Share

Inside Labour: Privatisation: don't blame the companies

THE still simmering row about the firefighters’ strike in Canada has thrown into sharp relief a global reality: around the world, this essential service and others are under pressure as local, state and national governments seek to cut costs. Even in Canada and the United States, where the International Association of Fire Fighters (IAFF) is a well established and militant union, there is a constant battle against creeping privatisation, a fight against turning a service that prioritises public good into one that serves profit.

In Britain, where city populations and presumably the fire risk has grown, the Fire Brigades Union reports having shed more than 7 000 jobs in recent years. Even in Scandinavia, with its history of social democratic governance, firefighting and related emergency medical services are under pressure.

Everywhere private companies, many with their bottom lines squeezed, are hovering, keen to pick up any lucrative pieces that may be on offer as various levels of government try to offload their service delivery obligations. In so doing, they are often accused of behaving like vultures. They are, but only because this is what they are compelled to do.

It would, for example, be foolhardy for any company offered the opportunity of new revenue streams to turn these down. And it would probably be illegal - and certainly actionable - for companies to deprive their shareholders of dividends in order to provide free or cut-price services to poor households. Any more than it would be to retain workers who are deemed an unnecessary cost.

This sums up the fundamental conflict of interests within our society. The economic framework in which we exist is dominated by shareholder companies and transnational corporations; the executives, managers and supervisors merely police the system to ensure the flow of profits and dividends while governments exercise varying degrees of power to regulate this.

Here history provides us with some important lessons, one being the landmark 1919 case of Dodge vs Ford in the Michigan Supreme Court. The Dodge brothers, before they started making their own cars, were 25% shareholders in the Ford Motor Company. When Henry Ford decided, as a goodwill gesture in a virtual monopoly market, to reduce the price of his cars, the brothers took him to court, arguing that it was the fiduciary duty of the company to maximise rewards to the shareholders, not the consumers.

The Dodge brothers won. And, despite some latter day legislative tinkering, that ruling remains basically the legal duty of companies.

The other lesson goes back to 1720 and the “South Sea Bubble” scam that saw the then finance minister jailed. And, showing there is nothing new in government corruption, it involved more than 500 MPs and members of the House of Lords. Bankers facilitated the corruption.

The response of the British government was to ban shareholder companies for the next 105 years on the grounds that they were inherently prone to corruption. It may seem ironic, but this ban and the reasons for it were supported by Adam Smith, father of modern laissez faire capitalism.

Given this history and the fact that the firefighters have highlighted the apparently increased international drive towards the privatisation of essential services, we should all be very concerned.

We should also bear in mind that even after corporations were again allowed in England in 1825, investors were still personally liable for the debts of companies. By 1856 that had changed: enter limited liability, a concept brilliantly satirised by Gilbert and Sullivan in their opera Utopia:

Though a Rothschild you may be, in your own capacity 
As a company you’ve come to utter sorrow,
But the liquidators say, “Never mind, you needn’t pay,”
So you start another company tomorrow!!

Healthcare has long been a private sector target and, over more than a decade, water has followed suit. Now firefighting has raised the whole issue again. Time for not only the trade unions but society as a whole to take stock and decide on appropriate action?  

* Add your voice or just drop Terry a labour question. Follow Terry on twitter @telbelsa.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.98
-0.2%
Rand - Pound
24.14
-0.1%
Rand - Euro
20.63
-0.2%
Rand - Aus dollar
12.39
+0.2%
Rand - Yen
0.13
+0.3%
Platinum
911.84
-1.3%
Palladium
1,018.92
-4.4%
Gold
2,160.36
0.0%
Silver
25.11
+0.3%
Brent Crude
86.89
+1.8%
Top 40
66,252
0.0%
All Share
72,431
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders