... if the arguments for privatisation no longer stand up to scrutiny, what is driving the process? Along with an ideological fixation with neoliberal policies in the Commission, it is notable how many powerful legal, accountancy and financial firms are reaping profits from the process.
The report, The Privatisation Industry in Europe shows that the privatisation of state-owned assets depends on the participation of a small coterie of corporations, that provide the financial and legal advice.
In terms of financial advice, Lazard and Rothschild are the big players; legal advice features mainly UK-based law firms, such as Freshfields Bruckhaus Deringer and Allen and Overy, and in all of the deals the so-called ’Big Four’ accountancy firms (Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young) are involved. Their advice does not come cheap: Lazard made profits of £1.5 million as an advisor in the privatisation of Royal Mail.
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’The drive for austerity was about using the crisis, not solving it. It still is.’
It comes as no surprise that these institutions are all involved in powerful European lobbying groups, such as the European Financial Services Roundtable, Business Europe and the Society of European Affairs Professionals. Many of the firms have their own lobbyists in Brussels: Freshmans Bruckhaus Deringer openly states that it is present there to “help to shape EU legislation and administrative decisions.”
Collectively, these lobbyists have turned privatisation into a capitalist virility test; used to judge whether an indebted country is truly committed to economic reform and competitiveness. The fact their advice reaps considerable private profit for themselves in the process is rarely mentioned.
The fact that the financial sector emerged not only unscathed, but strengthened in the wake of the financial crisis is a conundrum that the left and progressives still grapple with. It showed that popular awareness and anger was not enough to overcome the combined force of a powerful financial industry and a neoliberal ideology deeply entrenched in political and cultural life.
So it is perhaps no surprise that privatisation has accelerated in Europe rather than slowed down since the economic crisis. As Nobel prize-winning economist, Paul Krugman put it: “The drive for austerity was about using the crisis, not solving it. It still is.”
However, just as in the financial crisis, this powerful nexus of forces cannot hide the social costs of policies that put private profits before human needs. Along with anger at the surging inequality expressed in the rise of anti-establishment party candidates on both sides of the Atlantic, there is also growing disaffection with growing cases of privatisation that have led to declining public services and rising prices.
In the area of water, for example, 235 cities worldwide in the last 15 years have brought water services back under public control in frustration at rising prices and declining service delivery. This trend is one that European Commission bureaucrats would do well to learn from before ploughing ahead with the next wave of austerity-drive privatisation in its most indebted countries.
Their failure to listen, will only contribute to a growing disaffection with the European Union project, from both the left and the right, that won’t be reversed until economic policies are designed for the benefit of the majority rather than a privileged minority.
