Privatization and the Theft of the Commons

Catastroika

by Aris Chatzistefanou and Katerina Kitidi

Film Review

Catastroika is a Greek documentary on neoliberalism, with a specific focus on the privatization of publicly owned resources. Although it makes no mention of historian Richard Linebaugh, its depiction of the neoliberal privatization movement provides an elegant illustration of the ongoing theft of the Commons (see Stop Thief: the Theft of the Commons).

After a brief overview of the University of Chicago economists (championed by Milton Friedman) who first put neoliberal theory into practice during the Pinochet dictatorship, the documentary tracks the wholesale privatization of Russia’s state owned industries after the 1993 coup by Boris Yeltsin, in which he illegally ordered dissolution of the Russian parliament (see The Rise of Putin and the Fall of the Oligarchs).

The fire sale of state assets to oligarchs and western bankers would virtually destroy the Russian economy, throwing millions of people into extreme poverty and reducing average life expectancy by ten years.

The Privatization of East Germany

With German reunification in 1990, East Germany would be the third major target for massive privatization. According to German economists interviewed in the film, the process amounted to an “acquisition” of East Germany by West German bankers. The West German government set up an agency called Treuhand to buy up state owned East German businesses at the rate of ten to fifteen a day – a total of 8,500 businesses in four years. The process, undertaken with virtually no oversight, predictably resulted in massive chaos and fraud. Many well-performing East Germany companies were dissolved for the simple reason they competed with West German businesses. Three million (out of 4.5 million) East German workers lost their jobs, which East Germany’s GDP shrank by 30%.

Using Debt to Compel Compliance

With the gradual demise of the world’s dictatorships during the 1990s, debt, rather than brute force, became the main mechanism to compel people to give up their publicly funded assets. At present, most of the focus is on Greece.

Current EU Commission Jean-Claude Juncker holds up Treuhand (which incurred a 250 million euro debt German taxpayers are still paying off) as a model for the Greek Asset Development Fund. The latter has been steadily selling off (at bargain basement prices) Greek railroads and municipal power and water systems.

The Dismal Track Record of Privatized Utilities

The filmmakers end the film by highlighting the disastrous outcome of Britain’s decision to privatize its railroads in 1993, the city of Paris decision to privatize its water service in the 1980s (it’s recently been re-municipalized due to massive public unrest – like privatized water systems in Bolivia, Ecuador and Argentina) and California’s experiment with electricity deregulation in the 1990s (leading to the Enron scandal).*


*The Enron scandal involved massive securities fraud and a deliberate conspiracy by power companies to withhold power to drive up electricity prices.

12 thoughts on “Privatization and the Theft of the Commons

  1. Pingback: WITH CRIMINAL INTENT: Privatization and the Theft of the Commons – By Aris Chatzistefanou and Katerina Kitidi | RIELPOLITIK

  2. “The Dismal Track Record of Privatized Utilities”

    With the divestiture of AT&T and the break up of the “baby bells” in 1984, the first major privatization of a utility in the US, the privatization of all US utilities began in earnest. And I can point to that time when I consider how everything has continued to get worse for the common people, especially in dealing with basic services.

    As you know, before this time, utilities were something the people could count on: you had the service, the service worked, and if it didn’t, you would call and get a technician out to fix the problem, and without paying extra. And also with very little changes in cost, in comparison to today.

    I took a job at AT&T in 1985, and everything, in a matter of months had changed. “Resellers” and limited service based on cost was the new order of the day. And on top of this, when a customer called in they were immediately attacked by a sales pitch instead of getting help.

    Was it by chance that this major change began in 1984? Who knows?

    Liked by 1 person

    • How was the telephone move thirty years ago not good for telephonic communications, now with spiraling usage and diminished cost benefiting from competition? It’s certainly better than the good old days, when that ugly black party-line phone on the wall belonged to AT&T and long distance calls were prohibitively expensive.

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      • I note you don’t have a blog, or at least it doesn’t come up on your comments. You seem to have strong opinions about everything, why not stick your neck out there and write them down?

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      • Don, monopolies such as AT&T are notoriously difficult to regulate. Even when you introduce competing companies, you still end up with with companies who refuse to deliver service to really low income customers because there’s no profit in it. In my view, essential services such as fire, water, electricity and telephone always work better if they’re publicly owned and accountable.

        There’s a lot of neoliberal propaganda out there that the private sector delivers these services more cheaply and efficiently – but as they point out in the film, studies show this is a myth. Privatized services always cost more to deliver the same level of services because taxpayers and CEOs have to take their cut.

        Privatization is a really effective way to get rid of labor unions and drive wages down – this is an apparent cost savings but there are enormous social costs involved in a low wage economy. Private utilities are also notorious for their failure to invest in infrastructure. While this may look good on their balance sheet, ordinary people always wind up paying in more – what they save in cheaper services they make up for in taxpayer funded corporate subsidies.

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    • Sojourner, it’s largely thanks to privatization of New Zealand’s state owned telephone service that they are 10-15 years behind the rest of the world in rolling out ultra fast broadband. As is typically case, the new private owner (an Australian company), pocketed the profits and refused to invest in the fiber infrastructure necessary to roll out ultra fast broadband. Instead they demanded hundreds of millions from Kiwi taxpayers to subsidize the upgrade – while they pocket all the profits.

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      • Does not surprise me in the least. The only “competition” creates is hell for the worker/common individual.

        But then again, like you, I don’t worship at the alter of corporate capitalism and the all mighty dollar, unlike many others.

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  3. Hello, the divestiture of AT&T was not privatization, i.e. the transfer of ownership of property or businesses from a government to a privately owned entity.

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