Public-private government

Photo: Predrag Trokicic

Photo: Predrag Trokicic

The minister of traffic and infrastructure triumphantly announced a solution to all our problems recently – public-private partnerships (PPPs). According to her: “In the previous period we were dedicated to stabilizing the budget, which is one of the reasons for the lack of PPPs in past years. On the local level, we may have lacked the necessary knowledge for these projects. Now, as a state, we are economically stable, we have a clear strategy, our laws are aligned with the EU and we are ready for these projects”. The minister also gave us examples of public-private partnerships that are currently being implemented – the incinerator in Vinca and the concession for “Nikola Tesla” airport.

As the public is already aware, both projects were already subject to serious criticism and civil disobedience. The incinerator due to the fact that the environment is put in danger for private profit, and the concession because the contract apparently implies that the government will meddle in the market and kill the competition for the concessionaire – hence the case of “giving away” of Nis airport (of course, we can only speculate about this, because we still haven’t seen the contract and we probably never will).

The minister didn’t mention another example of public-private partnership – construction of mini power plants on Stara planina. Instead, Aleksandar Jovanovic, from the Union of local communities of Stara planina, spoke about this project. He caused a small scandal at the ceremony marking Environment day when he refused to accept the minister’s award. He said:

“The ministry of construction issues permits, they use urbanistic plans which are contrary to the Constitution, the Law on environmental protection, and the opinion of the Institute for environmental protection. They break these rules deliberately in order to give the water and the rivers to private individuals and help them make big money. They are stealing the water from us. The amount of energy produced is negligible, but the money is not.”

Jovanovic accused the minister of traffic and infrastructure of issuing permits for power plants which will endanger people in this area.

Someone may say that these are only beginner’s mistakes. The minister herself said that there were not enough public-private partnerships thus far, that these are only the initial steps and that things will get better. This may be true if we were the first country in the world to discover this kind of investment and if we knew nothing about its potentially harmful consequences for the citizens, public property and society as a whole.

But we do know. Eight years ago, British historian Tony Judt wrote about this in his book Ill Fares the Land. This is what Judt said about British experience with PPPs:

„The only reason that private investors are willing to purchase apparently inefficient public goods is because the state eliminates or reduces their exposure to risk. In the case of the London Underground, for example, a ‘Public-Private Partnership’ (PPP) was set up to invite interested investors to buy into the Tube network. The purchasing companies were assured that whatever happened they would be protected against serious loss – thereby undermining the economic case for privatization: the workings of the profit motive. Under these privileged conditions, the private sector will prove at least as inefficient as its public counterpart – creaming off profits and charging losses to the state.

The outcome has been the worst sort of ‘mixed economy’: individual enterprise indefinitely underwritten by public funds. […] The result is moral hazard. The popular cliché that the bloated banks which brought international finance to its knees in 2008 were ‘too big to fail’ is of course infinitely extendable. No government could permit its railway system simply to ‘fail’. Privatized electric or gas utilities, or air traffic control networks, cannot be allowed to grind to a halt through mismanagement or financial incompetence. And, of course, their new managers and owners know this.”

In June last year, a fire broke out in Grenfell tower in West London and 72 residents were killed in the blaze. The investigation found that the main “culprit” for the quick spreading of the fire which resulted in so many victims was the flammable façade, constructed in 2015. But the poor quality of work which led to the tragedy was no accident. According to the Guardian, the neo-liberal transformation of the public sector, initially under prime minister Margaret Thatcher and then under “New Labour” gave the construction of social housing (like the ones in Grenfell tower) to private contractors – i.e. public-private partnerships. Regulations regarding safety standards kept decreasing in order to “stimulate” private companies, i.e. to increase their profit. The Guardian wrote:

“Regeneration projects are now invariably delivered through hugely complicated public-private partnerships, with little government funding. Instead, in exchange for their work, private developers receive highly lucrative long-term contracts, such as PFI, and valuable land on which to build homes for private sale. Local government has become distanced from housing provision, central government funding for social housing has been reduced, and the involvement of powerful private companies has increased. As this has happened lines of accountability have become blurred, and social housing tenants have become a “necessary evil”, tolerated by the private sector only because they allow lucrative private market housing to be built.”1

Judt didn’t live to see the Grenfell fire (he died in August 2010). But if he did, he certainly wouldn’t be surprised. One of the many ways that public-private partnerships transfer risk from private capital to citizens is by saving on elementary safety. The lives of the tenants were the price of the “moral risk” Judt wrote about seven years earlier.

If he was alive today, he wouldn’t be surprised by the fact that, thanks to public-private partnerships, companies in Serbia are allowed to collect private data of citizens, with the aid of the ministry of health, as well as to use this data for commercial purposes. The surprise would be even smaller if he knew the persons heading the government and the ministry of finance. The Serbian government itself is a public-private partnership.

Today, when we read Judt’s book in light of current political events, it would be good to remember this conclusion: “By eviscerating public services and reducing them to a network of farmed-out private providers, we have begun to dismantle the fabric of the state. As for the dust and power of individuality: it resembles nothing so much as Hobbes’s war of all against all, in which life for many people has once again become solitary, poor and more than a little nasty.”

Translated by Marijana Simic

Peščanik.net, 18.06.2018.

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  1. If this reminds you of Belgrade Waterfront and the recent fire there (without victims, fortunately), it’s no coincidence.