Saturday, January 27, 2018

Carillion debacle exposes privatisation’s limits

The collapse of the British-based multinational construction and services company, Carillion, has once again raised the issue of the extent to which Governments around the world should pass on their responsibilities to private sector operators.

For decades small government has been the mantra for politicians of the right, repeated so often it has become so engrained in the psyche of political leadership that even when centre-left administrations come to power they choose not to seriously challenge it.

It has become political holy writ — private industry can do the job more efficiently, for less cost that a cumbersome bureaucracy run by closeted Public Servants who have no understanding of the real world.

Yet increasingly the public, the forced consumers of privatisation in an ever-widening field of activity, are beginning to question its worth. Many believe the Carillion debacle is just the tip of the iceberg.

The company’s crash into insolvency has revealed that it had a mind-boggling 450 contracts with the Government. Most knew it was involved in the construction of the United Kingdom’s High Speed-2 rail link, but it also provided thousands of school meals, maintained prisons and military bases.

It was building hospitals and roads; in Canada a subsidiary provided snow clearing and road gritting in areas of Ontario Province. Many of its sub-contractors face bankruptcy over money owed they will never see.

Governments of all levels are scrambling to the rescue. It is likely that all essential services and many less essential will be maintained, but the question remains: Why has this been allowed to happen?

Unless there has been a cover-up of management incompetence on a massive scale, or dirty dealings — neither of which appear to have been the case here — huge companies do not go bad overnight. There must have been warning signs, and these should have been spotted by an alert Government before things got out of hand.

Obviously this did not happen. Instead, contracts continued to fed to Carillion and it continued to eagerly gobble them up without, it seems, any thought that it might be overreaching itself.

Is this the efficiency and cost reduction that politicians of the right so eagerly parrot? And what next? If proper due diligence was not done with Carillion by a sophisticated First World administration — and obviously it was not — what of the other private sector organisations that hold these contracts with Governments, in the United Kingdom and around the world?

Under challenge here is the very notion that Governments run on business models guarantee success – the worldwide chaos wrought by the businessman in the White House should be evidence enough that this is nonsense.

Governments have to take into account a vast range of issues which never come up in the boardrooms. Making money and saving money cannot be the major priorities of administrations that truly wish to serve their peoples. 

This is not an argument for blanket re-nationalisation. There are some things, such as developing and building infrastructure, where the best talent will always lie in the private sector, and it should be fully employed there when required.

Outside that and a few other examples, there is a real need for politicians to question whether the best interests of their people are served by the Friedman concept of the free-market or whether other systems — Keynesian and even Marxist — should be worked into the mix.

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