Monday, April 23, 2012

Privatization: Converting Progressive Taxes to Regressive Taxes

Representative governments generally assume responsibilities for the functions of a society based on a real or perceived need. Needs and perceptions change over time so it occasionally makes sense to move functions into and out of the private sector, as appropriate. That is the ideal, but that is not what is occurring. Instead, we are being subjected to the greatest plutocratic scam of all time: private ownership is always more efficient than public ownership. James Meek makes clear what is really involved in privatization in a short piece in the London Review of Books: Human Revenue. Meek’s context and examples are British, but the issues he discusses apply to all of us.

Meek explains how the bill of goods is sold to the public.

"First, the denigration of the existing service, as if a universally accepted truth is being voiced: the schools/hospitals/roads are crumbling/failing/ second-class. Then, the rejection of government responsibility: we’ve no money/bureaucrats are incompetent. Finally, the solution: private investment."

The interest from private investors derives from the fact that they will acquire a captive customer base that has no choice but to use the provided service. And this permanent base comes with the guarantee from the government that they will be able to make a profit—no matter what. Just as the citizens must use the service, the state must assure that it is available—providing an excess of leverage to the private company in any negotiation with the state. Just the fact that a profit must be produced assures one that there will be higher usage fees.

"The commodity that makes water and roads and airports valuable to an investor, foreign or otherwise, is the people who have no choice but to use them. We have no choice but to pay the price the tollkeepers charge. We are a human revenue stream; we are being made tenants in our own land, defined by the string of private fees we pay to exist here. If it’s not obvious that we’re being sold to investors, it’s partly because the idea of privatisation is sold so hard to us, in a way that is hypnotically familiar."

Meek’s most important contribution is to remind us what is really happening under privatization.

"Surely if the private sector weren’t replacing our old sewers, and won’t replace our old motorways and power stations, we’d need to pay higher taxes instead? The truth is that we already do pay higher taxes. They just aren’t called taxes. Our water supply system is being upgraded because of a huge water tax increase. But it isn’t called that. It’s called ‘the water bill’. As Chris Giles explained yesterday in the FT [Financial Times], water bills have gone up by nearly twice as much as inflation since privatisation. We pay a rail tax: it’s called ‘fare increases’. We pay an energy tax in the form of higher electricity bills, and so on."

What the advocates of privatization are actually advocating is the transition from a system where a service is provided by a progressive tax on all citizens and in which the wealthy pay a higher share, to one in which usage fees are increased and shared equally—a highly regressive tax falling heavier on the less wealthy.

"By packaging British citizens up and selling them, sector by sector, to investors, the government makes it possible to keep traditional taxes low or even cut them. By moving from a system where public services are supported by general taxation to a system where they are supported exclusively by the fees people pay to use them, they move from a system where the rich are obliged to help the poor to a system where the less well-off enable services, like a road network, that the rich get for what is, to them, a trifling sum."

Every scam requires an accommodating mark willing to be taken. Is there any hope that we can escape the barrage of right-wing propaganda from the industrial/media complex? Meek provides us with an example of a people who refused to be taken advantage of.

"Will there be a revolt? There was one in the 1990s, on the Isle of Skye. Ostensibly, the private sector was going to build something the people of the island would not have had otherwise: a road bridge to the mainland, replacing the old ferry. The islanders understood what was actually happening. They were being sold as revenue stream. Instead of the bridge being built from a tiny fraction of the government budget, it was built by a private firm, which had been promised that it would be able to gouge the islanders with hefty tolls. Less general tax for British taxpayers: a huge private tax for Skye islanders. A long campaign of civil disobedience ended in victory for the islanders when in 2004, against the tide of history, the bridge was nationalised."

Meek ends with a note suggesting that there is at least the potential for optimism for the British—and for us.

"Skye is a small island. Britain is a big one. The plan’s the same. Let’s see what happens."

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