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More privatisation myopia

Australia was established a federation in 1901 after being a collection of colonies after the British consficated the land space from the indigenous population that had been here for more than 30,000 years. In 1916, the Australian government as one of the important early initiatives in establishing Australia as a nation under white rule created the – Commonwealth Serum Laboratories – as a national manufacturer of vaccines. Its early priorities was to produce antivenom to deal with snake bites, insulin and tetanus vaccines, and, later, vaccines for diptheria, whooping cough, and polio. It became a leader in manufacturing blood products for HIV and more. It was a jewel in Australia’s crown, guaranteeing that we could deal with the dangerous human conditions with our own capacity and without being held ransom by profit-seeking corporations. In 1994, the Labor government privatised the public body, claiming it did not have sufficient funds to update some equipment. The Government has now contracted this private corporation (CSL) to the tune of $A1.7 billion to supply the AstraZeneca vaccine, while at the same time, refusing to provide pandemic support to workers in the arts and university sectors.

Losing self-sufficiency on an ideological whim

Learning about our history is important because it brings things that are impacting now into relief.

The CSL story is indicative of why mainstream macroeconomics has led the world into appalling outcomes.

The advice has been wrong in a technical sense and the policy makers that have listened to the advice have been myopic in the extreme.

Myopia is a defining characteristic of this neoliberal era.

It is now becoming increasingly obvious to all that decisions taken under the guise of ‘saving the public money’ and ‘making things work better’ are now requiring significantly higher public outlays to redress dysfunctional outcomes.

In the 1992-93 annual fiscal statement, the Labor government announced it would sell CSL in its entirety to private interests.

The – Budget Paper No. 1 – summarised the privatisation frenzy that the Government was engaged in:

Included among these are:

Commonwealth Serum Laboratories Ltd (CSL) …
McLeod Repatriation Hospital in Melbourne;
Snowy Mountains Engineering Corporation Ltd;
the Moomba-Sydney gas pipeline system …
some more shares in AIDC Limited …
private sector financing of the DAS car fleet,

And this is after the big sell-offs of the public telecom company, the Commonwealth Bank, QANTAS, and more.

So the descriptor – frenzy – is apt.

The Labor government was trying to sell anything public that moved.

The justification was always the same:

1. The government cannot afford to invest in these public bodies.

2. They will be more efficient in private hands.

3. Why should the government own a vaccine company.

4. These bodies need to be internationally competitive and expand onto the world stage.

None of these justifications stacked up then, nor do they now.

Both sides of politics were gung-ho for privatisation.

When the CSL Sale Bill was into Parliament, David Connolly, a conservative MP (for Bradfield) spoke at the Second Reading on October 23, 1993 (Hansard Transcript):

The Commonwealth Serum Laboratories have played a very important role in the health of Australia and in Australia’s defences against disease for over 75 years. Obviously the health of the nation is a matter of the very highest national interest, and consequently the outcome of the sale of the Commonwealth Serum Laboratories, in view of its long historic and effective involvement in the health of Australians, is a matter of great concern to many people …

The coalition has consistently initiated and led the debate on the need for the privatisation of government assets, including the «CSL . There is no reason for the government to own a pharmaceutical company …

The fact that the Labor government was transferring public assets into the hands of private greed was a delight to the conservatives. Here was a so-called progressive government doing the work of the Right.

But we know the ‘Left’ started down this road in the 1970s and is one of the reasons the political parties have been fractured, missionless and unelectable.

On May 31, 1994, Labor’s Kim Beazley who was by then the Minister for Finance, gave the Parliament an update on their asset sales program.

He said (Hansard):

… I am delighted with the progress that has been made in fact in the last few days with the government’s asset sale program. On Sunday we concluded a very successful float of CSL … In fact, the government has a proud record of successful privatisations, privatisations which have not only incorporated a substantial return to the taxpayer …

… These are good developments which give us confidence that the government’s asset sales objectives for the forthcoming year and the subsequent years will be capable of achievement.

This was a Labor minister talking. The so-called political voice of the workers, handing over public assets, that the government had invested billions to ensure the organisations served the public, glowing about the transfer of these assets to the private sector for ridiculously low sale prices.

It was a very depressing time to be on the Left I can tell you.

The public body, CSL was established in 1916 as an arm of the quarantine service so that Australia could be self-sufficient in pharmaceuticals and anti-venoms.

These plasma products were derived from blood donations by the public to the Red Cross. CSL got the blood for free.

In 1994, as technology developed, the manufacturer wanted to invest in a best-practice Blood plasma fractionation facility in Melbourne.

The cost of that new capacity was $A209 million and the Federal government at the time paid $A150 million of it.

Just before the sale, the Federal government had injected a further $A42 million into CSLs production facility.

When the float occurred, the shares were sold for $A2.30 each (130 million were offered). The final sale price reached after deductions was $A299.

The paper by Clive Hamilton and John Quiggin – The Privatisation of CSL (published June 1995) provided some analysis of the sale.

The $A299 sale price was a absolute bargain given what the new owners of CSL gained:

1. Assets valued at $310.2 million – including the new plasma plant and upgraded facilities.

2. Indemnities against any claims on former products.

3. A 10-year contract guarantee on the supply of blood products to the Federal government (which could be extended to 15) at supply prices far in excess of what the Government previously paid the public company for the same products (these were plasma products that are used in hospitals etc).

4. As a result of the Government’s investment in the new fractionatoin plant, the future CSL profits were forcast to be much higher than previously recorded.

5. The land that the Government owned was bundled into the sale. A massive bonus.

Clive Hamilton and John Quiggin showed that the Government would still have to outlay $A45 million per year to CSL after the privatisation, so it would take just 6 years to ‘spend’ the sale receipts.

They argued that the net loss to the Government was in fact $A607 million, which defied the (flawed) rationale for selling it in the first place.

The private firm would recoup the entire sale price within 6 years.

And then it was so profitable that it started a worldwide asset acquisition itself, hoovering up large foreign companies in competition with it, on the back of the assets that were basically generated by Australian government spending.

The latest scam in this sorry tale is the $A1 billion agreement struck on November 16, 2020 between the Australian government and a company called – Seqirus – which is in their own words “a world leader in influenza vaccines”.

In this press release – Seqirus Will Build World-class, Next-generation $800m Influenza Vaccine Manufacturing Facility in Australia.

The deal is for 10-years to supply “influenza pandemic vaccines, antivenoms and Q-Fever vaccine.”

The Victorian state government helped the company with the land for the new plant.

Guess who owns Seqirus?

You guessed it: CSL.

Corporate interests prioritised over general health care

It is no news that health care services have been increasingly privatised and moved from being provided as a human right to being a for-profit commodity that extends the reach of corporate capitalism.

So it should come as no surprise that when a once in a hundred year health crisis hits, corporations see the dollar signs in their eyes and gouge enormous profits out of government procurement contracts.

And, this process is leaving millions of people in the world unprotected and furthering the divide between the rich and the poor nations.

One expression of this indecency is the debate about intellectual property rights.

Recently, India and South Africa, both nations ravaged by the virus, sought to invoke temporary waivers on patent protections of Covid-19 technology (vaccines and research results) – the so-called Trade and Intellectual Property Rules (TRIPS) – until the pandemic is over.

As soon as that request was made to the World Health Organization, the US government (yes, this so-called progressive Biden Administration) sought to block it.

Coming in behind the US were most of the other rich nations.

This news release (February 25, 2021) – Two-thirds of WTO members issue call for a TRIPS waiver – tells us that:

In support of putting billions of human lives before the profits and patents of Big Pharma, more than two-thirds of the World Trade Organization’s 164 members have issued a clarion call to support the proposed temporary TRIPS waiver to combat the COVID-19 pandemic by ramping up production of diagnostics, therapeutics and vaccines to ensure equitable and affordable access worldwide …

Medecins Sans Frontieres provides a map to visualise the nations that have blocked this initiative.

That wonderfully cosmopolitan European Union (at least that what the Europhiles tell us) is among the rich nations blocking the TRIPS request by the less well-off nations.

Their article (March 9, 2021) – Countries obstructing COVID-19 patent waiver must allow negotiations to start.

Conclusion

The Australian government had all the currency capacity required to maintain these companies in the public sphere and ensure they would always be available to serve public interest rather than private profits.

The problem now is that the government is handing over cash to these private firms to provide essential services (products etc) and then claiming that because of the size of the outlays they have to cut back elsewhere – like on unemployment benefit relief etc.

It is pitiful.

Further, this is a time when these corporate protections should be abandoned

Governments can easily pay these private companies out for their IP so the argument about recouping development costs lapses.

They should then invest heavily in regional facilities to manufacture the vaccines to get them to where they need to go as quickly as possible.

There is no justification at all for profiteering in this context.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

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    This Post Has 14 Comments
    1. It really is depressing (though educational) to learn how Australia mirrors the UK in awfulness. @ Neil Wilson, indeed. Just the other day the UK government ‘raised’ £1.1 billion from selling back shares to NatWest (formerly the bloated bankrupt RBS) in an off-market purchase. GOV.UK says that the process was authorised by the Chancellor Rishi Sunak and managed by UK Government Investments (UKGI). Investment!

    2. Regarding selling off government owned companies, nationalising strategic sectors of the economy, having good publicly provided healthcare, long term care, childcare, etc.: when polls of the public are taken there is usually majority support, often overwhelmingly, for public ownership and/or provision. However getting these these things to happen through the political process is difficult. It’s not impossible but a real challenge.
      I’m not sure of all the reasons – political and class divisions, outright corruption of political elites, the power of big business interests, other more immediate concerns – probably a mix of reasons. It makes it a real challenge for social advance to happen.
      One of the more perplexing ones for me is publicly financed and regulated childcare. In Quebec we have had a brilliant system in place for over 20 years yet no other Canadian province has emulated it. There are no large business interests lobbying against it offering the usual payoffs such as lucrative Board of Director positions, jobs for family members, or outright bribes. As I say, I am perplexed…

    3. The only effect that privatization has had in Portugal is the accrued weight that the once state owned firms have on the government budget and on the wallet of everyone who uses them.
      Although those firms are private now, they cannot fail, because they are monopolies or because they provide essential services to citizens or whatever.
      So we got to pay the profits the shareholders can’t make on their own.
      Because they have never been good managers of their own businesses.
      In the past weeks, we’ve seen a privatized firm, one that serves as the logistics handler on the national aeroports, failing on the employees wage pay.
      Then we discovered that the guy who “bought” it, spent the incredible sum of 0€ on the privatization.
      So, the national flying company, who is getting billions of state aid, is giving a loan to the handling company, what translates to “the state is paying the wages” of the handling company.
      It’s mind-boggling that the sweethearts of the markets don’t come now to say that we should go the financial markets to solve to cash problems of the private companies.

    4. Well well now. I did not know CSL was once a public entity.

      I only recently had a discussion online about whether or not vaccines had ever been created outside of profit orientated companies, to which I was told a resounding NO as if it was the most ridiculous question ever put forward. Of course I should have realized there wasn’t any objectivity to the responses when the same parroted line of ‘the private sector is more efficient’ was part of the answer.

      So, if I have this right, the reason CSL was privatized had absolutely nothing to do with it’s ‘ability’ to create vaccines, but simply because of a perceived lack of funds.

      Righto, so apart form the fact this is not factually correct (we never seem to face this issue when it comes to defense spending), what does it say about governments ability to run anything? If I was in government and I was claiming it was necessary to be privatizing government entities, this is the same as saying ‘We also admit we do not know how to manage, control, or administer anything’. It creates a self-fulfilling spiral where more of it gets privatized. So, why is it then then government is even bigger today than ever before yet it hardly manages anything anymore. What are all those govt employees actually doing?

    5. @Dean, re. ‘why is it then then government is even bigger today than ever before yet it hardly manages anything anymore.’ Here in the UK, pre-pandemic, the government spent only slightly less on ‘social protection’ than on health and education combined. This is mostly not to full-time unemployed people, but making up for the low wages of the precariously employed and the significant share of those wages needed for inflated housing and utility costs. The government spending thus keeps a lid on social unrest while the money flows via the poor to private landlords. Next after social protection, health and education, the government spends most on ‘defence’ (we are about to add to our nuclear weaponry and have an aircraft carrier heading for the China Sea) and paying out interest to bond-holders (including to the central bank).

    6. @Dean I think we need to be careful with the use of popular stigmas attached to government workers “What are all those govt employees actually doing?” These stigmas assist in perpetuating the prevailing ideology of inefficient government that should not be allowed to run anything. There are plenty in the private sector who are in positions that are either unneeded or wastefully inefficient (I am typing this from work!)
      Language use matters in changing beliefs.

    7. This article is very informative on the neoliberal frenzy.

      CSL deal was a total steal.

      I think the doctors without borders chart speaks on its own.

      Class struggle still active.

    8. It happened here in New Zealand in the 1980-90s too. I have never really understood how the whole world turned upside down into the monetarist/neoliberal mode virtually at the same time. Yes, the Powell memorandum of 1971 explains a lot but there had to be more. It is all explained in Nancy MacLean’s book ‘Democracy in Chains’. How it can be changed back I do not know. Here in New Zealand we have a government relying on the ability of the Prime Minister to deal with crises and she does do that well. But nothing else is being done. Houses prices are in crowd cuckoo land. Infrastructure is in the doldrums. The young pour into the universities and end up indebted over and above their ability to pay their debt back. The poor here have it really hard too. Their children have diseases only seen in 3rd world countries. The only people who are doing well are us baby boomers who had everything provided so that our generation could get ahead. I can’t see any hope on the horizon. I think we are being primed for another world war. This time with Russia and China. That keeps the masses under control.

    9. Patricia
      Jacinda Ardern is well meaning but she is enamoured by finance minister Grant Robertson who supports the Australian banks to the hilt. I have no idea why?
      Answers on a postcard please.

    10. Many seem to think surplus of goods and services is a good thing but isn’t that an opportunity cost question so isn’t self-sufficiency or what I’m currently terming low-surplus sufficiency or what others pejoratively call subsistence a good thing? Isn’t it more (socially) efficient?

      From each according to his ability, to each according to his needs

      Isn’t this what communal ‘tribes’ and nations around the world do? Isn’t this what we learnt from Elinor Ostrom?

      Greatness is measured by how it treats its weakest members.

      Can we not have a State supported management of the commons?

    11. I was a lucky recipient of CSL shares at the time of the privatisation (5,000). Shortly after ,I recall investors voted down an increase in Directors’ fees. The shares were around $ 2.50 then. Of course I sold my holding long ago. Imagine if, CSL was still owned by all Australians and was properly funded by our elected government? Something like Telstra ,maybe.

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