Corporate Watch
Amelia H. C. Ylagan

Posted on March 10, 2014

IT WAS in the decade of the ’80s when rock rapped repetitive stanzas of dazed and slurred one-liners whining desperation. "Are you ready, are you ready for this," voice lead Freddie Mercury of the British rock band Queen asked. The somnambulistic crowd at the gig hung their bodies limp, and spasmodically nodded seemingly disjointed heads to the syncopated beat of drums and cymbals clashing with the shrieks of electric guitars. "Another One Bites the Dust" was a song apropos to its time, when the first recession after the boom years of the ’60s and ’70s laid out the realities of the new distribution of world economic power.

The twin oil shocks of 1973 and 1979 changed the balance of power to then include the oil producing nations (collectively called OPEC) as critical players with the US, UK and Japan in the world economy. The oil embargos imposed as sanctions against US interference in successive Arab-Israeli wars caused runaway oil prices in world economies grappling with inflation and loss of jobs from dormant production in the early 1980s recession. Economists cite the long term effects of this as contributing to the 1983 Latin American debt crisis, the savings and loans crisis in the United States, and a radical swing to neoliberal economic policies of the major economies throughout the 1980s and 1990s.

But the feisty first woman Prime Minister of the UK, Margaret Thatcher -- fearfully called the "Iron Lady" by the Iron Curtain (Russia) for her unmovable stands in the Cold War -- had more radical ideas than a Tory like her would have had about turning her country around in the recession. She shed the traditional Keynesian protocol of government tightly running the economy since the Wars, that of coaxing economic growth by increasing demand through increased credit and public spending. She echoed her friend Reagan’s supply-side economics that government should be there only to create a free market by lowering taxes and stopping subsidies to big business. But Thatcher’s real legacy to world economics was pioneering the privatization of at least a dozen state industries and government-run corporations to create money for government to spend.

"Another one bites the dust," fired British public workers yelled, definitely without the customary wry humor to accept things that cannot be changed. The inevitable "labor-shedding" that came with privatization in 1979-1988 was 71% in British Steel, 55% British Coal, 36% British Rail, 18% British Gas and 18% British Airways (Bishop and Kaye, 1989). Harold Macmillan, former Prime Minister (protégé of wartime Prime Minister Winston Churchill) was against privatization, likening it to "selling the family silver." For the high expectations were not realized that efficiencies and economic effectiveness would be achieved by turning over the public sector responsibilities for critical public services and industries to the private sector, as the latter are goaded by competitiveness and the profit motive.

Thatcher resigned in 1990 after three terms as Prime Minister, her popularity eroded by domestic controversies on privatization. But in her heyday, she was adulated by peers in world governance for the instant flood of funds that came to cash-strapped governments, specially in the world debt crisis of 1982-1983.

It was a debt-driven growth for the Philippines under martial law of Ferdinand Marcos, in his 14-year dictatorship. Between 1962 and 1986, the external debt of the Philippines grew from $355 million to $28.3 billion. When Cory Aquino was installed as president by the 1986 EDSA Revolution that threw out Marcos, the International Monetary Fund/World Bank came in to advice Cory to set up the Committee on Privatization (COP) and Assets Privatization Trust (APT) to raise money to pay out debts. But it was Fidel Ramos who, immediately upon his assumption as President in 1992, further reduced government subsidies to public services and briskly privatized Government-owned and -controlled corporations (GOCCs).

A total of 130 GOCCs and 419 public enterprises had been earmarked for privatization. Of these, over 400 were divested, generating gross revenues of P111 billion ($4.2 billion) -- nearly three times the government’s original target figure of P41.12 billion for the privatization program (USAID). Among the big-ticket GOCCs privatized during this period were Petron Corp., Philippine Airlines, Inc. (PAL), and the Philippine National Bank (PNB). Sales of these three entities alone accounted for P29.3 billion ($l.l billion), or 26% of the cumulative gross revenues of the privatization program as of August 1994.

Mainly because of the proceeds from the immediately preceding privatizations of Petron and PAL, a one-time fiscal surplus of P1.564 billion was extolled in 1997, with the Ramos administration claiming evidence for the success of his medium-term development plan, "Philippines 2000." However, the Asian Financial Crisis of 1997 overturned whatever advances were made by the Philippine economy, and exposed the weaknesses of government economic restructuring based on Ramos’ magic triad of privatization, deregulation and trade liberalization.

The painful experiences of the 1997 Asian Financial Crisis and the more recent 2008 US Sub-prime Credit Bust which ushered in the "Long World Recession" of 2008-2012 cry out for a review of the privatization, deregulation and liberalization template policies used in the frenetic bandwagon to globalization and competitive cooperation in the last 30 years since Margaret Thatcher’s and Ronald Reagan’s bright ideas on managing economic turnarounds. The recession has particularly proven that government has to be big brother to industries and banks, subsidizing these purportedly to insure continuity of jobs and incomes in time of crunch. But subsidies are paid by taxpayers, and the rewards from their sacrifice will be enjoyed first by big business before these rewards would trickle down to them as undisturbed enjoyment of life and property. Subsidies effectively illegally disburse the people’s money to private enterprises (a sort of reversal of the privatization concept), and an unmerited reward for inefficiency and greed of these companies.

There is a strong movement in Germany, which is part of "a Europe-wide reversal of the trends towards liberalization and privatization that have driven up energy policy in the last decade" (Reuters). They point out that the EU-driven energy liberation was to "force the old monopolies to compete so that prices would fall and services would improve." Speaking about Spain, the report said that "inconsistent regulation... and generous subsidies to the renewables sector and caps on energy prices have led to the build-up of a €30-billion power tariff deficit -- the difference between the cost of energy and what utilities are allowed to charge for it."

In Hungary the government wants to turn utilities into non-profit organizations. Prime Minister Viktor Orban wants to nationalize six or seven utilities and make them "community-owned" in a year or two. Germany is likewise moving towards utilities being "re-municipalized," and to have energy issues dealt with on a local level.

In Britain, more than a decade of non-intervention in power generation was broken with the announcement that certain power plants will receive public money to provide back-up power generation. Offshore wind and nuclear power will be a government-regulated industry. One opposition candidate has vowed to freeze retail energy prices for 20 months if he were elected in 2015. Good night, Margaret Thatcher.

Hard times pushed privatization; are hard times now pushing for re-nationalization?

(Contact the author at ahcylagan@yahoo.com.)