Is privatisation and
deregulation incontestable?

Asbjørn Wahl

Introduction
We live in an era of deep social transformation. The ongoing so-called globalisation of the economy represents a redistribution of wealth, which is unprecedented in modern history. The gap between rich and poor is increasing at all levels on the entire globe – in rich and in poor countries as well as between countries.

The attacks on the public sector are an important part of the policy of redistribution. Through privatisation, the public sector is turned into an attractive area for the expansion of powerful multinational companies. Privatisation and competitive tendering of public services have therefore gained ground in all countries over the last 20 years. A massive transfer of assets has taken place from the public to the private sector. According to the OECD, assets for more than US$ 150 billion were transferred from the public to the private sector in 1997 – an increase of 50 per cent from the previous year. A new world record was made in 1998, and the process is going on unabated.

Power, power relations and the social pact
Before we take a closer look at the policy of privatisation, however, I should like to go back in history – to the period when public utilities, public infrastructure and public welfare services was developed in society. I will particularly focus on power, power relations and the so-called social pact, which was established between labour and capital in great parts of the world as a result of a specific historic development during most of the 20^th century.

In the last resort, democratically managed public services, as opposed to profit-driven private service markets, is a question of power – of structural power and power relations in society. High quality and equally distributed public services are the results of social struggles. What made the welfare state possible in Europe as well as successfully developed public services in other parts of the world in the last century, was an enormous shift in the balance of power in society. Public health, national insurance schemes, social security and other public services were thus introduced and improved as a result of the increasing power of organised labour. Public ownership and control of the basic infrastructure in society, of the utilities, represented an important part of these new power relations.

In this regard, it is important to notice that the strength of labour was not only reflected in labour laws and regulations. Probably more important was the general taming of market forces. The power of capital was reduced in favour of politically elected bodies. Competition was dampened through political interventions in the market. Capital control was introduced and financial capital became strictly regulated. Through a strong expansion of the public sector and the welfare state, a great part of the economy was taken out of the market altogether and made subject to political decisions. It was the organising and the struggle of the trade union and labour movement, in alliance with other popular and social movements, which created new power relations in society and gave us universal, high quality public services.

An important part of the history of public welfare as well as of the balance of power in society is the social pact or the class compromise. As there is no time for a comprehensive analysis, I will only focus on some key elements of this specific, historic development. During the last century, the trade union movement in great parts of the world gradually developed a sort of peaceful cohabitation with capitalist interests. This development was most prominent in Europe, but it influenced to some extent the capital-labour relationship all over the world. In the 1930s this cohabitation started to become institutionalised in some parts of Europe when the trade union movement stroke accords with employers’ organisations, particularly in the North, and after W.W.II in most of Western Europe. From a period characterised by hard confrontations between labour and capital, societies entered a phase of social peace, bi- and tripartite negotiations and consensus policies. This social pact between labour and capital formed the basis on which the welfare state and comprehensive public services were developed.

One important factor in the post W.W. II period was that international capitalism experienced more than 20 years of stable and strong economic growth. This made it easier to share the dividend between labour, capital and the public sector.

It is important to realise that this social partnership between labour and capital was a result of the actual strength of the trade union and the labour movement. The employers and their organisations realised that they were not able to defeat the trade unions. They had to recognise them as representatives of the workers and to negotiate with them. The peaceful cohabitation between labour and capital rested in other words on a strong labour movement – a strength which was developed exactly through the many struggles and confrontations between labour and capital in the previous period, including the Russian revolution and thus the existence of another economic system in the East. As the British historian Eric Hobsbawm correctly has pointed out, this created fear among capitalists and made them give in to many social and economic demands from the labour movement in order to dampen its radicalism.

Now, more than 50 years later, we have to admit that the capitalists succeeded with their strategy. Due to important achievements in terms of welfare, wages and working conditions, the policy of the social pact gained massive support from the working class, and the more radical and anti-capitalist parts of the labour movement were gradually marginalised. Thus, this development led to the depolitisation and deradicalisation of the labour movement and the bureaucratisation of the trade union movement. It became the historical role of the social democratic parties to administer this policy of class compromise. In other words, the policy of the social pact undermined in the long run the power basis on which the welfare state and the extensive public sector were developed!

The neo-liberal offensive for privatisation
Paradoxically, the Golden Era of the labour movement, which the period of the social pact has been named, thus contributed to the enormous backlash, which the trade union and labour movement experienced as from about 1980. Two parallel historical processes came together and made the neo-liberal offensive possible. One was the economic crisis in the 1970s, which made capitalists and governments take action to restore profitability, the other was the depolitisation and deradicalisation of the labour movement, which opened a possibility to “solve” the crisis by attacking working conditions, trade union and workers’ rights, public services and social rights and provisions.

What we have been facing over the last twenty years, is therefore the abolition of capital control and fixed exchange rates, the deregulation and liberalisation of markets, the redistribution of wealth, the privatisation of public services, the increased use of competitive tendering and outsourcing, the downsizing of the workforce to the absolute minimum, and the consequent increasing labour intensity, and the flexibilisation of labour. In short, an immense shift in the balance of power between labour and capital has taken place, and this time in favour of capital.

The US under Ronald Reagan and Great Britain under Margaret Thatcher led the privatisation crusade from the very beginning, by privatising and deregulating their own public services, but not least through political and economic blackmailing of developing countries. The IMF and the WB were used as effective instruments in this development.

The debt crisis of the developing countries during the 1980s, to which Western banks had contributed effectively, became a golden opportunity to force a national-economic and social destructive policy on these countries. Countries with heavy debt burdens did not have much choice when the WB and the IMF “offered” their plans for structural adjustment consisting of deregulation, privatisation, the abolishment of currency and capital control, export orientation, social cuts and the removal of restrictions on the free flow of goods and capital.

The so-called Structural Adjustment Programmes (SAP) contributed to a systematic transfer of public spending from health and education to subsidies for the export industry – often owned by multinational companies – and to the repayment of debt. 20-30 percent of all foreign investments in the developing world was used to buy privatised infrastructure during the 1990s. In other words, the debt crisis, which to a large degree was created by Western Banks, was used to execute a take-over of a great part of public assets in developing countries by multinational companies.

After the fall of the Iron Curtain in 1989, Eastern Europe became the main aim for the IMF, the WB, Western think-tanks and the Chicago economists and their like. Most of Russia’s 180 billion inhabitants were made guinea pigs for the shock therapy of the Harvard economist Jeffrey Sachs. The result became an enormous theft of public assets, the destruction of public welfare provisions and a resulting mafia-capitalism and a dramatic reduction in the standard of living as well as in life expectancy.

One of the most striking features of the current development of the global economy is the enormous concentration of power and resources in the hands of transnational companies. At a very high speed they are taking control over an increasing part of the world economy. Ever more gigantic corporations are growing up from the mega merger wave, which is currently washing over all continents. Through privatisation they are in the process of taking possession of a rapidly growing part of public services in every corner of the world. Some of the most expansive ones have specialised in growing exactly by taking over public services. This takes place not least in areas where competitive tendering is being used to open the markets for transnational players.

Strong international institutions are being used to pave the way for corporate interests the world over. Currently, the WTO is the most important one. Particularly important in this connection is the so-called GATS agreement (General Agreement on Trade in Services), which came into force from the very beginning of the WTO in 1995. This agreement will have enormous repercussions on public services – even if this is consistently being denied by WTO officials and governments.

The GATS agreement embrace values of thousands of billions of dollars and almost all forms of human activities which can be defined as a service – in the public as well as in the private sector. Transnational companies exercise an immense pressure on governments to open up their service sectors to international competition. The GATS agreement represents an effective instrument with which corporate interests and their servants in many governments will commercialise public services and prepare private services for looting by multinational companies.

Organise resistance
“There is no such thing as society”, said Madam Thatcher when she still was the prime minister of Great Britain. Since then her neo-liberal friends have been struggling hard to prove this allegation correct. What can we do, then, to stop this destruction of our societies? Well, what else is there to do, other than to organise resistance, to mobilise trade unions and other social movements, local politicians and municipalities, confront multinational companies and financial institutions and put pressure on our governments?

We will have to build broad national alliances against these policies. In Norway we have organised the so-called Campaign for the Welfare State which includes trade unions in the private as well as the public sector, women’s organisations, student organisations, retired people’s organisation, small peasants' organisations, organisations of users of welfare services, etc. and for which I am the national co-ordinator. It is not yet a real popular movement, but we have established the political, social and organisational infrastructure based on the broad alliance which is necessary if we are to stop the policy of privatisation and make another world possible.

Based on the above, I would like to draw some few conclusions which particularly focus on the trade union struggle against privatisation and neo-liberal policies in general.

1) The shift from consensus to confrontation.
As the power basis of the class compromise has eroded, capitalist forces have withdrawn from the social pact. In other words, bi- and tripartite negotiations do not any longer work the same way as it did during the social pact period. The social forces which want to defend public services therefore will have to meet the confrontational attacks from the capitalist forces with a counter offensive. Whether we like it or not, reality is that we are moving from consensus to confrontation. We had rather be prepared. Great parts of the trade union movement have not yet realised this. Demands for a new class compromise, obviously with a nostalgic hope that the social peace and the gradual improvement of social conditions of the 1960s should be restored, do not have any realistic basis under the current balance of power.

2) The need for structural reforms.
We have to understand power. It is not a question of good intentions, good will or high morale (or Corporate Social Responsibility, as somebody names it), but of power relations, of the balance of power between labour and capital, between market forces and civil society. We will have to confront the economic, political and social power structures which stand behind the attacks on public services and the welfare state. Structural reforms like a currency exchange tax, capital control, increased taxation of multinational companies, local control of natural resources, progressively increased democratic control of the economy should therefore be the starting point and the perspective of the struggle which has to come.

3) The necessity to build broad alliances.
A considerable shift in the balance of power can only be achieved through a broad interest-based mobilisation of trade unions, social movements and other popular organisations and NGOs which is strong enough to confront the corporate interests and push them on the defensive. An ever broader part of our societies are affected by the current neo-liberal offensive, and it is these social groups which will have to be united in new, untraditional alliances. Finally, we do have to build alliances with the new, global movement against neo-liberalism – for democracy, global justice and solidarity. This global movement of movements is currently more politically radical and system-critical than most trade unions and the labour movement, even though its knowledge of class relations is rather poor. The trade union movement needs the radicalism and the militancy of this popular movement in order to break with a reality which is no longer there. If this alliance is developed constructively and correctly, the two movements could reinforce each other and bring the struggle to a higher level.

Power breeds counter-power – and this is all about power. Time is therefore ripe for resistance. There is no other way to break the existing development than by once again mobilising broad movements from below in society. Ever more people realise that globalisation not only represents the offensive of capital, but also its weaknesses, its vulnerability and internal contradictions.

The struggle is going on. We have probably all heard of defeats, but also of successful struggles. There are lots of important victories. The Cocabamba water case is well known. In Grenoble in France the municipality took back the water supply system after ten years of private operation – because some people had patiently organised and struggled for it without giving in to temporary setbacks. From South Africa we have learnt about community groups that re-connect water and electricity as soon as they are being cut by companies and public authorities – just to mention a few examples. Not to forget the many militant struggles of the South Korean workers, which have been an enormous inspiration to many of us.

Increasingly these counter-forces are establishing contacts over the borders – like here at the World Social Forum. Thus we are not only experiencing a growing resistance against corporate globalisation, but also an increasing globalisation of the resistance. The spirit of Seattle, which symbolised the birth of the new global resistance with its contribution to the breakdown of the 3^rd Ministerial of the WTO i 1999 was still vigorous, in force and even stronger when the 5^th Ministerial broke down in Cancun in Mexico last November. The neo-liberal project is not viable, it is not sustainable and it is not human. We may still be on the defensive, but we are gaining ground while they are increasingly being delegitimised through their Enrons, their growing internal contradictions and their corporate greed. Friends, it is hope for the future, but it will require some hard struggle before we are there. Good luck and thank you for your attention.

(Speech given at an Attac Japan seminar, World Social Forum 2004, Mumbai, 18 January 2004.)