"European citizens have witnessed a wave of privatisations in their countries in recent years," write Sol Trumbo Vila and Matthijs Peters in the introduction to a bleak report published this week, The Privatising Industry in Europe.
It's true and it's not: privatisation is happening across the continent but Europe's citizens don't exactly "witness" it. The transactions between public and private happen behind closed doors – finance capital thrives in the dark. European citizens are more likely to feel privatisation, for instance through crappier jobs and more expensive utilities bills.
It's hard to quantify how people experience privatisation, but the report does a great job demolishing its economic justification, demonstrating how it fails on its own terms – the IMF admits there's no evidence privatisation is more "efficient" than public ownership – and showing that it is riddled with corruption and legal grey areas.
The report looks at case studies of privatisation, detailing how Greek land, Spanish airports, Italian railways and Portuguese infrastructure have been undervalued and sold to private firms and foreign governments. These public assets are often "the most valuable and profitable" ones, because they're the easiest to sell, so it's almost guaranteed the public will make a loss in the long run.
As its title suggests, the authors were less interested in the ideology of privatisation than in the "industry" that goes with it – the informal coalition of supranational institutions, sovereign and investment banks, legal and accountancy firms that makes it possible. We read about the American firm Lazard, which the report claims under-evaluates public assets so it can buy them up for cheap (privatisations are "as sweet as it gets", a former Lazard banker testifies); and the "Big Four" accountancy firms who advocate for governments to "grasp the opportunity" of privatisation on the knowledge they'll collect "a fee of up to 5-7 percent" of the gross proceeds."
We spoke to the report's co-author Sol Trumbo Villa – a Spanish activist who remains optimistic about Europe's future – to discuss what shocked him about his findings, the limits of anti-austerity politics and whether the EU is so incorrigible the British left should vote for Brexit.
VICE: Privatisation has been a feature of western economies for decades. What's new about this report?
Sol: We had a report in 2013 called Privatising Europe that looked at the different privatisation programmes and the popular resistance to them – because privatisation almost always has strong opposition from the workers in those public companies but also across society in general.
So we wanted to develop this research looking at the specific actors involved. It was a surprise for us because we knew something was happening but when we started digging into the issues, we discovered that a few firms, most of them based in the UK and US, were involved in all aspects of the process.
One of the infographics in the report was inspired by "A Beginner's Guide to Privatisation" made by the accountancy firm PriceWaterHouseCoopers. I guess these guys speak honestly between themselves.
Exactly. It's striking to see what extent they're so sure about implementing privatisation. Of course we knew that there's this debate going on between neoliberals and Keynesians – debates about increasing the influence of the private sector versus those who want more public control of certain areas of the economy – but when you see who's actually endorsing this neoliberal agenda, it's the same institutions that are benefiting from privatisation: audit companies, banks and legal firms. So they're not being neutral. They have a vested interest in promoting certain policies.
One of the contradictions you show is how these privatised public assets are being sold to state-run companies in China. What does this tell us?
I think it's an example of how privatisation processes are not about economic efficiency. It's about making a lot of money in a quick time in a context of panic or "shock" – as Naomi Klein would put it. In the case of Greece and other places in Europe, the banks who were the most at risk in periphery were from Germany and France. They were lending billions of Euros to the periphery, making lots of profit in the process without making good risk assessments, and when they became afraid they might lose all the loans, that's when the Troika stepped in. This is how private debt became public debt for all the Eurozone taxpayers.
This enormous amount of now-public debt had to be sold – and it didn't matter how you did it. They just needed the money as soon as possible. And if the buyer is the Chinese state, that's fine, they didn't care. The need was simply to make as much money as possible in a short term.
What were the most shocking case studies you examined?
The cases in which the advising company advised the government and the buyer were the most striking. You have that with the Banco Espirito Santo de Investimento in Portugal, advising the Portuguese government on one side and then Chinese state owned companies buying Portuguese assets on the other.
In the case of Lazard [in the cases of the sale of the Royal Mail in the UK and AENA Airports in Spain], they were actually acting as the buyer of public assets with one of their branches while advising on the value of state assets with another. It's so clear that there's a conflict of interest there we were surprised that no prosecution was happening. But then we discovered those practices are actually legal.
When Lazard were questioned on it they responded saying, "We have a Chinese Wall within the company." They claim they have their own mechanisms to avoid sharing information within the same company.
Some of the most important opposition to privatisation can come from people who work in the sector affected. How effective have the unions been in resisting these changes from above?
Trade unions have been really combative in southern Europe. In Greece there were 22 general strikes in the process of the first memorandums from the Troika. It was a massive mobilisation, not really common in other countries. And the response to that was basically state repression by the police, with the institutional and discursive support of the European institutions and IMF.
It's true that nowadays unions have much less influence than before – fewer members and so on – so they've done what they could in a complex environment. However, it's also true that many unions are not up-to-date with the 21st century – in terms of forms of communication and mobilisation.
That said when they try to do anything they're suppressed. Just this week in Spain there was a trial of eight workers who were arrested simply for going on strike. It shows you the level of repression trade unions are facing these days.
People on the left in Britain might read your report as confirmation that we need a "Lexit" – to leave the EU for left-wing reasons.
What I would like to ask them is, "OK but then what is going to be left in Britain?" It's true that European institutions are strongly influenced by neoliberal policies; first by their own nature, how they're built, and also in the influence of corporate lobbies in Brussels. But then the institutions in the United Kingdom aren't very different – I think they'd be facing the same problems if they left the EU. Most of the companies we look at in this report are from the UK!
If the "Privatisation Industry" is so entrenched within the EU, what are the options for those who oppose it while staying in?
I think an important message is that we shouldn't be afraid of democracy. People in general know what is good for them. If they're not sure, it's good that they discuss and talk about it openly.
It's true since the 1990s the European Union project has been kidnapped by those who believe it should only be about markets and multinational corporations. But there are initiatives that can stop that. There are networks that advocate for registering lobbyists so they're obliged to disclose meetings they have. That could be implemented very quickly and will immediately put some light on who's influencing whom.
I also think we should start using referendums more often. There have been some already: there was one about the "Right To Water" which got over one million signatures in support so the European Commission had to reiterate their commitment that they can't oblige member states to privatise their water. This allowed the Greek people to protect their water because it was being privatised under the Troika. Thanks to this European Citizens' Initiative it was possible to stop it.
So let's keep doing that and building a capacity to discuss – this is how we empower people within the European project, this is the goal. Otherwise the EU will crumble and we'll have to find new structures. And in the current context, it's very likely that we'll return to the nationalisms.
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