Pandemic shines harsh light on privatisation & outsourcing

By Dave Holmes

September 21, 2021 — Links International Journal of Socialist Renewal reposted from Arguing for Socialism — Right from the start, Australia’s response to the COVID-19 pandemic has been shaped by the basic realities of contemporary capitalism (“neoliberalism”).

Essential goods supply crisis

It quickly became apparent that the various global supply chains we depended on for medical supplies and equipment were no longer reliable. Early on, getting hold of face masks (PPE) and ventilators was a big problem. We produced very little here in Australia and overseas suppliers were too busy fulfilling other orders or they had been hit by the virus themselves. 

The just-in-time, low-inventory approach of today’s big corporations depends on fast and reasonably cheap freight. But right now there is a worldwide shipping and transport crisis with container rates on key routes having quadrupled this year. In some cases, neither containers nor even ships can be had at any price. In Australia some producers and retailers are stockpiling for the Christmas period in order to insulate themselves against delays but this is a gamble which might end badly if the market shifts, leaving them with huge inventories to clear.

All this is a strong argument for making essential goods in Australia, especially medical supplies and equipment. We need to build up a strong local manufacturing capacity. Of course, now that there is a guaranteed market, numerous companies are coming forward and seeking government support and contracts to manufacture various items.

But the problem with relying on private companies is that they are in it for the money and will produce only insofar as it is profitable. They don’t want a big surplus capacity to insure against a future crisis; if production of a given item is not profitable, it simply won’t happen.

Low-paid, casualised work

So many people now depend on insecure, low-paid, casualised work. Many of these workers missed out on income support in the various lockdowns. A lot of the workforce used in aged care and hotel quarantine are insecure, casualised workers. Typically, they are forced to take shifts at a number of workplaces to make ends meet. This has been a key pathway for spreading the virus.

Even stopping work to get tested or vaccinated means real financial hardship for workers on the breadline. Finally, the governments recognised these realities and introduced payments for time off work for testing or vaccination.

Casualisation is great for the capitalists but a disaster for workers — it is a social and economic pandemic of its own. We need regular, fulltime jobs for all. A massively expanded public sector has to lead the way — in healthcare, in aged care, in disability care, in building public housing, and so on.

Keating defends his sell-offs

The AstraZeneca COVID-19 vaccine is being produced in Australia by biotech company CSL under a billion dollar deal with the federal government. Discussions are also underway about CSL setting up production facilities in Melbourne capable of producing the new, very effective mRNA vaccines.

CSL began its life in 1916 as the Commonwealth Serum Laboratories. It was privatised in 1994 by the Paul Keating Labor government. Last year John Quiggin wrote an article explaining the sordid details of this operation in which a prime public asset was sold to private interests at a fraction of its real value.

In an August 4 letter to the Age, Keating defended his many privatisations. “As Prime Minister I privatised a number of government institutions; the Commonwealth Bank of Australia, CSL and Qantas. All are competitive institutions. The Commonwealth Bank and CSL went on to become world-class companies.”

Just what is a “world-class company”? CSL now has a market capitalisation of almost $100 billion. In 2019-20 its nett profit was $US2.1 billion — a return on invested capital of 21.6%.

Furthermore, according to a Yahoo News report: “Paul Perreault, the chief of multinational biotechnology giant CSL, took home $43,044,606 in realised pay last financial year, new data has revealed, making him the nation’s highest-paid CEO.” The article explained that it would take a worker on an average salary of $63,085 more than 682 years to earn this sum.

Clearly, CSL long ago left behind its modest public origins. It is now truly world-class, with world-class market capitalisation, world-class profitability and world-class CEO pay and Keating presumably thinks we should all feel good about that.

John Quiggin argues that “there is now a strong case for renationalisation of a wide range of private assets, including roads, electricity transmission and distribution network and airports. It is time to call the failed experiment of privatisation to a halt.”

In the face of the pandemic, taking CSL back into public hands should surely be a priority. We need a publicly owned biotech company, based right here, that can develop and produce our own vaccines and medicines in a timely way, avoiding corporate profiteering.

In our opinion, a nationalised CSL should not operate on corporate lines (like Australia Post today) but have public service as its overriding aim, and be run under real democratic control and with all wages and salaries confined within a very narrow range (i.e., no obscene “market rate” CEO and executive pay or outrageous “bonuses”).

Privatisation a big success … for capitalists

Quiggin and other critics of privatisation have described it as a “failed experiment”. Obviously, this is true in one sense. But privatisation was never really an “experiment”, a bright idea. It was and is the insistent demand of big business. It wants a bigger and bigger slice of the cake. It is all about profits. And it’s been an outstanding success … for the big capitalists! It has been terrible for the mass of people — but public welfare was never the object.

Despite our governments selling off so many public assets, this process is not stopping. Every single governmental function is being eyed off for sale to the private sector. And those enterprises that remain in public hands have been corporatised (like Australia Post) with ridiculously high executive pay and an anti-worker culture.

Outsourcing — a modern plague

And even if something still remains in state hands, it will be subject to another modern plague — outsourcing. A September 8, 2020 article by Geordie Wilson on exposed how deep the rot has gone:

It’s been assumed by critics of privatisation, that outsourcing in the public service is mostly in call centre, technology, or consulting roles. However, documents obtained by show that even senior roles are being outsourced now. Senior public servants work in department buildings and take orders from the minister, but their real employer is actually a private business.

We have identified that senior roles in policy, management, biosecurity and even ministerial advice are now filled by private business. Even assistant directors and executives at many departments are now privately run. The headcount of non-IT public servant roles outsourced by the government is in the thousands.

Wilson went on to look at various government departments. The process had proceeded to an extraordinary extent in the Department of Defence:

Defence has 29,000 outsourced roles while it has 17,000 regular public servants. The outsourced staff number 1.5 times the number of true blue public servants. Some 8000 of the outsourced roles are in materiel maintenance while the other 20,000 appear to be regular public sector roles.

Spouses of senior defence officials have been given contracts to supply these outsourced roles even while those officials still were employed at the army.

The article didn’t give any information on the Commonwealth Department of Health or on how far this process has gone in the various state public services but we can assume it is underway there too.

Contracts for private companies

In addition to outsourcing personnel, our governments routinely contract private companies to perform all sorts of functions. In a January 29, 2020 article, David Paull wrote that:

… major accounting firms are reaping the benefit of our privatised public sector to the tune of hundreds of millions of dollars.

The names are very familiar, KPMG and Price Waterhouse Coopers (PWC), two of the biggest accounting firms in the world, are now playing increasing roles in this cash drain, securing contracts for Australian Government services at a rate that is mind-boggling. The biggest beneficiary of our Government’s desire to “cut red tape” is KPMG. It has secured 596 contracts from various Commonwealth departments since the 1st of July, 2018, amounting to between one to two contracts per day.

The pandemic & outsourcing functions

The pandemic emergency has showcased the problems with privatisation and outsourcing. We have mentioned the problems with staffing in aged care and hotel quarantine. We can add the problems with the vaccination roll-out in aged care. Private operators Aspen Medical and Healthcare Australia were contracted to vaccinate residents in private aged care facilities. It later emerged that the rollout didn’t include jabbing the staff! No doubt the private operators didn’t care — they were getting their money anyway.

The pandemic has shown that we need strong, well-funded and properly staffed health bodies — government departments, hospitals, paramedic services, and so on. Last year the private hospitals had to be incorporated into the state health systems (no doubt on profitable contracts) which brought an extra 30,000 beds and 105,000 nurses and staff into the national COVID response.

But government-run hospitals arguably need a lot more staff — to make up for staff required to isolate, to reduce the burden on everyone, and in “normal” times to reduce nurse-patient ratios. (And, of course, expanding nurse numbers would mean paying them properly and improving conditions.) Recently, Victoria hired 350 overseas medical staff, mostly doctors, to help maintain the health system in the crisis.

It has long been clear that hotels are not designed for COVID quarantine and there have been regular leaks of the virus. But the process of building proper, Howard Springs-style facilities in each state has been incredibly slow. In early 2020 China build a 1000-bed COVID hospital in a little over a week! We could have done that with quarantine facilities here but the political will simply hasn’t been there.

Now something is finally happening. In Victoria, the Commonwealth has contracted Multiplex to construct a big cabin-style facility which is meant to be ready by the end of the year. And in Queensland the state government is pushing ahead on its own.

Hollowing out of the state

In a November 10, 2020 article, Melbourne University academic Martin Bortz discusses “a fundamental view that has permeated public administration in Australia for decades — that governments are just there to steer, and the private sector will do the rowing.” He goes on:

However, over the last few decades, using private sector organisations for governance challenges has been pursued with particular vigour amid privatisation and the rise of so-called “new public management” (though it is not so new anymore).

Of particular interest to researchers and critics is what Professor of Government Rod Rhodes has called the “hollowing out of the state”. Here, the core functions of government are slowly eroded and eventually given off to private contractors, consultants and external agencies.

Crises the new ‘normal’

Our political leaders are trying to convince us that after the pandemic life will more or less return to normal. But the pandemic may never quite go away. And there may well be more pandemics as capitalist agriculture continues on its present destructive course.

But the pandemic is not the only problem we have to deal with. Climate change is arguably an even bigger and more dangerous problem. The recent fires, heatwaves, hurricanes, droughts and floods around the world and our own 2019-20 massive, pre-COVID bushfire outbreak shows that a host of disasters is coming for us. Crises of one kind or another or in combination will be the new “normal”. 

Obviously, our key concern has to be trying to stop them at source (cutting our greenhouse gas emissions to zero as rapidly as possible and moving away from destructive capitalist agricultural practices). But a lot of the fallout is in the pipeline already and we need to make plans to deal with it.

All emergency response services must be provided with vastly increased budgets and the necessary fulltime staffs — in the health sector and the general emergency response area. We need public housing on a massive scale to cut out the speculators (“developers”) and provide cheap quality homes to all who need them. We need the capacity to house people forced out of certain areas by bushfires, extreme heat,  drought, floods and sea level rise. We need projects to guarantee access to food for everyone in the face of what is coming.

If our response is dependent on the profit-motivated capitalist corporations, our society simply will not be able to cope. Ordinary people want our lives and welfare protected; the corporations want profits. They are not the same thing.