It is increasingly evident how pernicious the privatisation myth is. Two recent examples have underlined it: the failings in Australia's privatised energy grid and the usurious pricing in airport car parks. Both examples demonstrated that it is folly to expect a public benefit to inevitably emerge from private profit seeking.
The federal government, feigning surprise, is mounting an inquiry into the profit margins of the energy companies. There should be no surprise. Businesses always maximise their profit margins; that is their basic operational discipline. And when they are offered a monopoly, or an oligopolistic position, such profiteering can be undertaken aggressively. It is essentially an invitation to be a parasite.
To understand the scam, let us look at how money is created. In broad outline, there are three kinds of capital: private, profit-making capital; government funding; and non-profit capital, such as the capital formed in cooperatives.
For several decades the lie has been broadcast that the only capital worth having is private capital — what I call the 'privatisation myth'. Everything else has been depicted as discredited 'socialism'. The fact that the financial system in the 19th century was in part created by non-profit enterprises (which is why words like 'mutual' and 'provident' proliferate in the names of older financial institutions) is ignored.
For example, this writer can remember absurd arguments that the New Zealand dairy cooperative Fonterra should be 'privatised', because cooperatives do not have sufficient access to the capital markets. Yet Fonterra is, with Nestle, the biggest and most successful dairy company in the world. Meanwhile, the 'privatised' Australian dairy industry is a collapsing mess.
There are several fallacies in the pro-private business argument. One is the claim that business is efficient whereas government is not. It is true that government is often not especially efficient, but that does not mean the converse applies. Business is often spectacularly wasteful to the extent that most companies go out of business within a decade if they are subject to genuine competitive forces. That, indeed, is why purchasing public assets is so attractive: competition is either weak or non-existent.
Another fallacy is what might be called the 'profit circularity': because profits are the only thing measured, they are thought to be the only things that exist.
The purpose of government funded public infrastructure is not to make profits but to lower the cost of doing business, sometimes called the socialisation of the means of production. Countries that are able