A Level Economics 47: Privatisation

Privatisation refers to the transfer of ownership and control of government-owned or public-sector enterprises to private ownership. It involves the sale or transfer of shares or assets of state-owned enterprises (SOEs) to private investors or companies.

Justification for Privatisation: Governments undertake privatisation for various reasons, with the primary justifications being:

1. Efficiency: Privatisation is often pursued to improve the efficiency and performance of formerly state-owned enterprises. Private firms are typically driven by profit motives and have a strong incentive to reduce costs, improve productivity, and innovate to remain competitive.

2. Reducing Government Debt: Selling state-owned assets can generate significant revenue for the government, which can be used to reduce public debt or fund critical projects.

3. Enhancing Competition: Privatisation can introduce competition in previously monopolistic sectors, leading to lower prices, better services, and increased choices for consumers.

4. Focus on Core Functions: Privatisation allows governments to focus on their core functions, such as regulatory oversight and providing essential public services, while leaving commercial activities to private firms.

5. Encouraging Investment: Privatisation attracts private investment and expertise, leading to capital inflows and potential technological advancements.

6. Fiscal Discipline: Private firms are subject to market forces and must maintain fiscal discipline to remain profitable, unlike some SOEs that may receive continuous financial support from the government.

Types of Privatisation: Privatisation can take various forms, depending on the level of ownership transferred and the nature of the transaction. Some common types of privatisation include:

1. Asset Privatisation: In asset privatisation, the government sells specific assets or business units of a public-sector enterprise to private investors. For example, the government may sell a state-owned power plant or a telecommunications tower to a private company.

2. Equity Privatisation: Equity privatisation involves selling shares of a state-owned enterprise to private investors through an initial public offering (IPO) or stock exchange listings. The government may retain partial ownership or sell its entire stake in the enterprise.

Example: In 1987, the British government privatised British Airways by selling 51% of its shares to private investors, and the remaining 49% was floated on the London Stock Exchange. This allowed private investors to have ownership and influence over the airline's operations.

3. Full Privatisation: Full privatisation refers to the complete transfer of ownership and control of a public-sector enterprise to private investors. The government no longer holds any stake in the company.

Example: The privatisation of British Telecom (BT) in 1984 involved full privatisation, as the government sold all its shares in the company, transforming it into a private telecommunications company.

4. Partial Privatisation: In partial privatisation, the government retains some ownership in the company while selling a portion to private investors.

Example: The partial privatisation of Japan Post Holdings Corporation in 2015 involved the sale of a minority stake to private investors while the Japanese government maintained majority ownership.

5. Contractual Privatisation: In contractual privatisation, the government outsources specific services or functions of a public-sector enterprise to private firms through contracts.

Example: Local governments often contract private waste management companies to handle garbage collection and disposal services.

6. Management Buyouts: In management buyouts, the existing management team of a public-sector enterprise purchases the company from the government, converting it into a privately-owned entity.

Example: In 1987, British Aerospace (BAe) was privatised through a management buyout, with its management team acquiring ownership from the British government.

In summary, privatisation is pursued to improve efficiency, reduce government debt, introduce competition, encourage investment, and focus on core functions. The types of privatisation can vary based on the extent of ownership transferred and the method of sale or transfer. However, the decision to privatise remains subject to careful consideration of the economic, social, and political implications in each specific case.

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The privatisation initiatives in the UK, which began in the 1980s under Prime Minister Margaret Thatcher, aimed to achieve various objectives, including improving efficiency, promoting competition, reducing government debt, and encouraging private sector investment. Let's evaluate whether privatisation has lived up to these objectives by considering some key examples:

1. Efficiency and Performance: Objective: Privatisation was expected to make formerly state-owned enterprises more efficient and competitive due to profit-driven management.

Example: British Telecom (BT) was privatised in 1984, and it did lead to improvements in efficiency and service quality. BT invested in new technologies, expanded its services, and became a leader in telecommunications.

Evaluation: In some cases, privatisation led to improved efficiency and performance, as seen with BT. However, there were instances where privatisation did not result in significant efficiency gains, such as the rail industry, where concerns about costs and service quality persisted.

2. Competition: Objective: Privatisation was intended to introduce competition in previously monopolistic industries, leading to lower prices and better services for consumers.

Example: The privatisation of British Gas in 1986 aimed to increase competition in the gas supply market.

Evaluation: While privatisation initially increased competition in some sectors, concerns arose over the consolidation of private firms, leading to oligopolistic markets. In the case of British Gas, the industry eventually faced criticism for lacking competition, with the government taking steps to promote more competition in the energy sector.

3. Reducing Government Debt: Objective: The sale of state-owned assets was expected to generate revenue that could be used to reduce public debt.

Example: The privatisation of various public-sector enterprises, including British Telecom, British Gas, and British Airways, aimed to raise funds for the government.

Evaluation: Privatisation did generate significant revenue for the UK government, helping to reduce public debt to some extent. However, critics argued that the sale of profitable assets might have resulted in the loss of potential future revenue streams for the government.

4. Encouraging Private Investment: Objective: Privatisation aimed to attract private investment and expertise into various industries.

Example: The privatisation of ports and airports, such as the Port of Southampton and London Gatwick Airport, sought to attract private investment and modernize infrastructure.

Evaluation: In some cases, privatisation succeeded in attracting private investment and fostering innovation. For instance, London Gatwick Airport saw significant investments in infrastructure and services after privatisation.

5. Focus on Core Functions: Objective: Privatisation intended to allow the government to focus on essential public services while leaving commercial activities to private firms.

Example: The privatisation of various industries, such as steel and coal mining, aimed to reduce the government's involvement in commercial enterprises.

Evaluation: Privatisation did enable the government to focus on core functions, but it also raised concerns about the loss of direct control over strategic industries and the potential impact on certain communities and regions.

In conclusion, the evaluation of privatisation in the UK shows a mixed picture. While privatisation led to some successes in terms of efficiency improvements, competition, and private investment, it also faced challenges and criticisms. The outcomes varied across industries, and some privatisations achieved their objectives more effectively than others. Critics raised concerns about market consolidation, the loss of public ownership, and the potential impact on services and consumers. Overall, the effectiveness of privatisation depends on the specific context, industry dynamics, and the government's ability to strike a balance between achieving objectives and addressing potential drawbacks.

I worked on the privatisation of England’s water in 1989. It was an organised rip-off

Taxpayers lost out, and consumers have paid through the nose ever since. This failed regime is long past its sell-by date writes Jonathan Portes in The Guardian

 


“You could be an H2Owner.” That was the slogan, to the sound of Handel’s Water Music, of the 1989 campaign to sell shares in the 10 water and sewage companies of England and Wales – not quite as memorable as British Gas’s earlier “Tell Sid” campaign, but almost as successful. Although water privatisation was extremely unpopular, with every poll showing that a substantial majority of people were opposed to the policy, that didn’t stop more than 2.5 million people applying for shares. The offer was nearly six times oversubscribed.

The only surprise is that it wasn’t much more. Long before anyone talked about “magic money trees”, the Thatcher government offered one: this was free money to anyone who filled in the application form. The average gain to investors on the first day of trading was 40%, and over the next two decades the privatised water companies paid more than £57bn in dividends, at the same time as running up large amounts of debt, the interest on which is effectively paid for by customers.

So how did we get it so wrong? I mean me, not you. I was a very junior Treasury official working on the water privatisation project, responsible for securing value for money for taxpayers and water consumers. In retrospect, we utterly failed on both counts: the shares were sold well below their value so taxpayers lost out, and consumers have paid through the nose ever since. But this is not just hindsight. We knew what was going on, because water privatisation was never really about efficiency. In the short term, the overriding political priority was a “successful” sale – one where demand for shares was high – and where those who applied and who had, from previous privatisations, already come to expect a large premium, were not disappointed.

That meant that the Treasury’s position, when arguing for a higher share price or for tighter regulation to restrain bills in the future, was exceptionally weak. The National Audit Office report on the sale details how the forecast proceeds fell by more than a third over just three months, costing taxpayers £6bn or so in today’s money, as the Treasury was steamrollered by the combined forces of the water companies’ management, the Department of the Environment, No 10 and a huge army of investment bankers, accountants and PR consultants.

In our (partial) defence, we hoped that this was a one-off transfer of wealth from taxpayers and consumers to shareholders, and that over the longer term, if we got the regulatory structure right, shareholder returns would return to something more like “normal”, as the Office of Water Regulation (Ofwat) found its feet and sought to defend the interest of consumers. But as we now know, we were wrong. Just this morning, the hapless chief executive of Ofwat, David Black, was on the Today programme, claiming that Thames Water was penalised for excessive leaks. It was left to the indefatigable Feargal Sharkey to put the numbers in perspective.

Paradoxically, while the underpricing of the water and sewage companies helped fulfil Thatcher’s short-term goal of a successful sale that was lucrative for those who bought shares, it fatally undermined her long-term goal, which was to create a “shareholding democracy” that would parallel the way right-to-buy created a “property-owning democracy”. The problem was that few small shareholders could resist the temptation to cash out their large profits.

So, as they sold their shares, the companies were bought up, mostly by private equity, institutional investors and large infrastructure firms from abroad. These investors spotted the combination of large investment programmes, effectively guaranteed returns, and a supine and underpowered regulator that lacked access to high-powered economic consultants and lawyers. The result is that companies have been loaded with debt that has permitted huge returns for shareholders. Meanwhile, regulators have allowed returns that have been high or higher than an average risky private company, yet investors have been exposed to no more risk than government bonds. As the Financial Times puts it, 30 years on, “water privatisation looks like little more than an organised rip-off”.

Where next? Here it’s worth engaging with an interesting but deeply self-contradictory defence of the sector by the head of the Centre for Policy Studies, Robert Colvile. He acknowledges upfront that the “water companies are essentially contractors. They are running the water network on behalf of the state, in a fashion agreed with the state, to targets laid down by the state.”

Indeed – so why should directors get million-pound salaries and bonuses? Why should shareholders and bondholders get returns far in excess of those we offer to investors in government debt? His answer to this is that the “single greatest justification for privatisation is competition for capital”; by which he means that if water companies were in the public sector, their investment would be in competition with other priorities, from HS2 to hospitals, and the result, inevitably, would be underinvestment.

This is helpful for two reasons. First, it’s more credible than other defences of privatisation. It doesn’t claim some mythical gains from the magic of competitive markets. Nor is it an economic argument. From a rational perspective, there’s no reason why the government can’t invest as much as is justified by the underlying economics. Instead, Colvile’s argument is political. It implies that governments, especially but not only Conservative ones, pursue stupid, self-defeating policies for short-term political reasons, so it’s worth consumers massively overpaying the private sector to secure the level of investment that is required, even if the public sector could, in theory, do it more cheaply.

Second, this points to a potential way forward that could avoid both the upheaval of renationalisation and the continued reliance on a failed regulatory regime. At the moment, the water companies are simply permanent regulated monopolies. But if those operating the water companies are contractors delivering a public service, why not, as regulatory expert Dieter Helm suggests, treat them as such, and force them to bid competitively for the right to operate? One thing we know for sure is that the current model, where companies face public sector levels of competition and risk, and get private sector levels of profits and return, has long past its sell-by date.

Understanding the BJP

 

What is Modi-Shah BJP’s ideology? You’re wrong if you say Right wing, because it’s Hindu Left

Modi-Shah BJP government is Right only on religion and nationalism. The rest is as Left as the Congress or any other.writes SHEKHAR GUPTA in The Print
 

 


Prashant Kishor, who prefers to be described as a political aide rather than a strategist, which is generally the preferred usage for him, featured in our serious conversational show ‘Off The Cuff’ this week. Neelam Pandey, a senior member of our political reporting team at ThePrint, co-hosted it with me.

At some point, we asked him the question that’s always intrigued us. Does he have an ideology? Doesn’t that follow from the fact that he’s worked with Narendra Modi, Mamata Banerjee, Congress-SP (Uttar Pradesh, 2017), M.K. Stalin, Y.S. Jagan Mohan Reddy, Amarinder Singh and more?

To our surprise, he said no, I am not ideology-agnostic, you can call me Left-of-Centre. And then went on to elaborate what he meant, by using Mahatma Gandhi’s example. And so on. I noticed later, incidentally, that Kishor’s Twitter bio begins with the words “Revere Gandhi…”

His claim to a Centre-Left ideology set us thinking. What if we asked any of the other key political leaders the same question today? What is your ideology? Rahul and Priyanka Gandhi, Mamata Banerjee, Andhra’s Jagan, Tamil Nadu’s Stalin, Telangana’s KCR and so on. If any of them chooses to answer that question — the answer, honest or not, will be about the same. Everyone in Indian politics now wades in the waters of varying depth somewhere on the Left side of the pool. Nobody will say I stand on the Right.

Which brings us to the trick question. What would Narendra Modi’s answer be? We are, of course, making a brave and far-out presumption that he lets us or anyone ask him such a direct question: What’s your ideology, Prime Minister sir? Now, whether you are fan or a critic, chances are, your immediate response will be, of course the Right wing.

Over the past seven years since the Modi-Shah BJP has been in power, “Right wing” has become the widely accepted usage for the party, and the ideological forces behind it. We need to examine if this passes the test of facts. And fasten seat belts. Because, I will then make the case to you that what Modi and his BJP represent today is not a domineering national force of the Hindu Right. It is, on the other hand, the Hindu Left.

The Left-Right descriptors over time have become mixed up and confusing. In governance terms, the Right means first of all, social conservatism, strong religiosity, hard nationalism, low threshold for criticism, an authoritarian outlook. On all these parameters, the Modi government and today’s BJP pass the test of being Right wing. The reason I qualify it here is that we do not get caught in simplistic binaries. On all of these, this BJP and Modi are no different from, say, the Republicans in the US or the British Conservatives. Then, we enter contentious zones. 

How do we, then come to our argument that the Modi-Shah-Yogi BJP is not a force of the pure Right or even the Hindu Right, but of the Hindu Left?

Check out the many steps the Modi government has taken on the economy in the past seven-plus years. For historical reference, look back at the previous BJP government under Atal Bihari Vajpayee. It made its commitment to getting the government out of business explicit, and set up a disinvestment ministry. When the party returned to power in 2014, you would have expected it to bring that ministry back. No such thing happened, although now there is a department, DIPAM, in the finance ministry with a full secretary.

It is only now that there is heady talk of disinvestment, but not so much has happened yet, with the sterling exception of Air India. Much other privatisation is still merely talk, or sleight of hand. As in, getting one public sector giant to acquire a smaller one, and the government, as the majority shareholder, cashing out to balance its deficit. But it is, as we had said in an earlier National Interest, like genius Milo Minderbender of Joseph Heller’s Catch-22 trading with himself and making a profit. Of course, using the state’s products and cash.

Actually, this gets worse than a sleight of hand often enough. Think of the LIC, or even ONGC, being made to buy another PSU the government wants to ‘disinvest’ from. A bunch of money is paid out to the government. Our complaint isn’t that it disappears into that bottomless pit called the Consolidated Fund of India. If you believed in a market economy, you would have no complaint if the LIC or ONGC paid out dividends from its profits to its only, or overwhelming, shareholder, the government. But when the government makes them buy assets from it, these companies are not necessarily acting in the best interests of the policy holder or the minority shareholder. We are not saying that it always works out to their detriment, but the fact is these are not decisions these companies’ boards are taking with these non-sarkari shareholders’ interests at the top of their minds. This is a characteristic of the Left, not Right.

The Left is also known for handout economics, large, ambitious, welfare schemes involving redistribution of large chunks of the revenues. Which is precisely what the Modi government has been doing, from the MGNREGA it inherited to Gram Awas, toilet-building, Ujjwala, direct cash transfers to farmers and the poor, free grain and so on. Have you noticed, in fact, how muted as the opposition criticism of this governments’ Budgets has been?

There is some usual sniggering about being “pro-rich” etc. But everybody also notices that taxes on individuals now are the highest — almost 44 per cent — since reform began. Add to that an average of 18 per cent or so GST on goods and services that people, especially the rich, consume. The Left would applaud this. Of course, they’d want this to be even higher. Hopefully not the 97 per cent it was at Indira Gandhi’s socialist peak, when the foundation of the parallel black economy was laid. 
An expanding, large, maai-baap (mom & dad) sarkar is something the Leftists love. See the expansion of our government in the Modi era. More and more Bhawans have come up in Delhi to accommodate a burgeoning government. Now the new Central Vista will create space for more. A comparison again with Vajpayee government. He had no hesitation selling the loss-making Lodhi Hotel in the heart of Delhi. An even bigger PSU dud was Hotel Janpath. Which, instead of being sold, has now become another set of offices and government accommodation. Samrat Hotel, next to Ashoka, ceased to be a hotel a long time ago. It has become a sarkari bhawan too. In fact, almost everyone here will be surprised when I tell you that even the new Lok Pal (do you remember we had appointed one? Okay, what’s his name?) has been given half a floor here.

Our taxes are higher than in a generation, our government is bigger than two generations and still growing, we ‘privatise’ our companies often by selling one PSU to another, now our government also decides for all of the country which Covid vaccine to have when, to be allowed boosters or not, and what can be sold in India. In a genuinely free market, there will be shops and buyers for Covaxin, Covishield, Sputnik, Pfizer and Moderna.

As with cars, consumers can choose a Maruti or a Mercedes. But not vaccines. Why? Because ours is a maai-baap sarkar. It is in no way a government of the economic Right. The Right is limited to religion and nationalism. The rest is as Left as the Congress or any other. The reason we call Modi-BJP ideology as the Hindu Left.

Swamy on the Budget and Privatisation - An Unwelcome Budget

 

Britain out of the EU: a treasure island for rentiers

There’s no sign that ministers will use the twin shocks of the pandemic and Brexit to fix a broken system that is failing too many people opine the editors of The Guardian

‘Culturally, Brexit plays the same sort of role as the right to buy, insulating poorer leave voters from the idea that they will suffer from the resulting policies.’ Photograph: Christopher Furlong/Getty Images
 

When the UK entered the coronavirus age in March, state resources and collective commitment were mobilised on a scale not seen since the second world war. Decades ago, Britain had revealed itself, thanks in part to being able to marshal the industrial might of the empire, to be a formidable world power. Its economy was energised with breakthroughs in radar, atomic power and medicine.

Although the story of the pandemic has not yet ended, there appears to be no such transformation in sight under Boris Johnson. Rather depressingly, familiar trends of greed, incompetence and cronyism are reasserting themselves. This is bad news for an economy where there has been a collapse of socially useful innovation. Britain’s lack of hi-tech manufacturing capabilities, notably in medical diagnostic testing, was cruelly exposed by the pandemic.

This country has become more of a procurer than a producer of technology. But it is a remarkably inefficient one – despite an extraordinarily high percentage of lawyers and accountants in the working population. Connections seem to matter more than inventions. How else to explain why, in the desperate scramble to procure personal protective equipment, ventilators and coronavirus tests, billions of pounds of contracts have gone to companies either run by friends or supporters – even neighbours – of Conservative politicians, or with no prior expertise.

History is not short of examples where political insiders were successful in extracting virtually all the surplus that the economy created. Such influential interests moulded politics to enlarge their share of the pie. Greed was limited only by the need to let the producers survive. The shock of war, revolution, famine or plague provides an opportunity to fix a broken society. But if, post-pandemic, UK politicians care less about reform than the retention of power, they will fail to restrain the grasping enrichment that undermines democracy itself.

Windfall profits

Perhaps the most penetrating X-ray of this phenomenon today is by Brett Christophers in his book Rentier Capitalism. The academic makes the case that Britain has become a treasure island for those seeking excess profits from state-sanctioned control of natural resources, property, financial assets and intellectual property. Rent, paid by renters to rentiers, is tied to the ownership or control of such assets, made scarce under conditions of limited or no competition.

Mr Christophers says that the first sign of this new order was when Britain struck black gold in the North Sea. He writes that MPs on the public accounts committee noted with incredulity in 1972 that “the first huge areas of the sea were leased to the companies as generously as though Britain were a gullible Sheikhdom”. After that, public assets were sold off cheaply. The private sector ended up controlling lightly regulated monopolies in gas, water and electric supply, and public transport and telecoms. Customers lost out, overpaying for poor service. In a rentier’s paradise, windfall profits abound. Brazenly occupying the lowest moral ground was essential, as the housebuilder Persimmon proved by earning supersized state-backed help-to-buy profits long enough to hand out a £75m bonus to its boss.

The banks, which took this country to the brink of collapse a decade ago, are at the heart of a rentier state. France, Germany, Japan, the US all have banking sectors smaller than the UK. While banks earning rents have flourished, the households paying them – either directly as financial consumers, or indirectly as taxpayers of a debtor state or customers of debtor firms – have floundered.

The anger that such spivvery engenders is diffused politically by making voters complicit in the theft. The sell-off of council homes, says Mr Christophers, was a privatisation that gave many of those perhaps most inclined to kick against Thatcherism a personal stake in the project. Culturally, Brexit plays the same sort of role as the right to buy, insulating poorer leave voters from the idea that they will suffer from the resulting policies.

The prime minister understands that Covid can change Britain, but lacks modernising policies. He extols the virtues of free competition – both for itself and because such freedom, he reasons, will somehow liberate the spirit fluttering within a pre-Brexit Britain caged by coronavirus. He is no doubt betting that the disruption of leaving the EU will be lost in the roar of an economy taking off as an inoculated population returns to offices and shops.

Weakened regulations

The gap between rich and poor in the UK is at least as high today, academics calculate, as it was just before the start of the second world war. This is largely because the British state that once mediated the struggle between labour and capital has been taken over by rentiers. Weakening regulations, reducing the importance of fiscal policy and shredding social protections has corroded liberal democracy in which an increasingly influential wealthy few have been enjoying a free run. Ultimately, rentiers want to increase what the economist Michał Kalecki called the “degree of monopoly” in an economy. This allows them to limit the ability of workers, consumers and regulators to influence the markup of selling prices over costs and to defend the share of wages in output.

The EU says its labour, environment and customer protections are a floor, not a ceiling, and that they can’t be traded away for frictionless market access. If we had stayed in the club, our ability to concentrate profits for monopolists would have been stymied in future trade deals negotiated by Brussels and open to MEPs’ scrutiny. Outside the EU, Mr Johnson can barter away such regulations – without parliamentary oversight – and scrap safeguards in new technology for higher monopoly profits. Karl Marx wrote in The Eighteenth Brumaire of Louis Bonaparte in 1852 that “the Tories in England long fancied that they were in raptures about royalty, the church and the beauties of the ancient constitution, until a time of trial tore from them the confession that they were only in raptures about rent”. His assessment of early 19th-century Tories applies with unerring accuracy to today’s Conservatives.

Mr Christophers’ insight is that the Tories under Mr Johnson are a party of – and for – rentiers, much more than the interests of productive capital. This explains why, after 2016, the Tory party embraced Brexit and shrugged off productive capital’s concerns about leaving the EU. It will be to the great detriment of this country if the pandemic permitted Mr Johnson to combine present-day fears with a yearning for hopeful change to persuade the average person to vote against their interests in the future. But history often repeats itself first as tragedy, then as farce.

Privatisation is at the heart of the UK's disastrous coronavirus response

George Monbiot in The Guardian

Amid the smog of lies and contradictions, there is one question we should never stop asking: why has the government of the United Kingdom so spectacularly failed to defend people’s lives? Why has “this fortress built by Nature for herself against infection”, as Shakespeare described our islands, succumbed to a greater extent than any other European nation to a foreseeable and containable pandemic?

Part of the answer is that the government knowingly and deliberately stood down crucial parts of its emergency response system. Another part is that, when it did at last seek to mobilise the system, crucial bits of the machine immediately fell off. There is a consistent reason for the multiple, systemic failures the pandemic has exposed: the intrusion of corporate power into public policy. Privatisation, commercialisation, outsourcing and offshoring have severely compromised the UK’s ability to respond to a crisis.

Take, for example, the lethal failures to provide protective clothing, masks and other equipment (PPE) to health workers. A report by the campaigning group We Own It seeks to explain why so many doctors, nurses and other hospital workers have died unnecessarily of Covid-19. It describes a system built around the needs not of health workers or patients, but of corporations and commercial contracts: a system that could scarcely be better designed for failure.

Four layers of commercial contractors, each rich with opportunities for profit-making, stand between doctors and nurses and the equipment they need. These layers are then fragmented into 11 tottering, uncoordinated supply chains, creating an almost perfect formula for chaos. Among the many weak links in these chains are consultancy companies like Deloitte, whose farcical attempts to procure emergency supplies of PPE have been fiercely criticised by both manufacturers and health workers.

At the end of the chains are manufacturing companies, some of which have mysteriously been granted monopolies on the supply of essential equipment. These private monopolies have either failed to meet their contracts, or provided defective gear to the entire NHS, like the 15m protective goggles and the planeload of useless surgical gowns that had to be recalled.

Instead of stockpiling supplies, as emergency preparedness demands, companies in these chains have been using just-in-time production systems, whose purpose is to cut their costs by minimising stocks. Their minimised systems could not be scaled up fast enough to meet the shortfall. Where there should be a smooth, coordinated, accountable programme, there’s opacity, byzantine complexity and total chaos. So much for the efficiencies of privatisation.

The pandemic has also exposed the privatised care system as catastrophically unfit and ill-prepared. In 1993, 95% of care at home was provided publicly by local authorities. Now, almost all of it – and almost all residential care – is provided by private companies. Even before the pandemic, the system was falling apart, as many care companies, unable to balance the needs of their patients with the demands of their shareholders, collapsed, often with disastrous consequences.

Now we discover just how dangerous their commercial imperatives have become, as the drive to make care profitable has created a fragmented, incoherent system, answerable sometimes to offshore owners, that fails to meet basic standards, and employs harassed workers on zero-hour contracts. If there is one thing we have learnt from this pandemic, it’s the need for a publicly owned, publicly run National Care Service – the care equivalent of the NHS.
It could all become much worse, due to another effect of corporate power. A report by the Corporate Europe Observatory shows how law firms are exploring the possibility of suing governments for the measures they have taken to stop the pandemic. Many trade treaties contain a provision called “investor state dispute settlement”. This enables corporations to sue governments in opaque offshore tribunals, for any policies that might affect their “future anticipated profits”.

So when governments, in response to coronavirus, have imposed travel restrictions, or requisitioned hotels, or instructed companies to produce medical equipment or limit the price of drugs, the companies could sue them for the loss of the money they might otherwise have made. When the UK government commandeers private hospitals or the Spanish government prevents evictions by landlords, and stops water and electricity companies from cutting off destitute customers, they could be open to international legal challenge. These measures, which override democracy, have already hampered attempts by many governments, particularly of poorer nations, to protect their people from disasters. They urgently need to be rescinded.

The effectiveness of our health system is also threatened by the trade treaty the UK government hopes to sign with the US. The Conservatives promised in their manifesto that “the NHS is not on the table” in the trade talks. But they have already broken their accompanying promise, “we will not compromise on our high environmental protection, animal welfare and food standards”. Earlier this month, they voted that measure out of the agriculture bill. US companies are aggressively demanding access to the NHS. The talks will be extremely complex and incomprehensible to almost everyone. There will be plenty of opportunities to give them what they want while fooling voters.

Boris Johnson’s central mission, overseen by Dominic Cummings, is to break down all barriers between government and the power of money. It is to allow private interests to intrude into the very heart of government, while marginalising the civil service. This helps to explain why Johnson is so reluctant to let Cummings go. The disasters of the past few weeks hint at the likely results.