Privatization has failed. Australia must abandon the rhetoric of “incentives” and simply spend money on the things we need

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Daniel Andrews’ plan to re-establish a public electricity commission is not only proof that privatization has failed, it is proof that the politics of privatization have failed.

It is no coincidence that the Victorian premier uses a brand from the past for his investment in the energy generation of the future. And unsurprisingly, he’s focusing on public delivery of an essential service during an election campaign. The Australian public has never liked privatization as much as their own political class.

Related: Renewable energy contributes 68.7% to Australia’s main grid for a short time

Andrews is not alone in seeing the economic and political benefits of nationalizing the key infrastructure on which Australia’s economy and community are built. Malcolm Turnbull created Snowy 2.0, Barnaby Joyce is hugely proud of the publicly owned Inland Railway Company and the Queensland Government – having failed in previous bids to privatize its electricity generators – recently announced a new $62bn public investment into renewable energy through its state-owned power companies.

Economic theory does not provide clear rules about which assets are best owned by the government and which are best owned by the private sector. The simple fact is that different governments, in different countries, at different times in history, have made quite different decisions about what governments should own, operate and sell.

Just as there is no strong economic rationale for what assets governments should own, there has never been any strong economic evidence that privatization benefits budgets.

While governments eager to sell off the assets amassed by their predecessors always focus on short-term debt reduction, they rarely talk about the long-term impact of lost revenue streams in the decades ahead.

In the 1990s, Jeff Kennett sold Victoria’s electricity assets for $23.5 billion, but it was estimated that last year alone the electricity industry made $23 billion in profits from Victorian consumers and businesses . Oops.

The productivity benefits of privatization are equally vague.

Related: Power to the people: it’s not an alternative universe, Australia can make energy a shared good | Peter Lewis

While the rhetoric of privatization revolves around greater innovation, efficiency and spending discipline in the private sector, the reality is that since the privatization trend began, the growth of middle management and vendors in Australia’s utilities sector has been dramatic. . For example, between 1997 and 2012 the power, gas and water sector – where most of the privatization was taking place – saw the sales force grow from 1,000 to 6,000, the number of assets, human resources and marketing from 2,000 to 9,000 and the number of general purpose managers explodes from 6,000 to 19,000. The number of technicians and workers instead increased by only 28%.

While the high prices and low quality of privatized services are widely understood, one of the less visible but more important harms associated with the change of ownership of public goods is the impact on apprenticeships and skills.

Before economic rationalism and neoliberalism entered the minds of Australian politicians, government-owned firms employed tens of thousands of young apprentices each year, most of whom left to work in the private sector once their on-the-job training was over supported by training in publicly managed “technical colleges”.

These days most public bodies and public technical institutes have been replaced by private companies, but perhaps unsurprisingly, the privatization of training has not resulted in an increase in its quality, but in a so-called skills shortage.

It’s good to see a state government invest directly in public solutions

Given that companies such as the Grill’d hamburger chain were the main recipients of the former coalition government’s wage subsidy scheme to “boost apprenticeship starting” and that privatized training institutions had to be banned from offering iPads free to induce vulnerable people to enroll in inappropriate courses, it should come as no surprise that despite record spending on training, Australia has to look overseas to provide workers with a wide variety of skills, including electricians, bakers and masons.

Privatization has disrupted Australia’s vocational training system. But Andrews’ plan to create new “tech schools” to introduce more students to more trades before they leave school is proof that governments are starting to believe that old-fashioned economics and public spending policy are a better way. to solve problems.

Direct public investment in essential services through antiquated entities such as the Victorian State Electricity Commission and our school system allows governments to solve many problems directly at once. Not only can the Andrews government invest directly in the renewable energy clearly needed to decarbonise the economy, but it can play a direct role in shaping the wages, conditions, training and gender balance of its workforce . It can likewise ensure that physical investment and workforce training are located where they make the most economic, social and environmental sense.

Governments cannot and must not do everything. But after decades of privatization, deregulation, outsourcing, and the creation of private markets to replace public regulation, it’s good to see a state government not only investing directly in public solutions, but being so public and proud in the process.

Let’s hope the federal government drops the rhetoric of building a “Green Wall Street” to fund environmental protection and its “deal” with pension funds to build public housing and instead spends some money to protect wildlife and build houses. It’s not high finance, but it’s much cheaper and more effective.

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