Preparation of European Activist Meeting: Some Papers from 2008

Short Version of Privatisation East and West, Lisbon Treaty, and neoliberal exacerbation, 2^nd day

An earlier version was presented for comment at Attac-EU-Working Group, Fulda, October 7, 2007

 

By Carla Krüger

 

Preliminary Remarks

For our purposes of comparing East and West as part of the same neoliberal/capitalist push for privatisation, privatisation on this second day will be conceived broadly as the transition from more public to more private forms (with emphasis on the comparative), in the sense of de-humanisation, de-socialisation and capitalist exploitation. which then not only includes

1) the transition between systems, treated yesterday,

but also

2) take-overs that hand over a firm behind the back of the public to the majority responsibility of a hedge-fonds for being butchered, resulting in relocations and mass firings,

3) the financial crisis, at whose origins there are private credits that turn the house-keeping of a family into a debt obligation traded by public banks,¹

4) the privatisation of institutions of public existential provision, public services in brief, such as transport, postal services, electrictity, water, schools and universities, hospitals etc.

5) lobbying as a particular nasty way of usurpating authority from the public sector (compare Claude's contribution). Should this broad understanding provoke misgivings, think of why attac was founded ten years ago in 1998: the US wouldn't let French Roquefort in (trade war), while in Russia financial pyramids based on the reselling of bad enterprise obligations were crumbling, and Asian and other financial markets were speculating against the Ruble and other weak currencies (financial crisis). As a result, the savings of millions of ordinary peasants both in France and in these regions were obliterated (redistribution towards the corporate sector – a particularly insidious form of privatisation). Similarly in 2008, bad housing mortgages are sold as part of sub-prime values, sooner or later, the price of these assets tumble, their holders go broke and with them the American house-owner whose mortgages are no longer backed or the depositors at the European banks who were dumb enough to buy them.

 

Privatisation as an economic policy failure

In Poland, where in the first half of the 90s, over 50 percent of the economy were privatised, the receipts remain limited until today (25.88 Billion US $ until 2006), GDP at Third World level (7,942 US $) and real GDP growth at 4% inadequate to the catch-up need. That was really no gain in efficiency!

In France, the privatisation receipts (US $ 135.03 Billions in 2006) and the GDP per capita (over 40,000 US $) overtook those of West Germany, even though far less property was privatised; however, average revenues are still not quite as high as in Germany, and growth with barely over 1% is stagnating to a similar extent.

In Germany, despite the privatisation of roughly 8000 POEs in the same period, there were obtained less receipts (242 billion DM = US $ 106.38 billions) than in France from the privatisation of a few individual firms; GDP per capita now lies by 1000$ lower than in France, growth also by a few 100th percentage points lower.

In Russia, massive privatisation under Gaidar first triggered a downturn in growth and participation in collapsing investment funds 1998 in the context of the Asia bust yet another far-reaching destruction of private savings, this although Russia now advertises a private sector quota of over 70% and many filet pieces especially in the energy sector are being bargained off to foreigners (prominent example: Gazprom). Wages both in Poland as well as in Russia have remained ridiculously low (at most a sixth of those in the West). These few numbers show already that the privatisation in all four countries served itself: growth, welfare, and similar objectives were not striven for that way, let alone reached.

 

Table 1

	France	Germany	Poland	Russia
Privatisation Receipts (up to 2006)	135.02 billion $, individual firms (Renault), network industries/public services (water)	106.38 billion $, 8000 POEs, otherwise like in France (VW, Telekom, water, electricity), plus apartments	25.88 billion $, 50% of the economy privatised	1,000,000 firms with a value of “difficult to estimate”, over 70% of the economy privatised
GDP growth	1.09%	2.04%	6.06%	7%
GDP per capita	40,000$	39,000$	11,000$	9,100$
Average wage	2,334€	2,884€	680€	300€

Source: www.privatizationbarometer.net (updated from Rilling, rls, 2007); other data from www.dgb.de and www.frankreich-info.de, www.bfai.de on Poland, and www.wikipedia.de and www.septimatour.ru on Russia.

 

Privatisation and the EU: Development of the interpretation of trust law

Who in the 70s and still up into the beginning of the 80s was interested in the functioning of the market economy was fed with two strings of lectures: micro theory presents consumer preferences on the basis of the principle of utility maximisation, whereby demand is determined; firms work according to the principle of profit maximisation operating in the same way. Only under perfect competition, industrial organisation then picks up, free entry provides for immediate adaptation to demand, price = marginal cost, and “O” profits are obtained. Under perfect competition and in particular in the case of oligopolies and monopolies, the consumers pay more than the marginal cost, and the difference between the two is monopoly profits. Therefore, these firms need to be regulated by state anti-trust or cartel law; in the course of European construction, many of these tasks were taken over by the Commission, compare Art. 3 TFEU: striving for a high degree of economic competitiveness, also compare Art. 39/45, 43/49, 49/ 56 and 56/63 about mobility and Art. 87/ 101 and following on interdiction of subsidisation.

However, network industries/public services such as electricity, water, public urban transport, the railways, post, phone, child care, schools, universities, hospitals, old-people’s homes etc. belong among the so-called (quasi-)natural monopolies, where average costs only at a very high piece rate began to converge against marginal costs, and also did not necessarily go up after a still larger quantity (as in the normal case of decreasing returns to scale ), which is why these sectors in principle were not profitable for the private economy and could be operated publicly.²

However, the necessary degree of state subsidies should not act in a way that distorted competition ( Art. 88/102 TFEU Treaty), and this, in the course of the development of privatisation mania in the member states, and as time unfolded, offered the commission the possibility to push aggressively for cutting subsidies and that way for de-regulation and ultimately privatisation of whole sectors. Without active national-state policy in this sense, that needs to be emphasised, it would not have had the right to do so, all the more so since Art. 295 EU Treaty (Art. 345 under the Lisbon Treaty) guaranteed the property order of the individual EU member states.

 

 

Over time, by the end of Fordism, and the invention of more flexible methods for production and the rendering of services, natural monopolies were eroded in the eyes of private business, so that it wanted to try its mettle even here. This began in the beginning of the 80s in the area of transport. In the 70s, nobody would have thought of even scratching the role of Lufthansa as the large, German, public air transport company, but then it was first corporatised and ultimately privatised – a typical example for increasing privatisation/desocialisation as defined above. Subsequently, there was defined in EU law the notion of services in the general/or respectively general economic interest, to which the European trust-subsidy law was now applied with sharpened emphasis. Similar to the case of flexicu/arity in between flexibility and security on the job market, there exists here in European law a trade-off between free circulation of capital and trust law (in the sense of prevention of abuse of market position). In the course of advancing neoliberalism, this trade-off is solved more and more in favour of the narrowing-down of trust law to the prevention of subsidies (in particular Art. 87/101, EU Treaty) and subsequently in favour of the free circulation of capital. Examples are Bolkestein, the pressure for the privatisation of the Berlin Savings Banks that could only be saved by an emergency buy-out by the Savings Banks and Deposit Accounts Association, and the recent anti-union cases Viking, Rüffert and Luxemburg etc.

 

Changes by way of the Treaty on the European Union and the Treaty on the functioning of the EU (old EU Treaty and EC Treaty)

The Charta of Social Rights is further devalued even with respect to the constitutional treaty already rejected by referendum in France and in the Netherlands. By contrast, world-wide combat interventions and illegal procedures against terror suspects: struggle against criminality in the meantime counts among the main objectives of the Union (compare Articles 3 old/respectively changed treaty)³ and most recently may even be the cause for expropriations (Article 75, TFUE). In general, Art. 295/345 is overridden by new clarifications (e.g. Art. 123 TFUE) to the effect that public facilities are to be treated like private ones, generalising the market climate which, as we saw on the first day dries out not only state, but also communal property and cooperative forms of the solidary economy on a Europe-wide basis. Moreover, there are a few articles that in our opinion favour “a new privatisation push” (Stefan Hügel). There will be a new Article 118 that calls on EP and Council to pass, in the framework of the interior market, laws for the protection of intellectual property, which unambiguously means additional pressure by the profit-oriented private sector, in spite of the Microsoft and similar decisions. Article 262 (ex 229a) is changed accordingly, instead of “common property titles”, it will now be “European legal titles”. This looks like a reinforcement of Europe’s role, but this, so the text continues, “in accordance with the respective constitutional provisions”. There are accordingly three levels on which private property of means of production, soon also intellectual property and network industries/up to now public services will be protected Europe-wide: by the Council in collaboration with the commission and a minor role for the EU parliament, the constitutions of the generally more conservatively and liberally ruled member states that interpret their constitutions in the direction of neoliberalism and supplement them, and the strong power of private business that insists on the maintenance of the guarantees for their capital and its free circulation. Accordingly, Art. 36 in some cases even permits tariff barriers in order to enforce private property rights. Art. 262 allows special legislation on the handling of property rights cases by the EJC.

You also see that in external contexts: The article about trade policy (former Article 133, now 207) is, for example, straightened out considerably, the European Parliament is only mentioned once (it is supposed to be informed), and in all but 3 areas: intellectual income, services (cultural, audiovisual, social, education and the health sector – here with an addition: “if these agreements seriously (sic!, C.K.) impede the organisation of these services in the individual states”) and transport a simplified procedure of recommendation by the commission is being stipulated that is then passed by the Council by qualified majority (computed after the disputed new rules that favour Germany above all else). There follows again the obligatory clause that the competence of the EU in this area (here: trade policy) should in no case lead to a harmonisation of the legal orders of the member states, that means, there is no possibility to try, for instance, from the European level, to control or regulate capital and its free circulation. The trust law provisions are – as was already said – interpreted by commission and EJC in its recent cases Viking, Rüffert, and Luxemburg mainly in the direction of cutting of subsidies and the elimination of workers' rights. And then we get the trump, Art. 294, namely the emphasis on the rights of capital owners by their equal rights at the European level is shifted forward to Art. 55 so that the shareholder value orientation receives, so to say, additional contractual blessings.

 

Final remarks

We thus see here that the trade-off between free circulation of capital and anti-trust law in the new treaty drafts is clearly shifted even more in the direction of the former. Flexicurity and private capital focus are two joint aspects of the increasingly anti-social Europe in which we live. Therefore, a view at the property order shifting in the direction of private dominance supports the trend in attac and the left as a whole to look more closely at a social Europe. Because capital dominance promotes unemployment, worsens work conditions (40% of employed people in Europe following the 2006 Green Book already no longer have a stable job), minorities and women are disadvantaged. And also because ecological reforms in the framework of the current monopolisation of the energy markets by private agents are very hard to do. Moreover, the basically private capitalist structure is the reason for the victory march of flexicurity and flexicarity. Of course, we should not start our campaigns naively: it makes a hell of a difference, whether we only demand better working conditions, want to tax the private economy more highly, demand selective socialisations or retraction of desocialisation, for instance in the transport or energy sector, or openly strive for a mixed economy. But we should always be in the clear on which side of the sharpening class conflict in Europe we position ourselves with our thinking and our actions. Only the spectres we don’t know can inspire us fear…