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Return to Public Control, even if it's not yet Renationalisation

There is growing evidence that the part-privatisation or sale of public utilities in the 1990s by governments that said they could no longer afford to put down money, neither ensured a cheap or efficient service for customers nor did it free governments of the burden of subsidy. The bluntest admission of the growing disenchantment with private-control of utilities and services has been voiced by New Zealand's Deputy Prime Minister Jim Anderton.

Taxpayers in New Zealand, the United States and Britain have bailed out flopped companies or those teetering on the brink of bankruptcy. New Zealand's flag carrier, Britain's partly-privatised air traffic control system Nats, California's Pacific Gas and Electric and Southern California Edison, are on a growing list of privatised public services that have needed emergency bail-outs. Earlier this year British taxpayers threw a 30 million pounds lifeline to Nats:after crippling brown-outs last summer California's government said it would sell bonds to pay off the debts of its power utilities; and Air New Zealand was saved by taxpayers from going bust last year
 
How long can governments justify spending public money to prop up private enterprise? The renationalisation of privatised public utilities can one day be the only option before governments.
 
Already governments have stepped in to ensure good service. Kiwibank is a new state-owned bank set up by the Anderton government, signing up hundreds of new customers who could not afford the hefty service fees of the private banks in the country. In the wake of the fatal security goof-ups on September 11, the US government has taken back airport security from private companies who routinely flouted safety regulations.
 
The juggernaut of public service privatisations that led to tens of thousands of job losses and huge profits for companies has been devastating. Governments in the rich countries are returning to public control, even if it's not yet renationalisation.
 
Lessons of Privatisation
, speech by New Zealand's Deputy Prime Minister Jim Anderton
 
Air New Zealand was rescued from bankruptcy after an emergency cash injection from the New Zealand government.
 
Nats, Britain's national air traffic control system, had to be bailed out by taxpayers only months after it was partly privatised.
 
California's costly government bail-out proposal for energy utilities that profited from the outrageously expensive power has put an enormous strain on state funding for social services, including education, and infrastructure.
 
Kiwibank is floated by the New Zealand government as an alternative to the privatised banking sector that had become unaffordable for ordinary people.
 
New federal watchdog will take full control of all US Airports by November 18.

British tax-payers bankroll collapsed Railtrack's shareholders 

May 10, 2002.

 

© International Development Economics Associates 2002