Privatisation continues to be a matter for argument rather than debate in Australia. The issue must be brought beyond the two-legs-good, four-legs-bad syndrome under which the right of the Labor party and the Coalition parties say privatisation is good and the left of the Labor Party say it is bad.
Both sides of politics at both state and federal level should look at the objectives of private and public ownership endeavour by endeavour rather than take a blanket approach. In the past couple of weeks several events had shown some of the pitfalls and benefits of both private and public ownership.
The telephone and post systems have been pivotal in the debate. They contain virtually all the elements of both side of the debate. They have been called natural monopolies because it is better for one organisation to lay and service the millions of kilometres of cable or to deliver letters over a vast continent than to have duplication. They have been required to meet two broad social-justice goals: to provide essential communications services at a reasonable coast for people of small means and to provide the same thing for people living in remote areas of Australia where otherwise cost would make it prohibitive even for the most wealthy. Twenty years ago, few people thought these tasks could be done in Australia other than through government monopolies.
We now know differently. We know that at least partially the introduction of private competition has vastly improved services and reduced costs through enforced efficiencies. The most hardened socialist would have to agree that with competition on all but the cables, Telecom is a more responsive, effective and cheaper service than it was just five years ago. Private competition in parcel delivery has driven Australia Post to efficiency and service unimaginable 10 years ago and the mere threat to its letter monopoly has made it lift its game substantially there, too.
That said, the social justice demands are still valid. The important point is that public-ownership is not the only way to achieve them. Indeed, one could cogently argue that at least in the capitals, the whole population, including those on low incomes, get a cheaper and better service than they would have under the old monopolies. But those in the bush as still vulnerable to high charges and in the cities as new telecommunications services are introduced, there is a danger people on low-incomes will miss out. They could become the information poor as well as the economically poor.
The same issue presents itself with public transport. Totally private companies, though more efficient, effective and cheaper in places of high population, will ignore the isolated. Further, they have no reason to help the poor.
How are the interests of the isolated and the poor to be protected without losing the undoubted benefits of competition that comes with privatisation and partial privatisation?
The Minister for Communications, Michael Lee, has taken an interest in Telecom’s proposal to increase the cost of a local call. And before that the Government interfered with Telecom’s plan to increase the charge of calls from phone boxes. On phone-box charges, the Government insisted on a self-defeating inefficient program of mailing phone cards to the disadvantaged. The problem in both these instances is direct political interference. A Minister in charge of a public utility is likely to put the short term electoral interests over the long-term national interest, especially if goaded by an equally irresponsible Opposition.
It is critical that the Minister is distanced from being able to interfere. In the long run some services get hopelessly underpriced. The price mechanism is then less effective in rationing scarce resources and less effective in ensuring people do not waste things. Free pharmaceuticals, dirt cheap water, subsidised electricity and so on give little incentive for people conserve and use things well.
On the other hand, privatisation for its own sake, or worse for the sake of raking in some money to help balance the budget is not helpful. Replacing a government monopoly with a private monopoly does not improve much.
Some imaginative thinking is needed on both how privatisation is done and how the public interest in helping people on low income and in isolated areas is maintained. Sometimes a mix of methods can achieve the best result.
A raw subsidy to the service provider might not be as effective as giving cash to the service users. A voucher might be better than cash because cash can be misspent. And perhaps service users should have to partly pay for the vouchers so they are not wasted. Sometimes sale of a utility is not as effective as contracting the operation out in bits. Reverse contracting is another method to provide services like transport: “”Tender for the lowest amount of subsidy you will accept to run this acknowledged unprofitable route.” And so on.
The basic point is that the debate about the provision of what were largely state-monopoly services two decades ago has to go beyond the good-bad ideology-loaded debate that has dogged the issue for a decade. A more detailed, practical look at efficiency, effectiveness and protection of social-justice case-by-case is a better approach, even if it is a more difficult one.