by Michael Patrick O'Leary

This article appeared in the September 2013 issue of Echelon, a Sri Lankan business magazine.

All systems of government are flawed. But few are as flawed as those controlled by private money. George Monbiot.

Self-Mutilation by the State

I once had to wait nine months to get Sri Lankan government permission to buy with my own money, from a prominent national company, a printer for my own personal use. No-one in the ministry would answer my e-mails, letters or telephone calls. In 1977, JR Jayawardene cried, “Let the robber barons come!” There is no doubt that public services in Sri Lanka are in dire need of an overhaul. Beware of seeing privatisation as a panacea.

George Monbiot has written of the loathing that elected governments express for the concept of government: “Deregulation, privatisation, the shrinking of the scope, scale and spending of the state: these are now seen as the only legitimate policies. The corporations and billionaires to whom governments defer will have it no other way.”

Bretton Woods

The British Empire imposed western institutions and Christianity on the savages. In more recent times, the Bretton Woods institutions have imposed neo-liberalist orthodoxy on the “developing” world, often hindering their real development.

Developing countries were blackmailed into accepting the Washington Consensus – deregulation and “liberalisation” of markets. Health and education were cut and essential utilities like water handed over to foreign entrepreneurs. The people of Cochabamba in Bolivia succeeded, in April 2000, in throwing out the multi-national corporation Bechtel who had made a basic necessity unaffordable. Recently, Portugal was bailed out by the EU and IMF on condition that it privatised water, among other services.


I grew up with nationalised industries in the UK. Both of my parents and myself worked for the state. I tried hard, snoozing over hefty tomes on nationalisation by Ralph Miliband (father of David and Ed), but I did not learn to love British Gas or British Steel.

Employees of public services were often arrogant, rude and incompetent (I exclude my family). After privatisation, UK public utilities saw, initially, a positive customer service ethos briefly replacing surly sloth. Britain did not become a share-owning democracy. The man on the Clapham omnibus bought shares but was encouraged to offload them instantly to make a quick profit. Controlling blocks were acquired by big institutions, often foreign.

For and Against Privatisation

The argument in favour of privatisation is that a private firm’s main aim is profit which encourages efficiency. State-owned enterprises tend to inefficiency because they employ too many workers. The break-up of state-run monopolies should increase competition.

On the other hand, for some services a public monopoly might be more appropriate. Can the air we breathe be privatised and commodified for profit? Tap water has been commodified in the UK and most of the profit goes to foreign corporations who avoid UK tax.

Privatisation in Practice

British Rail seemed to be a privatisation too far, mainly designed for John Major’s ego and for private profit. The rail network was artificially fragmented causing confusion about responsibilities and skimping on safety. People died. Privatisation of rural bus services deprived a quarter of English parishes of public transport and forced an increased use of cars.

In Manchester, the bus company Arriva took over the ambulance service with dire results. Serco took on “out of hours” GP services and took the cheaper option of delivering patients to Accident and Emergency rather than to GP locums. Last year, private provider Harmoni had one advanced nurse practitioner responsible for out of hours GP cover for 250,000 patients.

A health worker complained to The Guardian: “If you privatise the NHS a large part of the budget that comes from our taxes goes to profit and often away to some tax haven, Doesn’t that automatically mean there is less to be spent on actually providing the service?”

Tom Gash, director of research at the IfG, (Institute for Government), a respected think tank, said: “Markets in public services can and do often work, but our research shows that mistakes can have a real impact on people’s lives and value for money. The IfG found mistakes in the setting up and management of outsourcing in areas such as care for older people, schools, probation and employment services.“

The Prison of Privatisation

There are currently 14 private prisons in England and Wales. G4S, Serco and Sodexo Justice Services currently manage them.  The private security firm G4S will lose £70m because of its monumental cock-up during the London Olympics. The Government was forced to bring in the army. An Angolan man died after being restrained by three G4S guards as he was being deported from the UK.  Lincolnshire’s police force now spends the lowest amount per head of population on policing in England and Wales after it handed over the bulk of its back-office functions to G4S.

The Serious Fraud Office has been asked to investigate G4S contracts going back more than ten years. An audit discovered G4S and Serco had overcharged taxpayers by up to £50m, billing them for offenders who were dead, back in custody or out of the country.


There has been in the UK a relentless drive to sell off public services. Anything, it seems can be hived off – from the Royal Mail (Even Margaret Thatcher said she was “not prepared to have the Queen’s head privatised”) to children’s services, from blood plasma to search and rescue helicopters. In the pipeline is a huge sell-off of the probation service.

Dr Hamish Meldrum told a BMA conference: “End the ludicrous, divisive, expensive experiment of the market in healthcare in England. Never has there been a better time to abandon the wasteful bureaucracy of the market”.

The trade union, Unison, recently urged the government to halt pending privatisation and outsourcing deals to allow for a forensic review. In the UK, an organisation has been established to campaign against privatisation. Cat Hobbs Director of We Own It, said: “Despite what the government might think, people aren’t sold on the idea of privatising and outsourcing public services.” Damian Lyons Lowe, CEO of Survation, said a poll his organisation conducted showed: “A clear majority of the general public, including Conservative voters, reject automatic privatisation of public services; 80% want to see public sector bids for all public service tenders, showing a clear desire not to see services simply privatised by default.“

Across Europe, public ownership is making a comeback. Southwark council recently took its customer call-centre back in-house, terminating a long-running contract with a private company. The in-house service costs £3m less to run each year and will provide a better service. Although private French corporations control the water supply in many countries, the water in Paris itself is now owned and controlled by the city.

No Panacea

Tom Gash: “Unless Whitehall and other agencies improve their skills and techniques for ensuring public service markets work, mistakes will be made and the public may lose confidence in this approach to reform”. The IfG report warns that big outsourcing companies tend to act as monopolies, stifling competition and preventing small companies getting involved.

As Monbiot writes: “If a market is to serve a wider social goal than simply maximising corporate profits, it must operate within a tight regulatory framework. Pricing mechanisms do not magic away the need for regulation: if anything they enhance it. To make them work, politicians still have to confront and overcome powerful interests.”

It surely was not too much regulation or not enough privatisation that caused Europe’s current financial woes.