
<p>The process of electricity privatisation in Australia began with Labor in Victoria, when the government of Joan Kirner sold <a href="https://researchdata.edu.au/loy-yang-b-known-lybco/491512">51% of the Loy Yang B power station</a> in 1992. Her Liberal successor, Jeff Kennett, then sold the remainder of Loy Lang B, as well as the rest of the state’s publicly owned generation, transmission and distribution assets.</p>
<p>Labor has been office for all but four years since Kennett’s defeat in 1999. Until now it has made no attempt to reverse his policies. Rather, it has undertaken some rather dubious privatisations of its own, notably the Andrews government’s <a href="https://www.abc.net.au/news/2018-08-27/victoria-privatises-its-land-titles-and-registry-office/10169056">2018 sale</a> of the Land Titles and Registry office. </p>
<p>Premier Daniel Andrews’ statement that “it was wrong, it was a mistake, to sell our energy companies” therefore marks a clear shift.</p>
<h2>Labor leaders change tack</h2>
<p>The change is part of a broader shift in Labor’s position throughout Australia. </p>
<p>Arguably this shift began in Queensland after the trouncing of Anna Bligh’s Labor government in 2012, winning just seven of 89 seats. The Bligh government had sold a range of public assets (though retaining distribution and transmission networks, and coal-fired power generators). The remnants of the Labor party concluded privatisation was electoral and economic poison. </p>
<p>Labor was returned to power in 2015 after the LNP government of Campbell Newman, having sought to push privatisation further, was ousted after one term. Under Annastacia Palaszczuk the Queensland government is now investing in new renewable generation through the publicly owned CleanCo – including <a href="https://reneweconomy.com.au/acciona-to-build-huge-1gw-wind-farm-in-queensland-after-landing-cleanco-deal-15236/">18 wind turbines</a> as part of the MacIntyre Wind Precinct, the <a href="https://cleancoqueensland.com.au/first-foundation-poured-at-the-macintyre-wind-precinct/">largest wind farm project</a> in the southern hemisphere. </p>
<p>NSW Labor went through similar contortions over privatisation, with a series of premiers and treasurers trying and failing to find a way of selling the electricity industry. </p>
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<img alt="alt" src="https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/491239/original/file-20221024-15-rae5f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">caption.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>The disastrous defeat of the Keneally Labor government in 2011 was driven by this failure, along with the string of scandals that seem to be the rule rather than the exception in NSW politics. </p>
<p>Now, with the prospect of Labor returning to power next March, Opposition leader Chris Minns has <a href="https://www.chrisminns.com.au/nsw_labor_to_protect_state_assets">given a guarantee</a> there will be no more privatisations.</p>
<p>At the national level, the biggest single commitment of the Albanese government is the $20 billion Rewiring the Nation initiative, to build the transmission network needed for clean energy. The first two projects to be financed – the Marinus Link between Tasmania and Victoria, and the Kerang link, between Victoria and NSW – are <a href="https://www.energy.gov.au/news-media/news/rewiring-nation-supports-its-first-two-transmission-projects">publicly owned</a>.</p>
<h2>Taxpayers worse off</h2>
<p>What explains this shift? </p>
<p>First, public opinion is now <a href="https://theconversation.com/publics-view-of-the-politics-of-privatisation-comes-full-circle-22073">opposed to privatisation</a>.</p>
<p>There was significant public support for privatisation in the 1980s, but this went into decline after major privatisations began in the early 1990s. Contrary to the hopes of supporters, experience with privatisation only made voters more hostile. This has finally permeated through to political commentary. The failings of formerly public enterprises like Qantas are now <a href="https://www.crikey.com.au/2022/06/23/qantas-alan-joyce-another-failure-privatisation/">regularly traced back</a> to the process of privatisation.</p>
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<a href="https://theconversation.com/publics-view-of-the-politics-of-privatisation-comes-full-circle-22073">Public's view of the politics of privatisation comes full circle</a>
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<p>More importantly, politicians now understand that the economics of selling income-generating assets don’t stack up.</p>
<p>The premise for privatisation was that it was better for taxpayers to sell state-owned assets and reduce public debt.</p>
<p>But, particularly when interest rates on public debt are below the rate of inflation, government-owned enterprises generate returns well above the cost of <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-8462.1995.tb00886.x">the capital invested</a> in them.</p>
<p>Those states that kept ownership of their electricity networks, such as Queensland and Tasmania, have received a steady flow of dividends, and the value of their assets have appreciated. The proceeds of privatisation in other states have long dissipated.</p>
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Read more:
<a href="https://theconversation.com/the-end-of-coal-fired-power-is-in-sight-even-with-private-interests-holding-out-191951">The end of coal-fired power is in sight, even with private interests holding out</a>
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<p>According to the ideology of privatisation, the low cost of borrowing for public enterprises is an illusion, because the public is on the hook for the cost of a bailout in the event of any business failure. But such bailouts have been very rare in Australia, and taking their costs into account does not change the calculation significantly.</p>
<p>The risk premium demanded by investors in private equity has always been large, and is now growing, making the gap between the private and public cost of capital even larger. There has been a corresponding drop in private investment globally, and (outside mining) in Australia. The case for public investment has never been stronger. Labor politicians seem finally to have realised this.</p><img src="https://counter.theconversation.com/content/193091/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin is a long-standing critic of privatisation in the electricity sector since the 1990s. He has made numerous submissions to public inquiries, and has undertaken research for the Electrical Trades Union. </span></em></p>
Victorian Labor started the process of privatising electricity assets. Now Premier Daniel Andrews says it was a mistake.
John Quiggin, Professor, School of Economics, The University of Queensland
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/149991
2020-11-13T03:49:12Z
2020-11-13T03:49:12Z
Split decision: Telstra’s carve-up plan comes 23 years too late for competition and customers
<p>Telstra’s plan to split into three entities is the most radical shake-up of Australia’s largest telecommunications company since the Howard government began privatising it in 1997.</p>
<p>But as David Hetherington, a senior fellow at progressive think tank Per Capita, has suggested, it <a href="https://twitter.com/davidheth/status/1326698783443349504?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet">comes 23 years too late</a>. </p>
<p>In privatising a public monopoly – controlling the copper wires and other infrastructure – the Howard government created a perfect storm for imperfect competition. It meant Telsta competed against other telcos to which it provided critical infrastructure services – hardly an ideal situation.</p>
<p>With the politicised and botched roll-out of the National Broadband Network, the market has become even murkier. </p>
<p>The NBN model championed by the Labor governments of Kevin Rudd and Julia Gillard – fully replacing the century-old copper-wire network connecting the nation’s homes and business with fibre optics – might have corrected the mistakes made in in the way Telstra was privatised, putting monopoly infrastructure back in public hands.</p>
<p>But the Abbott government neutered that by choosing to roll out a half-baked NBN, and now the federal government has its eyes on privatising the broadband network.</p>
<p>This is why Telstra wants to split into three entities. It is positioning to acquire NBN, putting itself back in a monopoly position. That might be good for shareholders. But it’s not good for competition and consumers.</p>
<h2>Strategic sense – for shareholders</h2>
<p>Telstra’s <a href="https://www.fool.com.au/tickers/asx-tls/announcements/2020-11-12/3a555182/proposed-corporate-restructure-roic-and-guidance/">plan</a> is this. Its existing infrastructure business, InfraCo, will continue to operate Telstra’s fixed-line assets. Mobile infrastructure will be hived off to form InfraCo Towers. The third entity, ServeCo, will own the active parts of Telstra’s mobile phone business, which includes its radio access network and spectrum assets that maintain the network’s coverage.</p>
<p>This makes strategic sense for Telstra. </p>
<p>In 2010, to make way for the National Broadband Network, the Australian parliament passed legislation requiring Telstra to split its retail and wholesale division, and sell its copper and cable broadband networks to the government-owned NBN Co.</p>
<p><a href="https://www.itnews.com.au/news/analysts-nbn-co-the-winner-from-any-telstra-split-156321">Analysts</a> at the time said it was a plus for Telstra as it would get a return on its ageing assets and free it up to focus on higher-margin revenue businesses such as its Next G Mobile and HFC Cable networks. </p>
<p>But it has lost an estimated <a href="https://www.afr.com/chanticleer/the-real-cost-of-the-nbn-to-telstra-20200213-p540dx">A$3.5 billion</a> in earnings from giving up control of its network. </p>
<h2>Positioning for a privatised NBN</h2>
<p>The split will give Telstra the opportunity to acquire a privatised NBN. </p>
<p>Federal Communications Minister Paul Fletcher last year <a href="https://www.smh.com.au/business/companies/fletcher-rules-out-nbn-sale-to-telstra-20190709-p525j0.html">ruled out</a> any chance of Telstra acquiring the NBN. No entity delivering retail telecommunications could own the broadband network, he said. “NBN cannot be owned by a vertically integrated telco.”</p>
<p>The restructure answers that: it won’t be Telstra buying NBN but InfraCo.</p>
<p>As Telstra’s chief financial officer, Vicki Brady, told <a href="https://www.morningstar.com/news/dow-jones/2020111112031/telstra-to-restructure-for-nbn-privatization-tower-monetization-update">Dow Jones</a>:</p>
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<p>The government has indicated at some point their intention is to privatise NBN and we wanted to make sure we had the optionality at that point to make sure we are at the table.</p>
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<p>Analysts now say Telstra is the most appropriate partner for a privatised NBN. It could potentially deliver a better service for NBN customers and create a more efficient Telstra.</p>
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<a href="https://theconversation.com/what-should-be-done-with-the-nbn-in-the-long-run-99294">What should be done with the NBN in the long run?</a>
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<p>Certainly NBN Co isn’t doing very well. In February it reported a half-year net loss after tax of <a href="https://www.abc.net.au/news/2020-02-11/nbn-on-track-and-on-budget-says-ceo-stephen-rue/11953694">A$2.8 billion</a>, adding to consecutive multibillion-dollar losses. It latest half-year result was a big improvement, but still <a href="https://www.zdnet.com/article/nbn-halves-ebitda-loss-in-fy20-as-revenue-grows-by-a-third/">a A$648 million loss</a>. </p>
<p>The NBN’s biggest problem is that its creation has been muddied by politics.</p>
<p>The Abbott Coalition government (elected in 2013) proclaimed it could deliver the NBN for less money by cutting back from a purely fibre-optic network to a mixed bag of fibre, coaxial cable, a century-old copper network and <a href="https://theconversation.com/around-50-of-homes-in-sydney-melbourne-and-brisbane-have-the-oldest-nbn-technology-115131">second-rate technology</a>. </p>
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Read more:
<a href="https://theconversation.com/around-50-of-homes-in-sydney-melbourne-and-brisbane-have-the-oldest-nbn-technology-115131">Around 50% of homes in Sydney, Melbourne and Brisbane have the oldest NBN technology</a>
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<p>It promised to deliver the NBN for $29.5 billion, rather the estimated A$50 billion for Labor’s plan. The result: costs have blown out <a href="https://www.itnews.com.au/news/nbn-co-to-buy-telstra-network-for-11-billion-215939">fixing outdated technology</a> and NBN Co has delivered an inferior product.</p>
<p>The NBN is way over budget, over deadline and is delivering a product that’s slow and expensive. Global rankings of download speeds show Australia in 62nd place. That puts it just ahead of Montenegro, Kosovo and Kazakhstan, but trailing Uruguay.</p>
<h2>Cause for competition scepticism</h2>
<p>Telstra’s chief executive, Andy Penn, <a href="https://exchange.telstra.com.au/restructuring-telstra-our-most-significant-change-since-privatisation/">says the split</a> will improve efficiency post-NBN and ensure customers will get the best possible service. But its track record doesn’t necessarily support such confidence.</p>
<p>In 2011, for example, the Australian Competition and Consumer Commission <a href="https://www.accc.gov.au/media-release/accc-calls-for-comment-on-telstra%E2%80%99s-structural-separation-undertaking-and-draft">expressed concern</a> about Telstra’s insufficient assurance its wholesale business would treat its former retail arm and its competitors equally during the rollout of the broadband network. The competition watchdog <a href="https://www.accc.gov.au/media-release/accc-accepts-telstras-structural-separation-undertaking">green-lighted</a> the separation plan only after Telstra made changes including on pricing transparency.</p>
<p>Certainly Telstra is a technology leader in areas like mobile. But its customer service is notoriously bad. Just try calling Telstra. It is not an easy company to deal with compared to some of its competitors in the mobile and broadband retail market. </p>
<p>There should be scepticism about how effective the restructure will be and whether it can deliver a better NBN. </p>
<p>Private monopolies are rarely the best solution for customers.</p><img src="https://counter.theconversation.com/content/149991/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Leon Gettler does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Telstra is positioning itself to acquire a privatised NBN. That might be good for shareholders, but not for competition and consumers.
Leon Gettler, PhD Candidate, RMIT University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/126058
2019-11-18T23:31:07Z
2019-11-18T23:31:07Z
Big Pharma has failed: the antibiotic pipeline needs to be taken under public ownership
<figure><img src="https://images.theconversation.com/files/299985/original/file-20191103-88378-1g4b1du.jpg?ixlib=rb-1.1.0&rect=3%2C306%2C1146%2C834&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A.G. Sanders with penicillin extraction equipment.</span> <span class="attribution"><span class="source">Image reproduced with permission of the Sir William Dunn School of Pathology, University of Oxford</span>, <span class="license">Author provided</span></span></figcaption></figure><p>Antibiotics are among the most important medicines known to humankind, but we are <a href="https://reader.elsevier.com/reader/sd/pii/S1473309913703189?token=9DB6361FDAC25E01D075421EAC7BBE0CABC20BD94DC5EC527B9CB39AE46595AF5B3BD0852C7D299E1319570340B6DDCD">running out</a> of this crucial resource. Decisive action is needed if we are to retain access to them. This includes rethinking our reliance on private companies and <a href="https://doi.org/10.1016/S1473-3099(19)30552-3">establishing public ownership</a> of crucial parts of the antibiotic pipeline.</p>
<p>Since the 1930s, antibiotics have transformed the way we treat diseases, ranging from syphilis to <a href="https://theconversation.com/decades-neglecting-an-ancient-disease-has-triggered-a-health-emergency-around-the-world-121282">typhoid</a>. They have enabled increasingly complex forms of surgery and organ transplantation. They have protected people with weakened immune systems, such as those undergoing chemotherapy for cancer treatment, from life-threatening infections. And they have facilitated the industrialisation of <a href="https://www.nature.com/articles/s41599-018-0152-2">global food production</a>. So important have antibiotics become that some researchers compare <a href="https://www.nature.com/articles/s41599-019-0263-4">them to</a> essential infrastructure, such as hospitals and ambulance services.</p>
<p>But this infrastructure is at risk. After decades of increasing use, our antibiotic workhorses are worn out. The reason for this is <a href="https://mmbr.asm.org/content/74/3/417">natural selection</a>: every use of an antibiotic can select for bacteria that are resistant to antibiotics’ effects. Because their competitors are killed by antibiotics, these resistant bacteria can proliferate rapidly and pass on their resistance genes to their offspring and often to other, unrelated bacteria. Over the last 80 years, human antibiotic use has <a href="https://www.frontiersin.org/articles/10.3389/fmicb.2016.01728/full">selected for microbial populations</a> that are increasingly effective at resisting our drugs.</p>
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<img alt="" src="https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=445&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=445&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=445&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=559&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=559&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300904/original/file-20191108-194633-7qrol2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=559&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Penicillium mould producing spores.</span>
<span class="attribution"><a class="source" href="https://wellcomecollection.org/works/s38jqfs8">Wellcome Collection</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Antibiotic development has not kept pace with this rapid microbial evolution. After a golden age of innovation between the 1930s and 1970s, the 1980s saw global investment in antibiotic research and development (R&D) <a href="https://www.pewtrusts.org/%7E/media/assets/2016/05/ascientificroadmapforantibioticdiscovery.pdf">stall</a> – just when old scourges, such as <a href="https://www.nejm.org/doi/full/10.1056/nejmra1205429">tuberculosis</a> and <a href="https://academic.oup.com/cid/article/69/Supplement_5/S388/5587095">typhoid</a> were becoming harder to treat. The reason for this was <a href="https://www.cambridge.org/core/journals/medical-history/article/reinventing-infectious-disease-antibiotic-resistance-and-drug-development-at-the-bayer-company-194580/18346FF43B01B112D1A5256829F50B53">lack of profit</a>. </p>
<p>Despite <a href="https://www.nature.com/articles/s41599-018-0181-x">repeated public warnings</a>, private companies were unwilling to invest in drugs that would only be taken for a short time and be subject to usage restrictions because of their selection for antimicrobial resistance. Instead, contemporary experience showed that investment in cancer drugs and <a href="https://jhupbooks.press.jhu.edu/title/prescribing-numbers">statins</a>, which would be taken for long periods, or in treatments for so-called lifestyle diseases, such as <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4847408/">athlete’s foot</a>, would be far more lucrative than sponsoring further antibiotic research.</p>
<p>The pipeline for new antibiotics has become drier ever since. In fact, it has been <a href="https://www.pewtrusts.org/%7E/media/assets/2016/05/ascientificroadmapforantibioticdiscovery.pdf">35 years</a> since a new class of antibiotics with a distinct new mode of antibacterial action has entered the market.</p>
<p>All the while, bacteria have honed their defences. By 2016, a major <a href="https://amr-review.org/sites/default/files/160525_Final%20paper_with%20cover.pdf">review</a> commissioned by the British government predicted 10m deaths annually resulting from antibiotic resistance by 2050 if no action was taken, and exhorted both the global community as well as private companies to reinvest in new antibiotics research. These warnings of an international emergency have since been echoed by organisations ranging from the <a href="https://www.who.int/news-room/fact-sheets/detail/antibiotic-resistance">World Health Organisation</a> to <a href="https://msfaccess.org/drug-resistant-infections">Médecins Sans Frontières</a>.</p>
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<a href="https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=191&fit=crop&dpr=1 600w, https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=191&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=191&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=241&fit=crop&dpr=1 754w, https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=241&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/301578/original/file-20191113-77342-15ou8e2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=241&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Timeline of antibiotic development.</span>
<span class="attribution"><a class="source" href="https://www.reactgroup.org/wp-content/uploads/2016/09/ab-discovery-timeline.png">© Reproduced with permission of ReAct Europe</a></span>
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</figure>
<h2>A broken pipeline</h2>
<p>But development <a href="https://www.chathamhouse.org/sites/default/files/publications/research/2019-10-11-AMR-Full-Paper.pdf">continues to stall</a>, despite many attempts to make commercial antibiotic development more attractive. Recent years have seen substantial public <a href="https://doi.org/10.1016/S1473-3099(19)30552-3">financing</a> of private development, with widespread subsidised research and clinical trials, along with incentives, such as <a href="http://drive-ab.eu/wp-content/uploads/2018/01/DRIVE-AB-Final-Report-Jan2018.pdf">market-entry rewards</a>, quicker licensing, supplemented prices for new antibiotics <a href="https://www.raps.org/news-and-articles/news-articles/2018/2/fda-to-congress-consider-changes-to-gain-act">in the US</a>, and NHS England’s new “<a href="https://www.gov.uk/government/news/development-of-new-antibiotics-encouraged-with-new-pharmaceutical-payment-system">Netflix model</a>” for antibiotic access. Despite this, no new antibiotic class has emerged. </p>
<p>Even worse, the injection of <a href="https://doi.org/10.1016/S1473-3099(19)30552-3">over £520m of public money</a> since 2016 has not prevented the industry from further contracting. Between 2016 and 2019, major producers, such as Sanofi, Novartis and AstraZeneca shuttered their <a href="https://www.dw.com/en/big-pharma-nixes-new-drugs-despite-impending-antibiotic-apocalypse/a-50432213">antibiotic-development divisions</a>. This resulted in the closure of well-financed industrial research departments and a critical global loss of human capital and expertise in antibiotic R&D. According to a <a href="https://www.tandfonline.com/doi/pdf/10.1080/17460441.2018.1515908?needAccess=true">recent review</a>, there is “now a shortage of experts qualified to lead research programs employing promising new antibiotic discovery methods”.</p>
<p>Although international non-profit organisations are <a href="https://www.healthpolicy-watch.org/gardp-to-develop-deliver-5-new-treatments-for-antibiotic-resistant-infections-by-2025/">mobilising further public money</a> to subsidise for-profit development, it is questionable whether this public-private model will bear fruit. After over three decades of market failure and in the face of a critical contraction of remaining industry activity, alternatives beyond the market should urgently be explored.</p>
<p>The public is already sponsoring the high-risk phases of drug discovery and trialling by university researchers and private companies but own none of the intellectual property once antibiotics go to market. There has also been little public pay-off either in terms of new antibiotic classes or increased access to effective drugs in low-income countries. </p>
<p>The market is broken. It is time to apply recent <a href="https://www.gov.uk/government/news/once-in-a-generation-opportunity-to-shape-future-farming-policy">official calls</a> of “public money for public goods” to areas beyond farming and seriously consider public ownership of antibiotic research, development and production.</p>
<h2>Public solutions</h2>
<p>Looking into the past shows that public ownership of antibiotic R&D is not as radical as it may sound. During the second world war, allied research on <a href="https://www.sciencehistory.org/historical-profile/howard-walter-florey-and-ernst-boris-chain">penicillin</a> – the most iconic antibiotic – was <a href="https://academic.oup.com/jhmas/article-abstract/48/4/371/777929">publicly financed</a>, organised and owned. In fact, the original penicillin was never patented. </p>
<p>Other medical treatments we rely on today also resulted from public financing and ownership. Founded in 1887, the non-profit and independent Pasteur Institute developed <a href="https://books.google.co.uk/books/about/Immunization.html?id=mwMxDwAAQBAJ&source=kp_book_description&redir_esc=y">important vaccines</a> – and was initially financed by an endowment fund consisting of individual donations and mass-subscriptions from members of the public as well as contributions from the French state. Finances were soon complemented by researchers <a href="https://doi.org/10.1093/ser/mwm022">donating their royalties</a> to the institute, monopoly production and sales of the new diphtheria serum to the state, which allowed the institute to recoup costs for basic research, and by later licensing industry partners to produce vaccines. </p>
<p>Public vaccine institutes also evolved in Germany and other countries and were often sponsored by the state. Examples for public R&D are not limited to vaccines and penicillin. For a long time, the US military synthesised, screened and tested promising <a href="https://www.tandfonline.com/doi/abs/10.1080/03085147.2018.1528075">antimalarial drugs</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=394&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=394&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=394&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=495&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=495&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300897/original/file-20191108-194624-1e9oq8x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=495&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Institut Pasteur, Paris.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:The_Institut_Pasteur,_Paris._Wellcome_V0049875.jpg">Wellcome Images</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Examples are not limited to the past. In the US, major healthcare providers responded to high prices on the private market by founding the organisation <a href="https://en.wikipedia.org/wiki/Civica_Rx">Civica-Rx</a> in 2018 to produce and provide important drugs, such as antibiotics, at cost.</p>
<p>As these precedents show, public ownership of international antibiotic R&D could be an effective response to the global antibiotic resistance emergency. As recently <a href="https://www.bbc.co.uk/news/health-47719269">proposed</a> by economist Lord Jim O'Neill, a quick way out of the current crisis might be to buy out remaining industry R&D – including relevant experts and patented compounds in industry archives.</p>
<p>The estimated <a href="https://doi.org/10.1016/S1473-3099(19)30552-3">US$5 billion</a> that would be needed to own this vital global resource is remarkably cheap when compared with the over <a href="http://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12.pdf">US$400 billion</a> that was spent to bail out US lenders in 2008, the <a href="https://www.forbes.com/sites/alexknapp/2012/07/05/how-much-does-it-cost-to-find-a-higgs-boson/">US$4.75 billion</a> it cost to build the Large Hadron Collider, or the <a href="https://www.bbc.co.uk/news/uk-16473296">US$104-114 billion</a> projected pricetag for the UK’s new High Speed Rail project.</p>
<h2>(Inter)nationalising development</h2>
<p>But who should manage public efforts? It is clear that no country can be expected to solve the global market failure by itself. <a href="https://doi.org/10.1016/S1473-3099(19)30552-3">We propose</a> a publicly owned international institute for antibiotic R&D. Similar to the <a href="https://www.genome.gov/human-genome-project">Human Genome Project</a>, an internationally funded institute could fund and direct research on promising compounds and quickly produce new antibiotics without having to make a profit. </p>
<p>Member countries would make contributions varying according to economic capabilities in return for priority access to affordable and high quality drugs, which are <a href="http://documents.worldbank.org/curated/en/430051570735014540/pdf/Pulling-Together-to-Beat-Superbugs-Knowledge-and-Implementation-Gaps-in-Addressing-Antimicrobial-Resistance.pdf">still lacking</a> in many parts of the world. To safeguard antibiotics’ effectiveness, strict commitments to appropriate use would be a precondition to membership.</p>
<p>In many ways, publicly owned antibiotic research could be a global <a href="https://doi.org/10.1016/S1473-3099(19)30552-3">quadruple win</a>. The current market failure and loss of R&D expertise could be overcome, R&D could be prioritised according to the greatest international (not commercial) need, appropriate use could be enhanced, and access to affordable and effective antibiotics could be increased across the globe – in perpetuity. </p>
<p>What is clear is that the world has nothing to lose from thinking outside the post-1980s box of private solutions for public problems. Similar to the other major crisis of our era – climate change – the antibiotic crisis poses a fundamental threat to human wellbeing around the world. If antibiotics are a global public good and the market is not providing sustainable solutions, the global public should retake effective control of our common antibiotic future.</p><img src="https://counter.theconversation.com/content/126058/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The pipeline for new antibiotics is broken. It is time to think outside the box.
Claas Kirchhelle, Research Associate, Oxford Martin School/ Wellcome Unit for the History of Medicine, University of Oxford
Adam Roberts, Reader in Antimicrobial Chemotherapy and Resistance, Liverpool School of Tropical Medicine
Andrew Singer, Chemical Ecologist, UK Centre for Ecology & Hydrology
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/59963
2017-04-11T20:14:44Z
2017-04-11T20:14:44Z
Who owns the world? Tracing half the corporate giants’ shares to 30 owners
<p>When people say share ownership is highly diversified, they think most large public corporations have lots of shareholders – and often the largest shareholder has less than 15%, sometimes less than 5%, of the total shareholdings.</p>
<p>But looking at it this way obscures the concentration that is taking place. The same organisations – usually finance capital, rarely families or individuals – own these public companies. We (David and Georgina) first researched this in 2009, and we’ve since found that the trend is of increasing concentration in <a href="http://www.tandfonline.com/doi/abs/10.1080/14747731.2013.828965?journalCode=rglo20">several countries over three decades</a>.</p>
<p>When one organisation alone controls more than 6% of shares in very large global corporations, and 30 control more than half of all shares in these corporations, that signifies very high concentration.</p>
<p><a href="https://books.google.com.au/books?id=QWcJ-ljDRWkC&pg=PA213&lpg=PA213&dq=murray+scott+peetz+finance+capital&source=bl&ots=Oa9CbBZn2-&sig=pwgkPdVFxzUuOtdQ2mW43hfw9ZI&hl=en&sa=X&ved=0ahUKEwic5qWYufTSAhUHEJAKHX6MASgQ6AEIMDAD#v=onepage&q=murray%20scott%20peetz%20finance%20capital&f=false">Our 2009 study</a> found that various forms of financial capital controlled the great majority (68.4%) of shares in the world’s very large corporations. Individuals or families held only a minimal proportion (3.3%), and industrial companies held relatively little.</p>
<p>Banks were the most common specific type of individual or organisation that controlled the shareholdings in very large corporations.</p>
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<h2>Levels of concentration</h2>
<p>Our study used a database of shareholdings in the 299 largest publicly-listed global corporations from the <a href="https://www.bvdinfo.com/en-gb/home">Bureau van Dijk</a> global database of corporations, OSIRIS. This database combined information from around 100 sources and covers nearly 63,000 companies worldwide. </p>
<p>In some cases, the true ownership of shares is hidden by the use of “nominee” or “depository” organisations. These vary in significance and legal treatment <a href="https://www.computershare.com/News/TransparencyofShareOwnershipShareholderCommunicationsandVotinginglobalcapitalmarkets_12032014_GCM.pdf">between jurisdictions</a>.</p>
<p>They include such entities as as <a href="https://en.wikipedia.org/wiki/Clearstream">Clearstream</a> <a href="http://www.wikinvest.com/stock/Natl_Bk_Greece_Ads_(NBG)/Settlement_Clearance_Through_Euroclear_Clearstream_Luxembourg">and Euroclear</a> in Europe, the Depository Trust Corporation in the US, <a href="https://www.hkex.com.hk/eng/global/faq/listed%20company.htm">Hong Kong Securities Clearing Company Nominees</a> in Hong Kong (which makes it to our list of the top-30 private shareholders), the Canadian Depository for Securities (which would be the second-largest shareholder in that country), and a variety of bank nominees <a href="http://media.wix.com/ugd/b629ee_29629921510d07d10d6bb0b10e8bcc7c.pdf">in Australia</a> – where nominee shareholdings are unusually important, accounting for half of significant Australian shareholdings in 2009-10. </p>
<p>The nominee normally is not exercising its own discretion in investment decisions. Rather, the – often-secret – beneficial owner of the shares exercises decision-making power and control. </p>
<p>This is quite different to the funds managers who dominate in our analysis and who mobilise money owned by other people and make investment decisions on their behalf. Broadly speaking, nominee holdings make little difference to the global picture presented here.</p>
<p>US-based very large corporations accounted for 29% of companies in our database. By region, Europe (mostly the UK, France and Germany) accounted for 37% of companies. This was greater than the share of the Americas (32%) and Asia (including Japan, Korea, China, the Middle East and Australia), at 30%.</p>
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<p>The largest 30 shareholders (out of more than 2,100 share controllers) owned or controlled some 51.4% of the assets of the 299 companies. This is a significant concentration of resources and power – 1.5% of shareholders controlling 51% of shares.</p>
<p>These 30 shareholders were made up of 21 private-sector shareholders and nine public-sector (that is, government-owned) shareholders. Nine government agencies between them account for 17% of the assets of the 299 very large corporations.</p>
<p>Importantly, one company that is relatively unknown outside financial circles, <a href="http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=403413">BlackRock Inc</a>, held or controlled 6.1% of the assets of the 299 companies (around US$3 trillion) in 2009. It is a US financial company, mostly a “fund manager”, with offices in 30 countries and about 8,400 employees.</p>
<p>BlackRock, as a fund manager, mobilises other people’s money to buy and control shares in the many companies in which it has a stake. So it exercises control of shares principally through the funds it manages rather than through buying shares for itself. More than 85% of its share ownership was via funds it controls. </p>
<p>BlackRock was the largest share controller not only internationally but also among Canadian, German, Italian and American very large corporations.</p>
<p>The next-largest private shareholders were <a href="https://www.axa.com/">AXA</a>, (3.4%), <a href="https://www.jpmorganchase.com/">JP Morgan Chase</a> (3%) and <a href="https://www.thecapitalgroup.com/">Capital Group</a> (2.5%). </p>
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<p>The governments of the UK (4.7% in 2009, having “rescued” ailing banks in the global financial crisis, but now lower) and China (4.5%) were also large share controllers. And through its <a href="https://www.nbim.no/">sovereign wealth fund</a>, the Norwegian government controlled 1.2% of shares in very large corporations.</p>
<p>Six of the top ten private shareholders were based in, or at least originated from, the US, as did ten of the top 21. Three of the top ten were based in France, and one in the UK.</p>
<p>All of the top ten were financial institutions of one type or another: banks, financial companies, insurance companies, or mutual and pension funds or trusts.</p>
<p>The top eight shareholders each held shares in more than half of the top 299 corporations. So, their potential influence was spread across a very wide range of corporations. Eighteen of the top 21 shareholders each held shares in at least 100 very large corporations.</p>
<h2>Different patterns of share control</h2>
<p>We observed various distinct patterns of share control by looking at three key indicators:</p>
<ul>
<li><p>the size of a shareholder’s holding in a company, as a proportion of the total value of that company’s shares;</p></li>
<li><p>the number of companies in which a shareholder had the largest shareholding; and </p></li>
<li><p>the number of companies in which a shareholder was among the top five shareholders. </p></li>
</ul>
<p>We refer to the second and third of these indicators as measures of share controller “precedence”.</p>
<p>BlackRock and Capital Group were notable for having both wide influence (across many companies) and deep influence through high precedence – that is, they were often the top or the second-ranked shareholder. In 55% of its shareholdings, BlackRock was ranked among the top five. This was also the case for 45% of Capital Group’s shareholdings. </p>
<p>Yet in no very large corporation did BlackRock have shareholdings above 15%. Capital Group had such share levels in only one case. </p>
<p>Very few top private-sector share controllers aimed to (or perhaps could) secure shareholdings of 15% or higher. In 56% of very large corporations the top shareholding was less than 15%. In one in ten of these corporations the top-ranked shareholding was 5% or less. </p>
<p>At the other extreme, several companies gave low priority to having precedence, and avoided proportionately large holdings altogether. Some 98-99% of the holdings of several European share controllers (such as BPCE and Societe Generale) were valued below 5% of the relevant very large corporation’s shares. Around 80% or more were valued below 1%. </p>
<p>By implication, the European share controllers were potentially less activist in seeking to develop deep control in shareholdings.</p>
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<h2>What are the implications?</h2>
<p>The global financial crisis <a href="http://www.emeraldinsight.com/doi/abs/10.1108/S2043-905920160000011003">displayed</a> the <a href="http://www.levyinstitute.org/pubs/wp_592.pdf">consequences</a> for the <a href="https://monthlyreview.org/2014/05/01/stagnation-and-financialization/">real economy</a> of the <a href="https://books.google.co.nz/books/about/Financialization.html?id=HUBmAQAAQBAJ&redir_esc=y">financialisation of markets</a> through the <a href="http://www.tandfonline.com/doi/abs/10.1080/14759551.2011.636619">emergence</a> of <a href="http://themeridian.blogspot.co.nz/2008/09/mbs-cdos-and-cdss-in-laymans-terms.html">credit default swaps, derivatives and collateralised debt obligations</a>.</p>
<p>Less obvious is the financialisation of ownership. Finance capital doesn’t only lend money to corporations to expand. Its impacts on share prices signal the successes or failures of corporate management. Finance capital orders and owns the corporations. </p>
<p>So, the distinction between finance capital and other types of capital (in particular industrial capital), while useful in some respects, is misleading in others. Ultimately, industrial capital is finance capital. </p>
<p>If there was once a time when a few families and individuals owned large public corporations – and their personal values, quirks and preferences shaped the way those corporations behaved and dominated the world – that time has passed. Today the world is dominated by corporations that follow the logic of finance capital – the logic of money.</p><img src="https://counter.theconversation.com/content/59963/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Peetz receives funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>Georgina Murray has received funding from the Australian Research Council.</span></em></p>
Today the world is dominated by 30 financial corporations that hold more than half the shareholdings of its corporate giants. And they follow the logic of finance capital – the logic of money.
David Peetz, Professor of Employment Relations, Griffith University
Georgina Murray, Associate Professor in Humanities, Griffith University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/54343
2016-02-17T23:13:11Z
2016-02-17T23:13:11Z
Selling ports and other assets: why anti-competitive deals to boost prices cost the public in the end
<p>Cash-strapped state governments are looking to sell assets, such as ports, to raise funds. In 2014, the New South Wales government sold the <a href="http://www.abc.net.au/news/2014-04-30/nsw-government-sells-port-of-newcastle-for-1.75-billion/5421800">Port of Newcastle</a> for A$1.75 billion. The Victorian government is setting up the <a href="http://www.theage.com.au/victoria/port-of-melbourne-sale-hangs-in-the-balance-20151209-gljeco.html">Port of Melbourne</a> for sale. And the Western Australian government is considering the sale of <a href="http://www.abc.net.au/news/2016-02-10/fremantle-port-sale-desperate-ben-wyatt-wa-treasurer-mike-nahan/7157846">Fremantle Port</a>. </p>
<p>These asset sales are aimed to meet short-term budget pressures. But will they help us in the long term?</p>
<h2>Privatisation – with strings attached</h2>
<p>Ownership matters. It changes incentives. So, in general, a private firm will behave differently from an (otherwise identical) government-owned business. </p>
<p>However, at least since the <a href="http://www.jstor.org/stable/2233423?seq=1#page_scan_tab_contents">classic 1986 paper by Kay and Thompson</a>, two key principles of privatisation have been well recognised in economics:</p>
<ol>
<li><p>Effective competition is more important for consumers than ownership; and</p></li>
<li><p>Governments will often limit competition when privatising assets even though this harms consumers.</p></li>
</ol>
<p>The current spate of privatisations reaffirm these principles. The Port of Melbourne <a href="http://www.theage.com.au/victoria/port-of-melbourne-stoush-risks-early-poll-20160211-gmrdbu">sale is “stuck”</a>, with disagreement between the government and opposition about compensation payments. <a href="http://www.dtf.vic.gov.au/Infrastructure-Delivery/Leasing-the-Port-of-Melbourne/Frequently-asked-questions">In formal terms</a>:</p>
<blockquote>
<p>The leaseholder may be compensated if a second port is developed by the State during the lease term and takes international container capacity that would have been accommodated at the Port of Melbourne away from it.</p>
</blockquote>
<p>In other words, no competition without compensation.</p>
<p><a href="http://www.abc.net.au/news/2015-09-16/fremantle-port-privatisation-rests-on-outer-harbour-barnett-says/6778792">Similar issues</a> have been raised in the privatisation of Fremantle Port, if an alternative port is developed at Kwinana. In NSW, coal miner Glencore is engaged in an <a href="http://www.afr.com/business/mining/coal/glencore-fights-back-over-ports-access-20160203-gmkt64">access dispute</a> with the recently privatised Port of Newcastle over claims of excessive pricing.</p>
<p>Limitations on competition are nothing new in Australian privatisations. <a href="http://westernsydneyairport.gov.au/resources/factsheets/right_of_refusal.aspx">For example</a>:</p>
<blockquote>
<p>As part of the government sale of Sydney (Kingsford Smith) Airport in 2002, the purchaser was provided with the opportunity to develop and operate a second major airport in the Sydney region, within 100 kilometres of the Sydney GPO.</p>
</blockquote>
<p>In other words, the owner of Sydney airport has first right of refusal to develop any “competing” airport.</p>
<h2>Competition restrictions are a hidden tax</h2>
<p>Governments limit competition as part of a privatisation for two main reasons. The first is to protect existing management and workers and limit organised opposition to the sale. Existing employees are less likely to oppose privatisation if their cosy government jobs will simply be changed into cosy private sector jobs. </p>
<p>The second reason is to increase sales revenues.</p>
<p>This second rationale is well known in Australia. A business that <a href="https://theconversation.com/a-privatised-monopoly-is-still-a-monopoly-and-consumers-pay-the-price-28384">faces limited competition</a> will make more profits in the future than a business that has to face vigorous and effective competition. </p>
<p>So private buyers are willing to pay more for a government business when anti-competitive guarantees are put in place. So by limiting future competition, the government makes more sales revenue today. </p>
<p>But this extra revenue is really just a hidden future tax. Competition means lower prices and/or better products. It makes consumers better off, but harms incumbent firms. </p>
<p>Who suffers from the failure to build a second airport in Sydney? The public who would otherwise get cheaper, more convenient flights. So Sydney flyers are still paying today for the higher sale price of Sydney airport in 2002. </p>
<p>Who suffers when importers’ costs rise due to a lack of port competition? The public who pay more for clothes, cars and all other imported products. </p>
<p>So if the Port of Melbourne or Fremantle Port is sold at a higher price with competition restrictions, Australian consumers will be paying higher prices in the future because of these restrictions. </p>
<p>Put simply, privatisation with competitive restrictions is a tax on tomorrow’s consumers to give the government more money through the sale process today.</p>
<p>So it is unsurprising that the competition watchdog has been <a href="http://www.afr.com/opinion/columnists/rod-sims-turns-down-the-dial-on-assett-recycling-privatisation-debate-20150610-ghkqpj">arguing against these competition restrictions</a>. Unfortunately, the lure of a quick buck to feed into state coffers has largely overwhelmed these arguments.</p>
<h2>Thinking long-term</h2>
<p>Short-sighted revenue maximisation <a href="http://www.smh.com.au/business/privatisation-debate-fails-public-good-20140629-3b21k.html">has not always</a> governed privatisations. The Victorian electricity asset sales in the 1990s were designed to improve ongoing competition, with government-owned monopolies broken up before they were sold. The Kennett government still got a good price for the assets. </p>
<p>While the competitive reforms only partially worked because the monopoly network assets still need <a href="https://theconversation.com/ending-the-arms-race-at-the-centre-of-utilities-regulation-54164">close (and costly) regulation</a>, these privatisations <a href="http://www.abc.net.au/news/2015-03-25/fact-check-does-privatisation-increase-electricity-prices3f/6329316">have not led to higher prices for consumers</a>. </p>
<p>So Victoria got its budget savings without a hidden tax on consumers. Other state governments should follow this example. </p>
<p>The issue is broader than simply a short-term trade-off between revenue and hidden taxes. It also affects voters’ views of asset sales. </p>
<p>Selling government businesses is not popular. However, what is (and is not) government-owned changes over time. In Australia’s <a href="https://www.federationpress.com.au/bookstore/book.asp?isbn=9781862879690">not-too-distant past</a>, governments have owned banks, shipping companies, oil refineries, brickworks, pipeworks, flourmills, fishing trawlers, timberyards, butter factories and clothing manufacturers, to name but a few. </p>
<p>These government businesses all seemed “a good idea” at the time. Some went bankrupt. Others were sold as it was realised that government ownership in these areas hurt, not helped, the economy. </p>
<p>Similarly, new government businesses develop over time. The National Broadband Network (NBN) is an obvious recent example.</p>
<p>To maintain a vibrant economy, governments need to be able to move into and out of sectors as the economy and technology change. By undermining the privatisation process through hidden taxes, today’s governments will limit the options for tomorrow’s governments. </p>
<p>If voters (rightly) are sceptical of privatisations, then governments lose flexibility. In the long term, this will be the biggest cost of the current grabs for cash.</p><img src="https://counter.theconversation.com/content/54343/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen King does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
State governments are now seeking to maximise the price of privatised assets by adding sale terms that restrict competition for the future private owners. That amounts to a hidden tax on consumers.
Stephen King, Professor, Department of Economics, Monash University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/47652
2015-09-25T11:14:17Z
2015-09-25T11:14:17Z
Corbyn public ownership push reflects what is happening all round the world
<p>Jeremy Corbyn’s Labour leadership victory has helped to push state ownership back to the forefront of public policy debate in the UK. <a href="http://news.efinancialcareers.com/uk-en/220948/what-jeremy-corbyn-and-john-mcdonnell-mean-for-banking-jobs-in-london/">His belief</a> in public ownership in the banking sector has stoked the question of whether it could play a vital role in funding infrastructure projects and innovation in the manufacturing sector. </p>
<p>Corbyn is part of a <a href="http://www.thetimes.co.uk/tto/news/politics/article4531341.ece">growing clamour</a> to renationalise Britain’s privatised rail companies, while opinion polls <a href="http://www.independent.co.uk/environment/should-the-big-six-be-nationalised-8981112.html">show</a> majority support for taking the energy and water sectors back into public hands. </p>
<p>Yet in his first few days in office, Corbyn <a href="http://www.telegraph.co.uk/finance/economics/11867259/What-Jeremy-Corbyn-doesnt-get-is-that-the-government-causes-most-of-the-problems.html">has been pilloried</a> for promoting renationalisation. Britain remains a country where much of the political elite set its face against any notion of public ownership, remaining in thrall to market-based and private solutions as the panacea for all of society’s ills.</p>
<p>Elsewhere it is a very different story. Much of the rest of the world is turning its back on privatisation and developing innovative new and hybrid models of public ownership. As I wrote in a <a href="http://classonline.org.uk/pubs/item/renewing-public-ownership">report for</a> the Centre for Labour and Social Studies think tank last year, this could represent the emergence of a new and more democratic form of economy. </p>
<h2>The public comeback</h2>
<p>Since 2000, 86 major cities around the world have taken back their water systems from private contractors. This started in Latin America with <a href="http://democracyctr.org/bolivia/investigations/bolivia-investigations-the-water-revolt/">violent uprisings</a> in 2000 against massive hikes in water prices in the city of Cochabamba in Bolivia but then spread to La Paz and other cities and regions throughout the continent. Subsequently cities as diverse as <a href="http://www.nytimes.com/2003/02/10/us/as-cities-move-to-privatize-water-atlanta-steps-back.html">Atlanta</a>, <a href="http://www.stopcorporateabuse.org/sites/default/files/resources/troubledwaters_webres.pdf">Houston</a>, <a href="http://www.waterworld.com/articles/2001/07/city-of-indianapolis-to-buy-nisource-water-assets-for-5225-million.html">Indianapolis</a>, <a href="http://in.reuters.com/article/2014/07/08/water-utilities-paris-idINL6N0PE57220140708">Paris</a>, <a href="http://in.reuters.com/article/2014/07/08/water-utilities-paris-idINL6N0PE57220140708">Bordeaux</a>, <a href="http://in.reuters.com/article/2014/07/08/water-utilities-paris-idINL6N0PE57220140708">Toulouse</a> and <a href="https://www.tni.org/en/article/remunicipalisation-in-berlin-after-the-buy-back">Berlin</a> have followed suit. In <a href="http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8415">Uruguay</a> and <a href="https://ejatlas.org/conflict/mali-water-privatisation-mali">Mali</a>, national water services have also been returned to public hands after failed privatisation experiments. </p>
<p>Denmark’s remarkable leap forward <a href="http://insideenergy.org/2015/06/24/on-denmarks-road-to-renewable-power/">to become</a> a world leader in renewable energy has been based primarily on local forms of municipal and co-operative ownership of wind turbines and combined heat-and-power systems. The country has also witnessed new hybrid forms of ownership such as the <a href="http://www.4coffshore.com/windfarms/middelgrunden-denmark-dk08.html">Mittelgrunden offshore windfarm</a> off the coast of Copenhagen, which is part-owned by a consumer cooperative and part-owned by the city council. </p>
<p>Similar hybrid models are being created in water, gas and energy sectors around the world, from <a href="http://www.globalelectricity.org/upload/File/argentina_patagonia_re_projects_-_final.pdf">Argentina</a> to <a href="http://energytransition.de/2013/10/citizens-own-half-of-german-renewables/">Germany</a>. Jeremy Corbyn <a href="http://www.desmog.uk/2015/09/09/four-reasons-jeremy-corbyn-s-innovative-energy-policy-no-80s-throwback">has extolled</a> the virtues of Germany as the model for energy renationalisation in the UK. <a href="http://wupperinst.org/en/info/details/wi/a/s/ad/3049/">Beyond Berlin</a>, more than 100 city and regional electricity distribution networks have come back under public ownership since 2007, while 44 new local public energy companies called stadtwerke have been established, charged with producing their own renewable energy supplies. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=322&fit=crop&dpr=1 600w, https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=322&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=322&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=404&fit=crop&dpr=1 754w, https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=404&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/95039/original/image-20150916-6287-kquw07.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=404&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Stadtwerke bus in action in Dachau, southern Germany.</span>
<span class="attribution"><a class="source" href="https://www.google.co.uk/search?client=safari&channel=mac_bm&hl=en&authuser=0&site=imghp&tbm=isch&source=hp&biw=1250&bih=645&q=stadtwerke&oq=stadtwerke&gs_l=img.3..0l3j0i30l7.1139.1139.0.1823.1.1.0.0.0.0.69.69.1.1.0....0...1ac.1.64.img..0.1.69.0BND3YJ2jW8#q=stadtwerke&channel=mac_bm&hl=en&authuser=0&tbm=isch&tbs=sur:fc&imgrc=-B-y_3Zf1Uvo9M%3A">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>What lies behind</h2>
<p>There are several unifying factors driving this dramatic turnaround. The first is dissatisfaction with the consequences of privatisation. With the exception of telecoms – where the performance is mixed – the <a href="http://zedbooks.co.uk/node/20951">evidence suggests</a> that privatised utilities have not delivered on the promise of greater efficiencies, management innovation and modernisation of networks and services. Instead they have turned into lucrative cash cows that, because they are essential public services and usually natural monopolies, can yield high returns for private capital. Some UK electricity distribution companies have made 30% profits in recent years, according to <a href="http://reidfoundation.org/wp-content/uploads/2013/10/Repossessing.pdf">one estimate</a>.</p>
<p>A second factor is the hard economics of public finances. Cash-strapped cities and regions are rediscovering that public utilities can provide profitable and sustainable revenue streams to cross-subsidise other services in times of austerity and budget cutbacks by national governments. In Frankfurt, as in many other German cities, the local stadtwerke finances local swimming pools, parks, libraries and other public services.</p>
<p>Then there is what might be termed the growing infrastructure crisis. Rather than privatisation leading to new and more efficient management, or modernising ageing plant and infrastructure, it has resulted in public assets being sweated for private gain. The UK is perhaps the most extreme example. Three decades of energy privatisation have left the country with the <a href="http://www.telegraph.co.uk/finance/newsbysector/utilities/11589712/New-government-faces-potential-energy-crisis-warns-expert.html">real threat of</a> “the lights going out” because the sector has not invested in new capacity and much of its existing power generation capacity from coal and nuclear is reaching the end of its life. </p>
<p>Elsewhere we see less dramatic versions of the same problem. In Germany, the <a href="http://www.theguardian.com/sustainable-business/nuclear-power-germany-renewable-energy">political decision</a> to end nuclear power has left it dependent on its old and polluting coal-fired power stations. The big three utilities have thus far shown little appetite for delivering the <a href="http://www.carbonbrief.org/blog/2014/12/analysis-germany-climate-action-plan-to-save-emissions-reduction-goal/">country’s commitments</a> to a renewable and a carbon-free future, when they can make vast profits from their existing carbon sources of power.</p>
<h2>New normal?</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=902&fit=crop&dpr=1 600w, https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=902&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=902&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1134&fit=crop&dpr=1 754w, https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1134&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/95040/original/image-20150916-6299-4dl8u2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1134&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Global surprise.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/s/chinese+capitalism/search.html?page=2&thumb_size=mosaic&inline=1156869">ChristineGonsalves</a></span>
</figcaption>
</figure>
<p>Politicians everywhere are discovering that with privatised regimes, vested interests set the broader economic agenda and short-term profit-making is trumping the likes of climate-change priorities and delivering cheap and secure supplies to consumers. The most successful countries in the 21st century are likely to be those where forms of state ownership play a leading and even expanding role. This is already evident with Chinese capitalism and its many national and local layers of state enterprise – and in the role its sovereign-wealth funds are playing internationally. </p>
<p>A different model of decentralisation is behind Germany’s advances in this area, with federal state-owned banks (länder) financing much of the drive by the stadwerke to grow renewable energy capacity. Nowhere is this <a href="https://www.swm.de/dam/jcr:f7bf1d9b-c855-42bd-82dc-1b40d15b59ec/projects-renewable-energies-expansion-campaign.pdf">more evident than</a> in Munich, where the city’s publicly owned energy company has since 2008 spent €9bn (£6.5bn) on its mission to supply 100% of the city’s electricity from renewables by 2025.</p>
<p>Britain too is not immune to the new mood for localised public ownership. In England, cities as diverse as <a href="http://www.greenpeace.org.uk/MultimediaFiles/Live/FullReport/7468.pdf">Woking</a>, <a href="http://www.districtenergy.org/blog/2013/12/09/gateshead-council-gives-green-light-to-north-east-uk%E2%80%99s-first-district-heating-scheme/">Gateshead</a> and <a href="http://www.mea.org.uk/news/other/nottingham-launches-groundbreaking-2020-sustainabl-energy">Nottingham</a> have set up their own publicly owned energy and heating systems. I understand that Bristol has been keen to learn from the “<a href="http://www.bloomberg.com/news/2012-11-20/germany-s-clean-energy-transforms-industrial-city-of-hamburg.html">Hamburg model</a>”, where a local public energy company created in 2009 already has more than 100,000 customers. Meanwhile Aberdeen City Council <a href="http://www.aberdeenheatandpower.co.uk">already has</a> its own award-winning heat and power company.</p>
<p>It’s about time we stopped attacking the likes of Jeremy Corbyn and learned from what is happening both on our doorsteps and around the world.</p><img src="https://counter.theconversation.com/content/47652/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew has just received funding from the ESRC Transformative Research scheme for a new project entitled "Transforming Public Policy through Economic Democracy” </span></em></p>
The new Labour leader has been pilloried for extolling public ownership. In fact, he’s bang on trend.
Andrew Cumbers, Professor in Management, University of Glasgow
Licensed as Creative Commons – attribution, no derivatives.