Tuesday, July 30, 2013

Outsourcing and privatisation: Serco, Ayn Rand, and the Neo-liberal model

I've written before about how the "Neo-liberal model" emerged from the Second World War, and thirty years ago became the established method of financing government.

I've just read an informative article about the hidden, but massive, influence that the private company Serco has over many parts of government services across the Anglo-Saxon world, especially in the UK. Serco is an example of what happens when Ayn Rand's idea of having private companies carrying out government services is put into practice. In short, it's a disaster.
Like the infamous Halliburton in the USA, Serco is what is euphemistically-called a "public service company". It is the privatisation of government. The concept, following Rand's belief in private sector near-infallibility, is that private companies are supposed to do the carry out former government operations with lower costs to government and more efficiently, due to a combination of the profit motive and competition. This thought has become almost gospel in the last thirty years, especially in the Anglosphere.

The reality is that government often ends up handing over wholesale segments of government services to publicly-unaccountable private monopolies. Following all the failings of the Fascist economic model, government monopolistic control is transformed into the monopolistic control of government by corporate behemoths, with the public purse of government (i.e. the taxpayer) still taking the tab, but the private sector taking all the profit. The excuse for this is that the private sector need some form of incentive to become involved in the awkward work of government services; the reality is that politicians are either too ideologically-blinkered and ignorant to see when they're being robbed blind, too weak-willed in the face of corporate might, or there is something more corrupt going on. The question of where these political parties get the funding from also may help to explain things.

Whatever the truth, under this model, government is therefore ran with private-sector unaccountable, monopolistic inefficiency. Costs are transferred to the consumer and the workforce; to ensure profits are maximised to maintain the company's share value, employees working conditions and salaries are pared down to the minimum, with overheads reduced through squeezing the most out of the smallest-possible workforce. As this creates greater unemployment, this creates even more reason to reduce salaries further, boosting profits again, which creates more greater expectations on the share price. This downward spiral is what happens when government services are transferred to the private sector. And as already mentioned, any losses are covered by the government as a condition of these companies agreeing to provide the services in the first place. Such financial vampirism might but smoothed-over with euphemisms like "subsidies", but the result is the same.

This aspect of the Neo-liberal model effectively ensures the worst of all worlds for the taxpayer. Fascism was the parent to National Socialism in Germany; the Neo-liberal model in the contemporary world has given birth to "Corporate Socialism", which is, economically-speaking, much the same thing.

When companies are "too big to fail", like the banks were five years ago, this really means they are too big to exist. Not allowing companies to fail because they are too big, by definition tells you there is no market in a real sense; at best, a cartel. The outsourcing of government services to huge public service companies goes against the principle of the free market; Ayn Rand knows this best of all, because small companies cannot possibly hope to compete with the huge barriers to entry for these kinds of services. This is because these services are not designed to be in the domain of the private sector; when they are, the result is always a rapid cartelisation of the service - or monopoly in the cases of Serco and Halliburton.

Cartels are synonymous with crime for a reason: because they are, by definition, corrupt. So it goes with outsourcing and privatisation in general. These practices breed corruption and inefficiency, with the largest loss of all going to the consumer - or in the case of outsourced government services, the taxpayer. There is a reason why the USA happens to have the most financially-inefficient and yet the most expensive health care service in the developed world; because it is ran by the private sector.

Fascism is therefore the psychology of the Mafia put into economic practice. Like the Mafia in the control of rackets and criminal markets, the Neo-liberal model's creation of "Corporate Socialism" has created a vampire on the public purse. Neo-liberalism's fetishisation of the merits of the private sector over the public sector has simply created a modern version of Fascism, only these days it's called "Corporate Socialism".

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