Powerless in Georgia

Observations on electricity cuts

''Total blackout in Georgia" was the news agency headline earlier this month. But this wasn't Jimmy Carter's Georgia in the Deep South. It was Eduard Shevardnadze's home state south of the Caucasus.

Power cuts in the Republic of Georgia don't usually raise eyebrows there or anywhere else. For more than a decade, the country has been de-industrialising and learning to live with firewood or diesel generators brought in from Tur-key. But Georgia's lack of electricity is down to much the same reasons as New York's, even though its problems are less publicised than the latter's power cuts.

The promotion of energy privatisation around the globe has been a key goal of the past three US administrations. For post-communist states, there is a sharp correlation between getting good marks in the State Department's assessment of your human rights record and selling utilities to US companies. Georgia, for instance, sold its Soviet-era Telasi generating company to AES Corporation, the energy giant based round the corner from the Pentagon in Arlington, Virginia. AES also bought that mastodon of our own grid, Drax in North Yorkshire.

AES has now gone bust because it has found that the economic policies which go with privatisation hugely reduce demand for electricity. In Britain, energy-hungry metal-bashing plants have virtually disappeared without air-conditioning taking up the slack, as it does on the other side of the Atlantic. In Georgia, nearly all industry has collapsed and the mass unemployment shafted AES's projected profits.

Yet the company cut off 70 per cent of the population from the grid from the start. Sadly, even the cruellest approach to non-payment couldn't find enough Georgians able to pay up, so AES's investment went down the tubes.

Its investments in Georgia or Drax had one thing in common - they were not investments in the real meaning of the word (the purchase of new technology), just one-off payments to get control of a supposed Milchkuh. Electricity grids were supposed to generate a steady return - money for old rope when the grid had been built at someone else's expense.

Privatisation hasn't encouraged a surge of entrepreneurial capitalism in the energy sector. Instead, good old-fashioned rentier capitalism has enjoyed a rebirth at the expense of the consumer. It was fitting that the guru of the new economics, Alan Greenspan, chairman of the Federal Reserve, received the Enron Prize for economics just a fortnight before the donor filed for bankruptcy. Enron was the chief architect of the state-wide power cuts in California in 2001.

It has been argued that no democracy can ever suffer a famine, because elected rulers cannot risk losing votes by tolerating starvation. Power cuts should be the postmodern equivalent of food shortages. But it seems unlikely that George W Bush will challenge the consensus that made America's Enrons rich enough to put him in the White House.

Even in the most sacrosanct area of public spending - the military - privatisation goes on apace. Iraq's slow reconstruction and the dissatisfaction of GIs with conditions there owe a lot to the Pentagon's preference for hiring outside contractors to do what US army engineers used to do. This helps the Halliburton balance sheet but does not make for what soldiers call a secure environment. Saddam Hussein's state socialism got the power back on quickly after the first Gulf war 12 years ago. But the rentiers of the new world order don't invest in generating power, and don't seem able to make peace either.