Privatisation slows down worldwide

Has the money lost heart, or is it the bureaucrats?

Via Richard Murphy comes this Financial Times piece (£), suggesting that privatisation may be declining globally:

The pace of privatisation around the world has slowed sharply, with an unprecedented number of asset sales delayed or cancelled amid volatile markets and political uncertainty.

Despite governments across the globe continuing to hoist for-sale signs over state-owned enterprises ranging from airports to electricity networks, the number of completed deals last year was less than half the 2010 figure, according to the Privatisation Barometer, a joint project between KPMG and Fondazione Eni Enrico Mattei, a Milan-based research institute.

The report (pdf) offers the explanation that last year was one of "global financial retrenchment", prompted by the Eurozone crisis and the fight in the US over the debt ceiling. It offers, as a "dramatic" example of the former:

The Spanish government['s] forced cancellation, literally days before execution, of what would have been 2011’s largest privatization — the October sale of 30% of the national lottery, Loterias y Apuerto del Estado, which would have raised over €7 billion ($9.7 billion) — and the near-coincident delayed (not yet renewed) sale of the Madrid and Barcelona airports that could have raised more than €5 billion ($6.9 billion).

The explanation leaves something to be lacking, however. If, as the report argues, the Eurozone crisis was one of sovereign debt, then it ought to have led to more, not fewer, privatisations, given that they are one of the most effective ways for a nation to raise in a short period of time the amount of cash necessary pay down debt.

Similarly, the big economic story of the last year has been the flight to safety, which has led to the reverse-sovereign-debt-crisis being experienced across much of the world, as well as little quirks like RORO. That too ought to lead to greater, not lesser, privatisation, since taking control of an established monopoly is a pretty safe investment. So long as a company doesn't completely misjudge how much it can make from a utility (looking your way, GNER), it's hard to fail when buying out the state (hard to fail, that is, from a financial point of view. Very easy to fail when it comes to actually providing services).

I think the best explanation is that privatisation is becoming uncool, not for economic reasons, but for political ones. States simply don't want to take the unpopular move of handing over control of their services to the private sector. Whether this is good or bad depends on the specific circumstances (as with Matt Yglesias, I think a well-thought-out mutualisation of the US Postal Service could do wonders, but the sale of Madrid and Barcelona airports risks creating the nation's own version of BAA), but Murphy thinks there is something to celebrate anyway:

Let’s hope that there might also be a realisation implicit in this that people now realise that it’s not just banks that can be too big to fail, but that much else that we depend upon is also too big to fail, and needs to be state run to ensure it survives as a result.

Barcelona airport, following a protest by cleaners. The airport was due to be privatised this year. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Jeremy Corbyn secures big victory on Labour's national executive committee

The NEC has approved rule changes which all-but-guarantee the presence of a Corbynite candidate on the ballot. 

Jeremy Corbyn has secured a major victory after Labour’s ruling executive voted approve a series of rule changes, including lowering the parliamentary threshold for nominating a leader of the Labour party from 15 per cent to 10 per cent. That means that in the event of a leadership election occurring before March 2019, the number of MPs and MEPs required to support a candidate’s bid would drop to 28. After March 2019, there will no longer be any Labour MEPs and the threshold would therefore drop to 26.

As far as the balance of power within the Labour Party goes, it is a further example of Corbyn’s transformed position after the electoral advance of June 2017. In practice, the 28 MP and MEP threshold is marginally easier to clear for the left than the lower threshold post-March 2019, as the party’s European contingent is slightly to the left of its Westminster counterpart. However, either number should be easily within the grasp of a Corbynite successor.

In addition, a review of the party’s democratic structures, likely to recommend a sweeping increase in the power of Labour activists, has been approved by the NEC, and both trade unions and ordinary members will be granted additional seats on the committee. Although the plans face ratification at conference, it is highly likely they will pass.

Participants described the meeting as a largely low-key affair, though Peter Willsman, a Corbynite, turned heads by saying that some of the party’s MPs “deserve to be attacked”. Willsman, a longtime representative of the membership, is usually a combative presence on the party’s executive, with one fellow Corbynite referring to him as an “embarrassment and a bore”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.