The coalition governments’ attempt and ultimate failure to privitise forests in Britain is an excellent, illustration of what the Hungarian radical Karl Polanyi described as the ‘double movement’.  Polanyi in his epic book ‘The Great Transformation’ published in 1944, a strident attack on liberal economics, noted,

‘To allow the market mechanism to be sole director of the fate of human beings and their natural environment … would result in the demolition of society (Polanyi 1957:73).’

The double movement was a process whereby attempts to marketise society, the first movement, would result in widespread resistance, the counter movement.

Forests seem to strike at the soul of millions of people in Britain, the idea of selling them off to corporations for profit instead of using them for children to play and wildlife to inhabit sickens voters. Thatcher too tried to sell off forest commission land, and was also defeated. While arguably the major environmental NGOs have been slow to act in defence of the forests, grassroots campaigns have sprung up like mushrooms, inspiring people who are not usually politically engaged to anger and action.  Assaults on libraries and the NHS are also likely to provide iconic targets for anti-cuts campaigners and prove costly to the Conservatives and Liberal Democrats.

The government may have executed an apparent u turn to this public pressure, but the supposed halt to sales is more likely to be a tactical move than a real change. Again this is in line with Cameron and Clegg’s adoration of Mrs Thatcher, who despite her image as an ‘iron lady’ was prepared to take a step back from policies in the short term to buy time for their success in the long term.

The influential free market think-tank the Adam Smith Institute has claimed that even before the perhaps temporary climb down, the privatisation policy did not go far enough.  They quote their supposed mentor, the 18th century economist who noted in his magnum opus, The Wealth of Nations,

‘In every great monarchy of Europe the sale of the crown lands would produce a very large sum of money, which, if applied to the payment of the public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the crown…When the crown lands had become private property, they would, in the course of a few years, become well-improved and well-cultivated…the revenue which the crown derives from the duties of customs and excise, would necessarily increase with the revenue and consumption of the people.’

They also argue much of the Foresty Commission land ‘comprises endless acres of identikit conifers. Dark, dense and unwelcoming, these plantations serve none of the interests that the campaigners champion.’ The reality is that most local communities lack the resources to buy forests, so privatisation would mean them going to the highest bidder.

There were fears that the forests could be bought by biofuel companies, who would reduce trees to chippings which would be burnt for electricity. The government claims that planning law makes this impossible but at the same time as trying to sell off the forests the government is also hoping to weaken planning law. The point from the Adam Smith Institute about fast growing conifer trees is also spurious, companies will seek to maximise profit; planting broad leaf forests and opening them up to the public will not generate short term profit, planting uniform monocultures of trees will.

A forestry commission programme to turn the conifer plantations into more diverse and ecologically rich woodland has just been closed down.  Thousands of forestry commission jobs are also still to be cut.

The moves to privatise the forests in the UK are part of a wider neo-liberal consensus. Indeed the last Labour government launched a programme of forest sales. Assaults on the forests by private corporations are global; South Africa, the USA and Australia have all seen battles, at least partially successful, against forest privatisation.  If protest is sustained, militant and imaginative it is possible to win. In the Peruvian Amazon, the indigenous coalition Aidesep, have used direct action to prevent the government selling the forests to corporations who would open them up for oil and gas exploitation.

In turn indigenous people and forest campaigners fear that climate change is being used to enclose forests and exclude local people via the REDDS system. Reducing Emissions from Deforestation in Developing Countries essentially acts as a means of privatisation, taking woodland away from local people and putting it in corporate hands.  Last year Ethical Consumer magazine noted that, ‘Owen Espley from Friends of the Earth feared that REDDS will lead to a massive land-grab from the world’s 60 million indigenous rainforest people who depend upon the rainforests for their livelihoods.’

The campaign to protect the forests must continue. If we drop our guard, there is little doubt that the government will have another go.  Dave Bangs who co-ordinates Keep Our Forests Public wrote recently in the Morning Star, ‘State ownership’s major advantage is that it subtracts a resource, at least partially, from the irrationality and greed of the market.’ The answer for our public forests is the same as the answer for our economy – we need more democratic public ownership and economy-wide planning, enough to break the dominance of the market and not some porridge of private businesses and “social enterprises” struggling for their market share.’

Links

REDD Monitor  http://www.redd-monitor.org/

38 degrees forest campaign http://blog.38degrees.org.uk/tag/save-our-forests/

Aidesep http://www.aidesep.org.pe/

Keep Our Forests Public article on Sussex Socialist Resistance blog ttp://sussexsocialistresistance.blogspot.com/2011/02/keep-our-forests-public_14.html

The key policy aims of the Big Society are summarised simply by the government as ‘Empowering Communities’; ‘Opening up Public Services’; and ‘Building a stronger Civic Society’. However, the politics behind these headlines are complex, combining hard-nosed political economy with conservative idealisations of the good society. At the economic level the Big Society is part of a strategy of shrinking the state, cutting public expenditure and accelerating the out-sourcing of public services. At the social level, it aims to create an idealised world where the better off help the poor; where self help, charity and philanthropy replace public services; where neighbourhoods are run like village communities and parish councils; and where ordinary people experience freedom because there is no state bearing down on them.

The Localism Bill

The Localism Bill tackles one key ingredient of the Big Society mix, the idea that the best decisions are made locally and that local communities are best placed to decide on what services they want and how to deliver them. The contradiction underlying this for the Conservatives is that markets do not want to be constrained by local rules and regulations. They prefer uniform national regulations, and as few of them as possible. One of the clearest examples of this is the housing market where developers want freedom to build where they want, not a host of local regulations, hoops and neighbourhood consultations to pass through, increasing their costs and risks.

But in spite of misgivings in business circles, the Localism Bill is going ahead, with a raft of measures aimed at changing the relationship between central government, local authorities, and local residents. The most significant are; ending the security of tenure of social housing tenants; granting a general power of competence for Local Authorities (i.e allowing councils to use their resources in any way they want within national laws and regulations)a; creating a community right to bid for local government services; a community right to develop neighbourhood plans; a community right to build under neighbourhood development orders; a community right to buy public assets; and a right to call a referendum on local issues including the level of the council tax.

Community Rights

The community “rights” set out in the Bill are particularly interesting because the measures tap into the frustrations of many communities with local government regulations and bureaucracies, with public consultations which often appear to have no effect, and with some public services that are unresponsive to local needs. Although this is a caricature, it goes with the grain of politics. And it also taps into the sense that New Labour efforts at revitalising poor communities (through New Deal for Communities, Housing Pathfinders, and Community Asset transfer for example) had had only limited results. And where New Labour had done good things such as encouraging community land trusts, or the community right to buy scheme for land in Scotland, it was too little too late.

Local authority powers

From the point of view of local authorities faced with the need to make massive cuts, there are advantages in being able to reduce staff by out-sourcing, and transferring the costs of running community facilities such as libraries and community centres to community groups. But where local authorities stand on localism is very far from the “village green” idealisations that lie behind some of the localism rhetoric. If there is to be more “community power” it will be strictly circumscribed. Not only is there a deep reluctance to give up power, but also a scepticism that local communities have the necessary skills, or can be trusted.

For local authorities, localism creates complications, costs and political risks. They will have to enable and manage the new community rights, including entertaining tendering from a much more diverse and fragmented range of voluntary and community providers, and helping communities draw up neighbourhood plans. And they will be under a duty to regulate, manage and scrutinise the whole process. They will be the ultimate gate-keeper and accountable body. There will be legitimate demands on them to help facilitate the process with funding and staff time. This could be a political and bureaucratic quagmire, raising expectations of community power and self help to unrealistic levels. It will also be costly. Instead of the Localism Bill reducing bureaucracy and costs and increasing “freedom” for local action, an entire swathe of new bureaucracies, regulations and financial scrutineers will be created to establish and manage the system.

Limiting Community Rights

Each Right in the Bill is carefully proscribed. The example of community rights to make neighbourhood development orders and neighbourhood plans is instructive. A neighbourhood development order can give planning permission with or without conditions for development. However, the orders must be approved first by the local authority. They do not give communities the right to act outside the Local Planning Authority. Orders can be brought forward by designated bodies – parish councils in rural areas and neighbourhood forums in other areas. However, neighbourhood forums will only be recognised if they are regarded by the local authority as representative and constitutionally valid.

Similarly, neighbourhood plans can be brought forward only by designated neighbourhood forums or parish councils and the plans cannot override existing local authority plans. Even the form and content (and documentation) of neighbourhood plans will be proscribed by the Secretary of State. Both neighbourhood orders and plans must be examined by an independent inspector and then put to a local referendum. Only if the referendum is approved (and there are lots of complications to be sorted out here), will the Orders or Neighbourhood Plans go ahead.
The right of communities to bid for community assets is similarly circumscribed. Local authorities under Labour were urged to create lists of public assets (land and buildings) that could be transferred to community groups (at market value). Under the Localism Bill, there will be a community right to bid for public assets. But as under New Labour, each local authority will decide itself what is an asset of “community value”. Local groups can seek to add public land and buildings to this list but in the end the local authority will decide whether an asset is on the list or not. The critical point of principle is that the community itself will not be able to decide which assets are of “community value”.

What is striking about these examples is the strict gate keeper role of local authorities with very little opportunity for communities to side step local councils and go to national government if they think their proposals for plans, orders, asset transfer, or tendering are opposed or obstructed by their local council. This right of appeal was an important option under previous local/central arrangements. Thus, it is likely that where community rights are exercised with the approval of the local council, they will get a fair wind; but where they do not, they will go nowhere.

An opportunity for the left?

This analysis suggests that potential (within the measures of the Localism Bill) for radical community actions that aim to change or overturn local cuts or privatisation of services or housing policies of local authorities and central government will be limited. In spite of this there may be opportunities to use the new Rights to put forward alternatives to local council or government policy, including generating local referendums and drawing up “people’s plans” for disputed land and buildings.

If local authorities actively take sides with the community against central government cuts and public service reforms, exercising community Rights might be a useful way to establish local alternatives which can challenge government policy. Given that most local authorities are currently under Conservative control in England, and local government is generally very compliant, this does not sound a likely scenario in the short term. But if Conservatives (and Liberal Democrats) lose control of councils in forthcoming local elections, and the political temperature over Coalition policies rises, this may change, although by then much of the damage to local public services will have been done – with libraries, youth facilities, and care homes sold, and public services reduced.

Conclusions

At present the Bill is likely to help better off communities who are organised, have their own resources and are supported by Conservative councils. It give further strength to communities opposing new housing (particularly affordable housing) in their neighbourhoods, while it will be of much less help to hard pressed communities in both urban and rural areas fighting for social justice and against cuts in services, jobs and housing. The outcome will be increased inequality and fragmentation.

Many on the left have been arguing for years that deprived communities should have more power . But for the left “more power to local communities” means grass roots community organising and action; a quite different community politics to the top down community control that the Localism Bill will bring about. The Localism Bill encourages community power but it is strictly conditional; if local initiatives conform with Tory led policies, there will be devolution of power to local communities, albeit subject to quite stringent conditions. If communities use the Rights to challenge the policies of the local authority, the authorities have the power to simply block them. However, the complexity and contradictory nature of the Bill and its inevitable variety of application from place to place and over time, means that Localism could turn out to be more of a hostage to fortune for the Tories than they imagine.

Its none-too-snappy name and low-profile location – tucked away in the World Bank – have meant that few of us have heard of the PPIAF, let alone understood what it is up to. But this has been a mistake. While its expenditure is relatively small in global terms, its influence has been immense.

To take just one sector, water, in 24 countries, from Afghanistan to Zambia, the PPIAF has funded consultants to advise on privatisation options or the legal and institutional changes required for privatisation.

In most of these countries, the World Bank, International Monetary Fund or other aid donors have also imposed water privatisation as a condition in return for debt relief or aid. Most shockingly of all, in 16 poor countries, the PPIAF has organised thinly veiled pro-privatisation PR campaigns, which it describes as ‘consensus building’ projects, to support water privatisation processes.

Workshops, conferences and public awareness campaigns have been organised to persuade parliamentarians, civil society, trade unions and anyone else likely to disagree that privatisation reforms are needed. Indeed, the PPIAF admits that as civil society resistance to privatisation has grown, its consensus building work has increased, just to keep up.

Journalists, too, have been the target of consensus building. In 2000, the PPIAF funded a communications programme for 32 African journalists. As well as a workshop in Durban (themes included, ‘Changing institutions and involving the private sector’), there was an email discussion group, and the group was flown to the World Water Forum in the Netherlands, an event heavily influenced by the water industry lobby.

This year in Malawi, a PPIAF project will design a strategy to ensure ‘communication and participation’ in the reform of two public water boards. And the nature of these reforms? In late 2006, Malawian campaigners saw a leaked cabinet paper that proposed privatisation for the water board in Blantyre. This was no surprise: after all, a previous PPIAF project had recommended leasing the water board to a private sector operator in 2003.

The PPIAF is not just active in Africa. In Paraguay, despite public protest and a parliamentary vote against water privatisation, the IMF is still pushing for a management contract for the main water utility. It has been aided by PPIAF projects in 2000 and 2005.

But the PPIAF’s anonymity is coming to an end. Following a report last year by the World Development Movement and the Norwegian NGO, FIVAS, campaigners now have the organisation firmly in their sights.

And the 12 governments that fund it are coming under increasing pressure to review their support. Already, the Norwegian government has said that it no longer views the PPIAF as a means of solving the problem of access to water for the poor and that it will no longer fund it. Other donors are expressing concern too.

Unfortunately, the UK government is not among them. The UK created the PPIAF in 1999 and by 2008, it will have contributed a whopping £53 million to its activities. The PPIAF is essentially a New Labour creation and the UK’s defence of it may have a familiar ring: ‘The PPIAF does not push privatisation; it supports developing country governments to … harness the full potential of public/private partnerships.’

As anti-water privatisation campaigns gather pace around the world, and further evidence comes to light of the failure of the private sector to connect the world’s poorest people to affordable water, campaigners are getting ready to rebut the spin of the PPIAF. When it held its annual meeting in the Netherlands in May, campaigners were present and watching.

Across the world public water providers are delivering clean water to poor communities at prices they can afford, reinvesting profits and involving communities in managing their own water. These providers need our support. What is needed is faith in the public sector to deliver; support to enable successful public utilities in poor countries to share their expertise with other providers; and significantly more finance for the water sector, to reverse the recent decline in aid.

As for the PPIAF, it is time to pull the plug.

The World Development Movement report on PPIAF can be downloaded from: www.wdm.org.uk/resources/reports/water/downthedrainreport26112006.pdf

For someone who is a true believer in competition and the free market and has praised legislation opening up public services to the market, this is remarkable. In the same presentation to a conference of the Italian senate on the ‘restructuring of public services’ he had to admit that, even in the case of Britain (always cited as a positive example of liberalisation),’We have witnessed problems arising in the provision of services and perhaps – since British authorities have stopped releasing data on security – also in the field of security.’

Across Europe a major conflict is raging over the future of public services. On the one hand are those who believe that privatisation and liberalisation is the only way to meet the needs of consumers, improve the efficiency of public finances and create a common European market allowing enterprises, professionals and workers to move freely. On the other hand are those who highlight the risks of privatising services that have been historically guaranteed and protected by the state, thereby depriving the public of democratic control over the way that their taxes are spent.

We are living in difficult times. In Italy privatisation began with the state-owned industrial corporations. Now the Prodi government is carrying it through to essential local public services – to what we consider to be ‘common goods’. In Germany they are still in the process of selling off their infrastructure: energy, railways, telecoms and so on. Everywhere, the views that emerged during the Thatcher and Reagan years in conservative parties have become all too common in parties of the centre-left – in spite of the growing evidence of the failure of privatisation and liberalisation from the standpoint of both consumer satisfaction and public finance efficiency.

Privatisation in the UK has gone furthest.The sell-off of industrial corporations such as steel and coal is historical memory. Britain is now engaged in opening up local government, health, education and part of the criminal justice system to private business. Public bodies are to become commissioning organisations, purchasing services from public, private and voluntary sector organisations.They are also being required to create new markets of competing providers where they do not already exist.

Claims and consequences

If we look at what is happening across Europe, a number of contradictions are emerging. One is that between the claims of liberalisation and the consequences of privatisation. Although in practice, they are closely linked (with liberalisation usually preparing the ground for privatisation), they are in theory distinct and often used for different ideological and political goals.

In theory at least, governments claim to use liberalisation to stimulate competition and to make it difficult for institutions with a monopoly or near monopoly to fix prices. Hence liberalisation of services is said to benefit the consumer.

Privatisation, on the other hand, is the partial or complete transfer of public industries to the private sector. It was used by Margaret Thatcher in its purest form – the outright sale of those industries – to defeat the trade unions. It has since extended to include the substitution of public delivery of services with private delivery through the process of competition and marketisation.

Italy provides a good example of how the impact of privatisation in reality conflicts with the theoretical claims of liberalisation. Last year, Perluigi Bersani, the minister for economic development during the first Prodi government (June 2006- February 2007), launched a liberalisation programme with the aim of attacking the privileges of monopolistic corporations, including taxi, insurance and pharmaceutical companies and mobile phone companies that impose unreasonable pay-asyou- go tariffs. Bersani’s attempt to protect consumer interests in the private sector will no doubt come up against strong corporate vested interest.The fact that it is necessary illustrates how disastrous were the consequences of the privatisations in the 1990s, when Italy went from being an economy dominated by state monopolies to one dominated by the oligarchies of private companies.

The way that postal services and telephone companies now operate illustrates this point. Although Italian Telecom has been privatised and there are various private companies competing in the mobile phone market, studies carried out by Eurobarometer, a research company employed by the European Commission, found Italian consumers to be the most dissatisfied in Europe, both in terms of customer services and value for money.The most favourable consumer feedback came from countries where public ownership of phone companies is still prevalent. Another classic Italian example of the failings of privatisation involves the high costs and inefficient operation of public highways, which were privatised in 1999 (with most of the shares bought by Benetton).

Our experience in Italy illustrates one of several problems with privatisation and liberalisation that are common throughout Europe: the end of a state monopoly has not translated into the realisation of a competitive market. Instead it has produced private oligarchies and massive profits for private companies, with very little going to public authorities, which continue to face dire problems of underfunding and debt. Financial institutions have been the main beneficiaries of the privatisation of infrastructure in Europe. Across the continent it is the same story: a deterioration in those services that were liberalised and a shared experience of huge job cuts and a weakening of trade unions.

Conflicts of interest

Another Europewide consequence of privatisation and liberalisation concerns the massive conflicts of interest within the continent’s major telephone, media, electricity and gas networks. For example, the European Commission wishes to separate the ownership of energy producing companies from that of companies that administer energy supply networks. It is seeking the same sort of split in the telecoms sector.

A conflict recently developed in relation to the latter between the EU commissioner for information society and media,Viviane Reding, and the German government.The problem is linked to German Telecom, which is currently investing large sums of money in the production of optic fibres and has no intention of allowing potential competitors access to its networks. For the moment, the issue seems to be on hold and it looks as though the commission may postpone any decision until after July, when the German EU presidency will expire. But these sorts of conflicts are becoming increasingly common and illustrate how the theoretical claims of liberalisation are contradicted by the fact that a pure and competitive market is an unreal abstraction.With the diminution of public control the interests of the economic elites will prevail – with ever lessening opportunities for any democratic challenge.

The passage from public to private that has taken place in Europe has demonstrated the link between privatisation (of industries, infrastructure and public utilities) and the increasing influence of financial markets on the direction of the economy and society. In many European countries, privatisation has been directly linked to diffused shareholding and ‘popular capitalism’, whereby shares in what were public industries and services are sold on the financial market and bought up partly by private citizens but mostly by international investors such as insurance companies.

France is a good example. Here the government, after years of resisting privatisation, decided to go down the route of selling shares to the public. ‘With the same pretext of controlling the public sector, both left-wing and rightwing governments gave birth to a real transformation of public industries into industrial multinationals, with a growing quota of private capital,’ says Nicola Galepides, of France’s main telecoms union. ‘State industries like France Telecom or EDF-GDF have often bought up public companies in emerging countries,’ says Galepides, and their involvement globally will only increase with privatisation.

In France, it looks as though postal services will be the next target of the privatisers, with international couriers first in the firing line. ‘Since this is not a market in expansion,’ says Galepides, ‘what will suffer are the rights of workers and the quality of services available to the citizens.’

The Spanish government, too, has turned to the private sector. Here privatisation began in 1986, when both industrial and public service sectors were privatised.The INI (National Institute of Industry) sold Seat and Puralator to foreign private companies, while 38 per cent and 98 per cent respectively of two important state owned companies in the energy sector, Gesa and Endesa, were sold on the financial market. In recent waves of privatisation, banks, food production companies and tobacco industries have all had the same treatment.

One result of this process of putting what were state services onto the market is that the citizen is being turned into a consumer and small shareholder. The political implications of this need seriously to be discussed; it underlies many of the contradictions facing left-wing parties today. There is only one explanation for the propensity of erstwhile parties of the left to support privatisation: in rejecting their past these ex-socialist and ex-communist parties decided they wished to strike a deal with the new holders of financial power.

Democracy and public services

There are two recurring strategic questions.The first is how to define in judicial terms ‘services for the general interest’ and ‘services for the general economic interest’ (see box); the second is the question of participatory democracy.

In relation to the first, the literature is vast but at the EU level there is no agreement. Italian research, undertaken by the CIGL union federation, the Network of Municipalities, Attac Italia and Arci found that EU legislation involves ‘no awareness of the notion of public service’ but only acknowledges ‘services for the general economic interest’. One of the most urgent political tasks for opponents of privatisation in Europe, therefore, is to secure a clear and definitive directive on services for the general interest.

Democracy is another fundamental problem that needs to be addressed. Privatisation has gone hand in hand with ‘individualistic’ and authoritarian political ideologies. The EU is witnessing a disastrous lack of civic participation in its policy-making.This has been highlighted in research by Greenwich University’s Public Services International Research Unit, on behalf of the European Federation of Public Service Unions, that is highly critical of the official report of the European Commission on services and liberalisation.

The researchers point out that the commission report – which, after all, deals with issues crucial to all European citizens – was published only in English and was edited by a very small circle of people, who failed not only to involve civil society associations but also institutional representatives from other EU committees. In the paper,’Evaluating Network Services in Europe: a critique of the EC evaluation of the performance of network industries’ (available online at www.psiru.org/reports/2006-03-EU-EPNIcrit.doc), the author, David Hall, highlights ‘the need for an independent, participative, and democratic process: the European Commission should not provide the defence, jury and judge for its own policies’.

Bolkestein and the future

A major problem facing Europe at present is the Bolkestein directive on the liberalisation of services. It was the latest of a series of directives that flowed from the European single market. The earlier directives were aimed at specific sectors – telecoms, energy, rail transport, waste and postal services – and required all EU members states to commit to a deregulation timetable to open up public networks to private operators.

Bolkestein aimed at complete liberalisation of service industries, creating a common European market. The way the law was formulated meant an attack on workers rights because it enabled a company from any EU member state to recruit workers in other EU countries on the basis of less favourable employment laws in its own ‘country of origin’.

Europe-wide protests led to a compromise by which the countries-of-origin clause was dropped and certain services would be protected from the opening up of the market. How long will this compromise last? Who can rule out that, sometime in the future, a foreign company might lobby successfully to take over services in areas that are now protected? In the internal European market, what sectors will be excluded from the liberalisation process? All services, linked to all sorts of general interests, might eventually be liberalised, leaving the state solely with the responsibility of assisting the most vulnerable.

One of the next battle lines on liberalisation and privatisation is likely to concern the health service. In this context, it may be worth noting that the present EU health commissioner is the Cyprus-born Marhos Kyprianou. It is well known that Cyprus does not have a public health service.

Translation by Ilaria Perlini

The end of state monopoly has not translated into a competitive market. Instead it has produced private oligarchies and massive profits

There are two classifications of public services in Europe. The services directive (2006/123/EC) applies to ‘services of general interest’, which includes education, social protection, security, criminal justice and local government services such as refuse collection. Certain services were excluded from the directive, including healthcare services, social services, social housing and financial services. The directive is intended to liberalise the cross border supply of services, thus helping to create a common internal market. ‘Services of general economic interest’ are commercial services with public service obligations, such as energy, transport and communications.

The European Public Services Union (EPSU) and the Socialist Group in the European Parliament (PSE) are campaigning for a new EU legal framework on public services. The aim is to establish common public service principles; legal certainty and exemption for social services, health, water and education from competition regimes; and the right for local and regional authorities to provide in-house services. It will also establish an Observatory to promote cooperation, improve standards and monitor the impact of liberalisation.

None of this worried health secretary Patricia Hewitt, who combines Cameronite optimism with a degree of detached composure that recalls Margaret Thatcher. Hewitt is almost unflappable. But for a few short minutes that afternoon, at a smart fringe meeting of New Labour’s favourite think-tank, the Institute for Public Policy Research (IPPR), she was well and truly flapped.

It happened like this. After a typically banal speech on the subject of ‘Can the NHS meet rising expectations?’ Hewitt took questions from the floor. The microphone was passed to an American businessman, who asked why she was handing over NHS Logistics, the health service’s supplies organisation, to a ‘criminal organisation’. It was difficult to tell what he was saying, because as soon as his question began to sound critical the chair, Richard Brooks of the IPPR, declared he wouldn’t take it. The microphone man tried to grab the mike back, but the questioner hung on heroically and managed to shout the rest of his enquiry, which Hewitt refused to answer.

The American wasn’t satisfied with that.

When Hewitt got up to leave for another meeting, he got up too, and chased her. At which point, all the journalists in the room got up and chased them both.

Michael Dixon, chair of the NHS Alliance, whose speech followed Hewitt’s, had to watch as a third of his audience ran off. Moving at pace towards the exit, Hewitt was definitely flustered.

The pursuing American was Phil Zweig, who had come to the UK to warn of the folly of handing over NHS procurement from NHS Logistics to US giant Novation.

NHS Logistics bought and distributed health equipment to hospitals. It was an award-winning non-profit organisation, reinvesting its surpluses in the NHS. Faced with a glaring example of public sector success, the government decided to outsource it to the German delivery firm, DHL, and its sub-contractor, Novation, which is to carry out the crucial role of procurement with control over £4 billion of NHS money.

According to Zweig, Novation is ‘the largest and easily the most corrupt US hospital group purchasing organisation’ (GPO). ‘Your government will be in bed with a rogue organisation that is currently under criminal investigation by the US Department of Justice,’ he told Red Pepper.

This investigation centres on whether Novation is guilty of bribery and defrauding US public health schemes.

Novation has also endured four hearings before the US senate antitrust subcommittee, investigations by the Connecticut attorney general, and critical studies by various US government agencies.

In the late 1990s Zweig’s company, Retractable Technologies, developed a blood collection device that protected nurses from HIV and hepatitis. These could be produced for 27 cents a time, but Novation suggested adding their private label and inflating the price to a dollar, splitting the extra profits. The deal didn’t go through, and Novation and other GPOs allegedly attempted to block the product from the market. In the ensuing legal action Retractable Technologies received a $155 million settlement.

Zweig is involved in a campaign, Stop GPO Kickbacks, working to change the corrupt supplies industry. He is ‘appalled’ that just as campaigners are making headway in the US, the UK government has decided to import some of the worst features of the US system.

‘It works this way,’ he says. ‘Giant multinational healthcare suppliers pay kickbacks of up to 20 per cent, disguised as administrative fees, marketing fees, prebates, rebates and the like, to Novation and the other GPOs to ensure that their products have exclusive access to hospitals.

In return, these monopolies get sole source, multi-year contracts that make it virtually impossible for a small, innovative company with a better pacemaker, syringe, or even surgical gloves to market its products.’

But, Patricia Hewitt might have said if she hadn’t been running out of the door, Novation will be able to save the NHS £1 billion over 10 years by bulk purchasing (a figure apparently plucked from the air, as no business case has been provided). Zweig disagrees: ‘Novation has no incentive to save money for hospitals, because higher price and higher volumes translate into bigger fees. Putting Novation in charge of NHS supplies is like appointing Jack the Ripper to run your neighbourhood watch. Or to use a more recent analogy, hiring Enron to operate your power grid.’

But that is what has happened – DHL/Novation took over on 1 October. Zweig believes Novation may imminently be indicted in the US, leaving the UK government in an embarrassing position.

Hewitt seems to have decided this is a price worth paying – indeed, that any price is worth paying – in the relentless privatisation of the health service. The week before the party conference she made a speech saying that there would be no limit to private sector involvement in the NHS.

‘America’s healthcare system is the world’s most expensive and inefficient,’ Zweig warns. ‘If that’s what your government wants for its citizens, it has taken a major step in the right direction.’www.keepournhspublic.com

www.stopgpokickbacks.org

Globeleq was set up in 2002 by the Department for International Development (DFID) as part of the government’s strategy of ‘promoting the private sector in the developing world’. The company remains wholly owned by DFID through its private sector promotion arm CDC, formerly known as the Commonwealth Development Corporation.

Globeleq now has operations in the energy sectors of 16 countries in Africa, Asia and Latin America, and is actively pursuing further acquisitions in its bid to be ‘the fastest growing power company in the emerging markets’.

Globeleq has indeed grown fast. The company’s rapid expansion has been made possible because other multinational power companies have been keen to exit developing country markets as a result of the problems associated with energy privatisation.

However, this means that vast amounts of aid money supposedly earmarked for development purposes have been given instead to US power companies wishing to pull out of the developing world. Two such companies – AES and El Paso – have benefited to the tune of over US$1 billion between them in this way.

In this way Globeleq is keeping alive a private sector presence in situations where other companies have abandoned the market. This is in line with DFID’s broader aim to sustain the private sector in cases of market failure, but it raises serious questions in light of DFID’s overall mandate of poverty reduction. The involvement of multinational power companies in the energy sectors of developing countries has been deeply problematic, as the poor have often found themselves excluded from access to privatised electricity. Far from solving the problems of poverty, electricity privatisation has often exacerbated them.

There are currently 1.6 billion people around the world without access to electricity, roughly a quarter of the world’s population. Two thirds of these are in Asia, with most of the rest in sub-Saharan Africa. The International Energy Agency estimates that it will be necessary to roll out electricity services to a further 600 million people by 2015 if the world is to meet the top line UN millennium development goal of halving the proportion of people living on less than a dollar a day.

Yet privatisation of the electricity sector has not been successful in expanding coverage to poor communities. In fact, privatisation has led to sharp increases in the tariffs charged to consumers, and these increases have often raised prices beyond the reach of the poor. The arrival of multinational companies such as AES, Enron and EDF in developing countries during the 1990s saw dramatic price increases in electricity. When the Indian state of Maharashtra opened its power sector to Enron, for example, the state electricity board soon found itself forced to raise tariffs to farmers by a crippling 400 per cent to meet the added costs.

Electricity privatisation has proved hugely unpopular in many of the countries in which Globeleq operates. In Arequipa, southern Peru, mass protests erupted when the government attempted to privatise two electricity companies in 2002, with two people killed and 150 injured. Months of demonstrations against electricity privatisation in the Indian state of Andhra Pradesh left three people dead and thousands arrested.

Yet DFID continues to promote the privatisation of public services through Globeleq and other such initiatives. This not only conflicts with DFID’s own poverty reduction mandate, but it also undermines the ongoing work to build alternative models of energy provision, such as public sector and community- based services that are affordable and accessible to all.

The government has acknowledged the problems caused when developing countries are required to hand over public services to multinational companies.

Why, then, does it own a private power company that aims to take over energy services in the developing world?John Hilary is director of campaigns at War on Want. A full report on Globeleq is available at www.waronwant.org/globeleq

But London’s livid lawn-waterers are not the only of Thames Water’s 70 million customers worldwide whose taps have run dry. Over 9,000 kilometres away, the citizens of Jakarta, Indonesia, have regularly complained of poor service and frequent water disruptions, including several days without water, since the city’s water company was taken over by Thames Water and French multinational Suez in 1997. Water rates there have been hiked by up to 30 per cent per year.

Double-digit price rises are also promised in Britain, and the company’s record of investment in the two countries is similarly unimpressive. But while Thames continues to make a £250 million annual profit domestically, its international operations are in trouble. The company is withdrawing from investments outside Europe and the German company RWE, which owns Thames, has recently put it up for sale.

A similar pattern is being repeated across the water sector. Veolia (formerly Vivendi), the world’s largest water company, is saddled with major debts. Suez, the second largest water company globally, is also being sold and is busily withdrawing from markets it deems politically risky. And for good reason: in March, the Argentine government cancelled the contract of the company’s disastrous Aguas Argentina subsidiary, citing poor water quality and the company’s failure to meet investment targets. Its Aguas del Illimani operations in El Alto, Bolivia met with a similar fate (see Nick Buxton, page 23 of the print version).

While it may be premature to talk of the end of water privatisation, that project has gone badly awry: ‘Due to the political and high-risk operations, many multinational water companies are decreasing their activities in developing countries,’ concluded the UN’s second world water development report, published in March.

What a difference a decade makes. In the 1990s, the World Bank, IMF and regional development banks (cheered on by the water corporations) pushed privatisation as the only solution to meet development goals. Instead of seeing access to potable water and sanitation as a basic right, a pre-condition for a dignified livelihood – they sought to impose ‘full cost recovery’ mechanisms, charging a market rate for water. Water was seen not as a basic resource but as an exploitable commodity. Subsidies were scrapped, and prices were hiked. In Bolivia, for example, the arrival of Bechtel in Cochabamba heralded an instant 60 per cent price increase.

The results in Bolivia are well known: successive ‘water wars’ saw the unpopular concession contracts scrapped and stimulated the rise of a new, more radical government. But this was by no means an isolated case. In June 2002, the Paraguayan parliament indefinitely suspended a privatisation scheme for the state-owned water company, Corposana (now called Essap), which was proposed in accordance with IMF targets for the country. Local struggles in Nkonkobe (Fort Beaufort), South Africa and Poznan, Poland, saw privatisation projects scrapped, while a successful campaign in Grenoble, France, saw the re-municipalisation of the city’s water services. Most recently, in November 2005 popular pressure led to the scrapping of a World Bank-funded privatisation project in Delhi, India.

But multinational withdrawals have not simply come from popular pressure. Contracts in the Central African Republic, Chad, China, Gambia, Malaysia, Mali, Tanzania and Uganda have all been terminated after the private water operators failed to invest adequately (if at all) in new connections. In Mozambique, Vietnam, and Zimbabwe, meanwhile, privatisation was abandoned when the companies themselves decided to withdraw.

As this list of failures grows, the arguments to justify privatisation have also melted away. The competition myth – the idea that the market system could bring efficiency savings by introducing competition – was the first to go. Even if this neoliberal theory was correct, it has rarely been tested because Suez, Vivendi, Thames, SAUR and Anglian – the world’s largest water companies – are connected by a web of joint ventures designed more to protect their interests than stimulate ‘market conditions’.

The myth that the private sector brings investment has also started to crumble. ‘Private companies only invest where they can make a profit, not where there is the greatest need,’ says Peter Hardstaff, head of policy at the World Development Movement (WDM). This is backed up by WDM’s recent Pipe Dreams report, which shows that the private sector globally manages to make just 900 new water connections per day – falling some way short of the 270,000 per day new connections needed to meeting the Millennium Development Goal of halving the number of people without sustainable access to water and basic sanitation by 2015.

Against this backdrop, the private water multinationals have increased their efforts to influence global water policy with the establishment in October 2005 of AquaFed, a new corporate lobby group headed by Gerard Payen, a former CEO of Suez’s water division. It has already run into controversy, when it emerged that draft documents for the World Water Forum’s ministerial declaration originated from Payen’s computer.

Through corporate lobbying, the major water companies are pressurising the development banks – which use public funds to bankroll most development projects – to stand as guarantors against ‘political risk’ (the chance that the people might react unfavourably to price hikes) and losses arising from currency fluctuations. In effect, they are hedging their bets: urging the development banks and donor governments to offer terms that guarantee private investments, while at the same time threatening to withdraw altogether if these demands are not met. Yet this cannot mask the fact that the privatisation model has largely failed. For all the promises and projections, the reality remains that 90 per cent of the world’s water is still supplied by the public sector.

‘In a world where the multinationals are withdrawing, it is obvious that the public sector has to play a more important role,’ says Emanuele Lobina of the Public Services International Research Unit. ‘But public sector operations are created to provide a local service, and don’t have the same vested interest as multinationals in trying to promote their practices around the world.’

The opponents of neoliberalism are starting to respond. At the World Water Forum in Mexico City in March, an unprecedented 30,000 people marched in defence of water as part of a global commons, rather than a commodity. Beyond this, an International Forum in Defence of Water and a symposium on Public Water for All, heard exchanges of practical schemes to make this a reality. Public-public partnerships (PUPs) are at the centre of these proposals, encouraging public sector and community co-operation on a not-for-profit basis.

These are sometimes born out of necessity. For example, much of the water infrastructure in Caracas, Venezuela, was developed informally by residents with no formal land rights. So participation there, which takes the form of communal water councils, is essential if water providers are to understand how the system has been developed. ‘This wasn’t an urban planning issue,’ says Santiago Anconada, who advises the country’s minister responsible for participatory water management. ‘The water councils developed to map the situation on the ground. But they are as much part of the overall reformulation of power in the country.’

This emphasis on participation is increasingly widely shared elsewhere in Latin America. ‘Public means much more than the state’, says Alberto Munoz, of the Provincial Assembly for the Right to Water (APDA) based in Rosario, Argentina. He adds that citizens increasingly ‘demand participation in decision-making that ensures effective democratic control’.

In Brazil, the National Association of Municipal Services of Water and Sanitation (ASSEMAE) has played a key role in co-ordinating partnerships between authorities and civil society groups. Silvério da Costa, president of ASSEMAE, argues that this has helped the spread of socially controlled sanitation services in the country: ‘Actions that are not possible by a small municipality may be possible by a group. We are calling this arrangement a public-public partnership. But our experience in Brazil is that genuinely public water delivery must go beyond consultations with users to involve control over key financial decisions and citizens’ participation in setting priorities.’

‘We need to learn a lot from active participation in the South, especially now that we are seeing de-privatisation in Europe, including in parts of France and Italy,’ concludes Satoko Kishimoto of the Transnational Institute, based in Amsterdam. Reversing privatisation is not yet on the political agenda here in Britain, with few political actors yet campaigning for it and the water regulator Ofwat ensuring that the existing private water companies’ contracts are not up for renewal until 2027. But as Thames continues to lose up to a third of its water, and hosepipe bans likely to spread more widely, it is time that these lessons were learnt in Britain too.

For more information see www.waterjustice.org