André Brie, contribution for LA GAUCHE, March 2008 

Public existential service provision instead of liberal privatisation

 

East Riding in the county of Yorkshire has more than 300,000 inhabitants, an impressive coast line, historical fortresses, well-kept gardens, and a partnership with arvato. Well over two years ago, the Bertelsmann daughter took over central administrative tasks in the North England district. Since then, the German firm has been solving tax matters, handling the payment of housing allowances and social aid, and has taken care of citizens' affairs offices. What is being presented there as cost-efficient “modernisation of public administration“ is nothing but one step further towards the privatisation of state existential provision. Or, as David Nolan, the chairman of the Liberal Democrats in East Riding puts it, “camouflaged privatisation“. 

Public services, services of general interests or public existential provision – behind the English, French and German terms, there hide in principle very similar things, namely the supply of essential services to the community. Among these tasks that are fulfilled by state agencies, in Germany first and foremost by the cities and local communities, there belong among other things the supply with energy and water, the disposal of sewage water, personal transport, but also the supply of educational and health services for   the whole population, savings banks and municipal administration. Even if services distinguish themselves in their details and among the respective  member states, they are nevertheless a central, tried and tested constitutive part of the European social state models.

 

Element of the European social state model

Over decades, this was accepted by the EU member countries and even  anchored into law, also in Germany. Already Article 20 of the Basic Law defines the Federal Republic as a federal social state. In this context, the role of the local communities is especially highlighted (Art. 28). Even in the EU Lisbon Treaty that was signed in December 2007 by the heads of state and government, existential services are accorded great significance. The Council, meaning the governments of the EU member states, should, according to the stipulations of the newly entered Article 188C (4) decide unanimously and precisely not by qualifed majority about the negotiation and the conclusion of agreements at least in partial areas of public services. Concretely, there has been mentioned in this context “the field of trade in social, education and health services, whenever these agreements risk seriously disturbing the national organisation of such services and prejudicing the responsibility of member states to deliver them.“  That way by the practically existing “veto power“ in an important part of existential provision,  the EU member countries are secured their continued right of word and decision-making power. 

The protocol attached to the “reform treaty“ concerning “services of general interests“ also fixes that among the “common values of the Union with respect to services of general public interest“, there also belongs  the essential role and the wide discretion of member-state, regional and local authorities in “providing, commissioning and organising services of general economic interest as closely as possible to the needs of the users“. Stressed is

“the diversity of various services of general economic interest and the differences in the needs and preferences of users that may result from different geographical, social or cultural situations“.  And last but not least, there is urged “a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights. “

 

Politics of unharnessed competition

What looks reasonable on paper, looks quite different in practice, however. Precisely, the lack of unambiguous rules and definitions leaves numerous back-doors open and makes possible many intrusions into the constitutional authority of the member states, especially by way of anti-social judgements  handed down from the European Court of Justice. All the more so the primacy of “open markets“, of liberalisation and especially of competition established by the EU and its member-states – once more in the Lisbon Treaty – is diametrically opposed to these stipulations. Moreover, what is problematic is the separation operated by the EU institutions between economic services (these are the so-called services of general interest) and non-economic services, where the latter are not subjected to the prescriptions of competition. However, since any non-economic service also has economic aspects, there threatens a flood of law suits to force unambiguous attributions. 

Where liberalisation and competition lead in the case of public existential services is well-known in the meantime. Of course, the argument is ever again pulled from the drawer that regional and communal suppliers are rendering their services too expensively and not efficiently enough. I don't want to deny that there might be cases where this is really a fact. In principle, however, this justification is adduced to hide the true motive, namely profit-mongering at the expense of the community. Ultimately, everybody depends on the suppliers of existential services. 

The clearest example of that is the privatisation of water supply and sewage water disposal. After the “Iron Lady“, Margaret Thatcher, in 1989 imposed the privatisation of British water supply, there developed ten regional private monopolies. While these made fat earnings, the citizens had to accept drastically rising water prices. Already in the first ten years after privatisation, prices mounted by 41 percent. The maintenance of pipe conducts, however, remained by the wayside. In the meantime, in London, almost a third of the water gets lost through rotten pipes.  

In Berlin as well, the citizens, since the partial privatisation of the city works ten years ago, have to pay more and more for the “blue gold“. Since 2003 alone, prices have increased by 26 percent – additional increases have already been announced. In the meantime, the Berlin Senat had to countersteer massively. “We shall try to remain below the rate of inflation“, declared the head of the executive of the company, Jörg Simon, in the beginning of 2008. Whether this can truly be achieved remains questionable. Finally, to the current costs that are of course transferred on to the consumers, there are still added the interests to be paid to the private investors. These, in the year 2008, will amount to 7.77 percent out of 3.7 billion Euros. 

A similar situation sketches itself with respect to the – certainly needed – disentanglement of the energy companies and the imposition of a real  competition among electricity and gas providers. It is known that the large firms dictate their prices and conditions to the city works and the regional suppliers. Apart from the fact that these smaller suppliers hand on the prices to the customers and in the final analysis, it is again the “big ones“ who profit, not so few regional enterprises are threatened by a direct take-over or even bankruptcy. Before this background, also the separation from their networks, so “generously“ offered  by a few energy multinationals, appears in a completely different light: Since the upkeep and the constant renewal of the system is expensive,  a (naturally highly profitable) sale of the networks and hence the transferral of the costs to the community could possibly increase profits even further.

 

A consequent protection of existential service supply is needed

It should be clear where the voyage is going:

- in public existential services as well, the competition for costs is supposed to be the main criterium. Social, ecological or security standards would remain by the wayside;                   

- the private suppliers would fix prices and conditions, the communities would hardly have any possibilities for intervention left;

- small and medium-sized enterprises such as community and regional service providers would only have small chances to compete with  large and internationally active companies;

- the communities would be deprived of the right to compensate their deficits by gains in other areas. That way, citizens would face increasing local taxes and fees.

 

Today we must force the EU and the governments of the member states to keep to their promises given in Lisbon and to actively use to that end the possibilities still provided for that in the treaty. The extension of market fundamentalism and of unbridled competition to public existential services must be prevented. For that purpose, there are needed last but not least clear rules and regulations at the European and at the member-country level. And therefore, the federal government in Berlin is also called to action as well as the discussion, the resistance, and alternatives by the victims, the women and men citizens, the local communities and counties.