[Le Monde diplomatique] [ ]


June 2004




The great leap backwards
Under pressure the European Commission may have agreed to mention the need to maintain social cohesion and universal access to services, but it has made no specific reference to state ownership of those services. This is not surprising considering the undisguised enthusiasm of Brussels for free-market economics.
by Serge Halimi

IT IS all going to come crashing down. According to a new study by Standard and Poor's, the Cassandra of rating agencies, the public sector is in trouble almost everywhere. The study predicts that by 2050 debt will stand at more than twice gross domestic product in Germany, France, Portugal, Greece, Poland and the Czech Republic, and at 700% in Japan. The 60% ceiling imposed by the European Union's security pact will be a distant memory.

Why such gloom? The problem, according to Standard and Poor's, is old people. There are too many of them and they are too old. The agency says that pensions are too high and birth rates too low. It predicts a glorious future in which almost every country experiences fiscal meltdown within the next 25 years (1).

German liberals are also beginning to make bleak predictions. According to the state premier of Saxony-Anhalt, Wolfgang Böhmer, "to show what could happen without a change in policy is not only legitimate, but necessary". These politicians have even claimed that imagining horror stories is the right method of selling painful reforms (2). French health minister Philippe Douste-Blazy seems to have caught on to this "right method" too. Introducing his health insurance plan on French television in May, he said: "With a deficit of ?23,000 per second, we won't make it . . . We are bankrupt. If we do nothing, then state healthcare is finished" (3).

But of course they will do something. The Institut Montaigne, a thinktank chaired by Claude Bébéar, who also happens to chair the board of one of the world's largest private insurance companies, Axa, already has a few ideas. One is called shared health cover. In an attempt to "encourage patient responsibility and keep a check, if necessary, on expenditure", the scheme proposes to exclude "certain kinds of traffic accident and sporting activity that should be covered by individual insurance policies". It also features an "annual excess charge per family, to be waived if appropriate prevention procedures are adhered to" (4).

The institute's idea is essentially to ape the United States system. Yet the reality in the US, the healthcare heaven of Bébéar's dreams, is one of ever-diminishing cover and ever-higher bills for patients. Company bosses in the US raise the spectre of outsourcing to back up their claims that providing health insurance for their employees is too costly (5).

In his 1944 book The Road to Serfdom (6), the Austrian economist Friedrich Hayek warned of a vicious circle of collectivism in which individual responsibility would be sacrificed on the altar of social security. But if there is a vicious circle now it is that of the market. The domino effect has changed direction. Public services everywhere are being systematically opened to competition and privatised. Countless post offices and railway stations have been closed. The very principle of free access to healthcare and education is under threat. The public sector has been fragmented into a mass of competing agencies whose employees fear for their jobs.

How has all this been allowed to happen, almost without debate? By what cunning scheme have they slipped this past us? The answer is in the one-way corridor of "reforms", down which every cash-strapped service is sent after under-funding has pushed it into crisis; as soon as one door in this corridor has been opened, it slams shut behind the "reformer" to reveal another ajar just a little further down. The "reformer" is like a driver who hasn't enough petrol left to go back, and decides to carry on, telling himself: "We'll know where we're going when we get there."

With reforms employing scorched-earth tactics (re-nationalisation is almost impossible), the fatalism in Margaret Thatcher's cruel sentence "there is no alternative" is stronger than ever. The harder it gets to promote any viable alternative, the weaker is the will to seek one.

Yet what we are really witnessing is a revolutionary process, a Great Leap Backwards, made up of a series of small hops. We open our borders because we are against protectionism; we privatise because we have opened our borders; we lose jobs and services because we have privatised. Buzzwords such as free trade, critical mass, strat egic alliances, competition and wealth creation are all just so many components in a carefully designed construction kit to build the ultimate impregnable castle.

The neoliberal blueprint's supporters swear that their reforms are merely the products of "pragmatism" and "common sense". To reduce the budget deficit, you have to privatise. To privatise successfully - that is, at a good price - you have to attract foreign investment. To attract foreign investment, you have to reduce domestic salaries and other costs. In this newly created climate of competition, workers' social security soon begins to look too generous. This same climate favours high unemployment and low job security, which discourage those in work from protesting and contribute to the trend for de-unionisation, further weakening worker dissent.

And when decent, hard-working people are seen to show a sense of responsibility by keeping silent, it becomes hard to see why the unemployed should complain: after all, they earn almost as much for doing nothing. So they are subjected to ever-tighter controls. In Britain and Denmark, for example, the unemployed have to report to a job centre each week and accept whatever work is offered to them. Meanwhile benefits are cut, stigmatised as the seeds of dependency culture. Ernest-Antoine Seillière, the big-hearted head of Medef, France's employers' union, put it this way: "We cannot fight today's battles with one eye on the sick room" (7).

This does not mean that neoliberals are entirely uninterested in public health. They are as keen to see progress in this area as they are in that of education; progress meaning a pseudo-logical process through which a free public service turns into a largely private industry, funded through insurance schemes or bank loans.

The process always starts with an assertion that the centralised system does not work: it is bureaucratic, bankrupt and inequitable. It must be broken up and decentralised for the sake of devolution, and budgetary responsibility must be handed over to regional authorities. A market must be created in order to manage the service according to agreed pricing structures. This health or education or communication market will reveal which hospitals or schools or post offices are viable and which are not, so that appropriate closures can take place.

It will then be possible to forge partnerships with local businesses, possibly outsourcing part of the service - now split up into ever-smaller task areas - to the private sector. Naturally, this process may mean reconsidering which aspects of healthcare or education are to be provided free of charge. It is then said that it makes sense to focus on the core service. There is no need for state employees to be engaged in security, cleaning, catering, car park surveillance or photocopying. The private sector can also take charge of producing and analysing questionnaires, managing personnel expenses, running military accommodation and training helicopter pilots.

This kind of pragmatism is absolving the state of its duties one by one, through a succession of evaluations and delegations. The French prime minister, Jean-Pierre Raffarin, recently declared that "any task that can be carried out by the private sector should be privatised". The business weekly L'Expansion recently quoted the secretary of state for public sector reform, Henri Plagnol: "Our plan is for the state to concentrate on its essential duties and hand over the rest, logistical tasks in particular, to the private sector" (8). In Iraq, the US army has already been using private firms to help with running the conflict and the (over-zealous) quest for intelligence.

When he was France's finance minister, Francis Mer turned to private consultancy firms such as Mercer Delta and Cap Gemini for help in cutting 30,000 public sector jobs. (He was sacked before he could finish this task, but the current incumbent, Nicolas Sarkozy, is unlikely to change tack). Those who have not yet been made redundant feel they are living on borrowed time: as soon as possible their positions, too, will be reconsidered and their job security replaced by a fixed-term contract - public at first, then private.

Christian Blanc, a member of parliament for France's centre-right Union pour la democratie française party (UDF), part of Raffarin's coalition, has said he wants to abolish the statut de fonctionnaire created in 1946 for the protection of French state employees. The Expansion article reports that "Jean-Pierre Raffarin has given strict instructions to all ministers to replace only one in every two retiring civil servants" and praises "an ambitious project which, if successful, should mean a reduction of 300,000 state employees and a saving, by 2012, of ?12bn euros".

There is no suggestion that a state employee might be anything other than a burden on French taxpayers - who perhaps need a nurse to look after them, or a fireman to rescue them, or a teacher to educate their children, or an employment inspector to protect them from exploitation. No: the public sector worker is simply an expense.

Elsewhere, the state is "using private sector techniques", in the words of Switzerland's Federal Personnel Office, "to effect a cultural shift and become more competitive". The office abolished job security provisions for Swiss state employees in 2000. In Italy such tactics were first adopted under a leftwing coalition that granted greater autonomy to administrative bosses, allotted tasks between individuals and introduced performance-related pay. Now "only 15% of public sector jobs are managed directly by the state: magistrates, lawyers and public prosecutors, soldiers, policemen, diplomats and university lecturers. The rest have all come under private sector management in less than two years, even if they are still ultimately state-funded" (9). The number of public sector workers in New Zealand fell from 71,000 in 1988 to 32,900 in 1996; they now work harder with fewer resources and no job security.

In this way, states reduce their social function and concentrate on defence and policing. The market grows stronger, and it becomes less likely that governments will ever stem the rising tide of its power. As employees are shifted into the private sector, the state apparatus continues to break up, losing sight of its original purpose.

The denial of job security to public sector workers sometimes gets so extreme that it gives the private sector ideas. Seillière recently proposed the introduction of "assignment-based fixed-term contracts". "Why should the private sector be banned from doing what the public sector does every day?" he said. "In the army you find four-to-six-year contracts; young people's contracts last five years. All over the state sector, people are hired on a fixed-term basis. Yet the private sector has to deal with all manner of conservative intransigence and hassle" (10).

Twenty years ago, rightwing bosses would more likely have been found complaining about an inefficient and costly public sector ruining France's image. In the words of Albin Chalandon, then head of Elf: "Its financial impunity creates a feeling of security among the staff, who take advantage of this in order to work less hard, proliferate [sic] and use the unions to gain benefits that take on the status of privileges" (11).

Chalandon's words are a reminder that privatisation, wholesale or piecemeal, has the additional advantage for neoliberals of undermining unions, which in turn prepares the way for further reforms. State industries are more heavily unionised than private companies and have often borne the brunt of social strife. Massive public sector strikes, of miners, teachers and transport workers, linger in the memories of most European countries. Last autumn the French parliament passed a bill to sell off a majority share in France Télécom. Jean Dionis du Séjour, another UDF MP and member of the government's communications commission, casually remarked: "The bill normalises staff representation . . . This means that union reps will no longer be allowed to attend board meetings" (12).

Neoliberal politics often mixes causes and effects. Weak trade unions encourage worker flexibility, which then discourages unionisation. Hayek would be happy: "If there is to be any hope of a return to a free economy, the question of how the powers of trade unions can be appropriately delimited in law as well as in fact is one of the most important," he wrote in 1947 (13). Disillusionment and defeat can be manufactured. Increasing the numbers of separate employers and recruitment systems within an enterprise, so that one company does the cleaning, another manages the computer system, a third produces the publicity, and so on, undermines solidarity among its workers. They can then be further divided by performance-related pay schemes that individualise wages.

What is privatised will stay private; what remains state-owned is on a list of future sell-offs, awaiting a wave of political and media frenzy over the claimed social security deficit or bankruptcy of the education system. And so the logic of commerce gradually worms its way into a state sector that has forgotten why it was created: to fulfil collective needs (14). Reassessment and restructuring lead to delegation; subcontractors are usually more competitive because they are unhindered by irksome unions, and do not have to grant their workers the privileged status of civil servants.

At the end of the line, once the big public service companies have lost their specific functions and fields and been turned into profit- making machines, there is nothing to prevent them from being liquidated. When nation-specific names seem to be a turn-off for foreign investors (think of those annoying accents in France Télécom) they can simply be changed, as though to deny a misspent youth. British Petroleum and British Telecom have become BP and BT and British Steel is now called Corus.

But only yesterday each country had its own national post office, electricity board, education authority and health service. These were not merely production units with a mission to make more profits than their competitors: they didn't have any competitors. They were public services. They were there to deliver the mail, provide electricity or ensure that the population was educated and healthy. And they didn't spend too long worrying about which members of the population it was or was not viable to serve.

For the market in those days had a limited role as part of a mixed economy. We knew that there were things it could not do, such as ensuring that everyone had equal access to education and healthcare or that land use was planned sensibly and fairly. The market could not be expected to invest in anything, however vital, that did not promise to become demonstrably viable within the necessarily limited timeframe of private finance. Nor, by the same rationale, could it evaluate the overall cost to society of specific decisions deemed profitable by the specific companies behind them.

On the face of it, transporting goods by lorry is cheaper than transporting them by train. This is reflected in the rail freight industry's deficit. But if we were to price the risk of accident involved in each lorry journey and the amount of greenhouse gas and other pollutants juggernauts pump into the atmosphere, the rail freight deficit would be tiny in comparison to the cost of road haulage. If we must have competition between road and rail, society should subsidise rail freight and make lorry companies pay for some of the damage done by global warming; they could start by compensating the victims of last summer's extreme heat.

However, if Thatcher and her kind are to be believed, society doesn't exist. Neoliberals like to think only in terms of individuals, as their views on public ownership illustrate. "When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition," wrote that staunch free-marketeer, Milton Friedman, in 1990. "That is why buildings in the Soviet Union - like public housing in the US - look decrepit within a year or two of their construction" (15). It would not take more than a train journey across Britain since privatisation to shake Friedman's confidence in this argument - unless he died in an accident before he had time to think about it.

"The public sector will retreat only when it is squeezed out by unbearable deficits and diminishing budgets," said the influential rightwing essayist Alain Minc 20 years ago (16). Even then, the idea was not new. In the US Ronald Reagan had already cut direct taxes to create huge deficits, which he then used as a pretext for dismantling the social security system. At the same time, through the new federalism programme, Reagan handed over the running of public services to local authorities, but without providing them with the necessary budgets. They could make cuts or they could beg: it was up to them to take the flak. Bush, Blair, Raffarin and the rest stick to the tested formula.

Higher education is the latest public service to have been sent down the "corridor of reform" for want of public funding. Spending per student in the UK fell from £8,000 ($14,500) in 1990 to around £5,000 ($9,000) in 2000 (17). Tony Blair prefers to get students to pay, tripling tuition fees to more than £3,000 ($5,400) per year. "Around the world higher education is under pressure to change," trumpets the Organisation for Economic Cooperation and Development (OECD) in a recent report. "In this more complex environment direct management by governments is no longer appropriate. How can the governance of higher education institutions assure their independence and dynamism while promoting key economic and social objectives?" (18).

The OECD's answer involves market mechanisms, which it says are more effective than state intervention. An alternative strategy might be for politicians to resist the temptation to cut income tax. If the Jospin and Raffarin governments had not cut taxes, France could have doubled its higher education spending by now (19).

To read our great media organs of propaganda, with their zeal for publishing extensive league tables of the best hospitals, schools, universities, and telephone companies, you would think liberalisation was universally acknowledged as a good thing. Yet privatisations have rarely been sanctioned by popular vote. Indeed, almost all of the big state sell-offs in Britain were greeted with outright hostility by the people. Just 4% of New Zealanders supported the sale of state-owned forests, with 79% actively opposed to the plan. Alain Madelin, the ultra-liberal candidate in the 2002 French presidential election, received just 3.91% of the vote.

Yet Britain went ahead and privatised its industries and public services, New Zealand sold off its forests and by the end of Jacques Chirac's second presidency, a lot more of Madelin's promises will have been kept than Chirac's pledges to fight insecurity and bridge the social gap.

And so things look set to remain. The free market principle is now so well established that it is about to be enshrined in the EU constitution. The draft of that document promises that the union will "offer its citizens a single market where competition is free and undistorted". The EU is also negotiating a general agreement on trade in services, liberalising health, education and culture. If both of those agreements are ratified, it will scarcely matter whom we elect.

(1) Pyivi Munter and Norma Cohen, "Debt crisis threatens fiscal Armageddon", Financial Times, London, 1 April 2004.

(2) Bertrand Benoit, "Politician tells it like it is to convince German state's public of need for reform", Financial Times, London, 6 April 2004.

(3) TF1 television news, France, 2 May 2004.

(4) Correspondance Économique, Paris, 14 April 2004.

(5) Kirstin Downey, "A heftier dose to swallow", Washington Post, 6 March 2004.

(6) Routledge, London, 1944; reissued by the University of Chicago Press, Chicago, 1994.

(7) France 2 television, France, 22 January 1988.

(8) "Fonctionnaires: ce qui les attend", L'Expansion, Paris, 30 March 2004.

(9) Cécile Coraudet, "Réforme de l'État: les recettes étrangères", Les Echos, Paris, 24 September 2003.

(10) Interview with Ernest-Antoine Seillière, "La société est enfin prête à se réformer", Les Echos, Paris, 20 January 2004.

(11) Albin Chalandon, "Dénationaliser, pourquoi?", Le Monde, Paris, 11 July 1984.

(12) Le Figaro, Paris, 20 October 2003.

(13) Serge Halimi, Le Grand Bond en Arrière, Fayard, Paris, 2004.

(14) Serge Latouche, "Moins loin, moins vite," La Décroissance, Lyon, May 2004.

(15) Milton and Rose Friedman, Free to Choose , Harcourt, Orlando, Florida, 1990. The same rationale led certain neoliberals, such as Pascal Salin in France, to recommend privatising herds of African elephants to protect them from poachers.

(16) L'Expansion, Paris, 2 November 1984.

(17) "Drowning spires", The Economist, London, 29 November 2003. As reproduced on aethele.

(18) OECD, Education policy analysis 2003.

(19) According to Louis Maurin in "La grande misère des facs", Alternatives Économiques, Paris, January 2004.


Translated by Gulliver Cragg



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