More
than a generation after President Ronald Reagan barked at his
subordinates, “Don’t just stand there; undo something!”
government officials from South Africa to southern California have
embarked upon an unprecedented dismantling of the public sector.
by
Jon Jeter
The
Maryland rapper Sean Born’s 2012 album Behind the Scale includes
what one reviewer described as the “candidly soulful single”
“Lights On,” which has the driving and catchy up-tempo beat that
tends to characterize much of contemporary hip-hop. Its lyrics,
however, have none of the swagger that the genre is known for and is,
in fact, so achingly honest that it seems an apologia of sorts to
explain the emcee’s drug-dealing past.
“I
ain’t trying to be a kingpin
Real Talk, I’m just
trying to pay rent
I’m just trying to put
some money away
Got to, Man, it only
makes sense
I’m just trying to
keep my lights on, lights on
I’m just trying to
keep my lights on, lights on
I’m
just trying to keep my lights on, lights on”
More
than a generation after President Ronald Reagan barked at his
subordinates, “Don’t just stand there; undo something!”
government officials from South Africa to southern California have
embarked upon an unprecedented dismantling of the public sector,
hiring for-profit enterprises to manage everything from homeless
shelters, to toll roads, parking meters, and utilities. While there
are no known comprehensive studies, the best available evidence
strongly suggests that consumers worldwide have never spent so much
of their paycheck to park downtown, or for a liter of water, or a
kilowatt of electricity.
No
demographic has been squeezed more than communities of color, which
have borne the brunt of Wall Street’s restructuring of the economy,
and its 40-year effort to hollow out the manufacturing industries
that Blacks and Latinos have heavily relied on for jobs that pay a
decent wage.
“I
really like Sean Born,” Chris Waters, a 33-year-old African
American social worker who lives in Philadelphia told MintPress,
“because he’s talking about hustling — not to buy big cars
or fancy jewelry – but just to meet life’s basic necessities,
like paying the electric bill. That’s real to a lot of people these
days.”
With
spring approaching, Waters said, he sees many families scrambling to
borrow or raise enough money to pay overdue gas or electric bills
before Philadelphia Gas Works is legally permitted to shut off the
heat. A popular scam in the city is doctoring paychecks to qualify
for discounts on electricity and gas, and Waters says he has an
unmarried friend who greets visitors wearing a bathrobe over his
daytime clothes.
“He
doesn’t want to get set back with a $300 or $400 gas bill [by
turning up the heat], Waters said. “That’s the equivalent of a
(monthly) car note just to heat your apartment.”
A
classic idea that hardly ever works out
The
classically liberal macroeconomic idea that undergirds privatization
is that the business sector has more incentive to innovate, improve
service delivery, and reduce costs over time. The reality has been
quite the opposite. By at least one estimate, water supply systems in
the U.S. require a $1 trillion investment over the next 20 years to
get up to speed. In the decade following the 1989 privatization of
England and Wales’ water system, consumers saw their rates increase
by 46 percent when adjusted for inflation, and shutoffs for
delinquent payments tripled. In perhaps the most infamous case,
Bolivia sold its state water system to a consortium of British
investors in 1999 for only $20,000. Within a year, the buyers had
tripled the price of water in Latin America’s poorest country, with
a population of nearly 11 million people, mostly indigenous. And to
reinforce its monopoly, corporate executives wrote a codicil into
their contract with the state that legally prohibited Bolivians from
collecting rainwater for personal use. Massive street protests in
2001 led the government to cancel the contract.
In
1999, privatization efforts led to the worst cholera outbreak in
South Africa’s history. In preparations to sell its water
infrastructure to a private vendor, government officials in the Kwa
Zulu Natal region on the country’s eastern edge installed taps to
underserved, rural areas but increased the price dramatically. When
customers couldn’t afford to pay, the municipalities shut off their
water, forcing thousands to drink from the same river that was used
as a toilet by their neighbors. Local hospitals reported nearly
115,000 cases of cholera at the height of the health crisis.
A 2014
study commissioned by an Australian trade union found that
privatization of electricity infrastructure in the 1990s resulted in
dramatic price increases. Then, just last month, the CEO for Dayton
Power and Light announced a plan to cut 160 jobs in Ohio and Indiana,
and market analysts predict that the company might soon request a
rate increase from the state regulator to recoup revenues lost as a
result of more efficient household appliances.
“A
new refrigerator only uses 10 percent of what it did 20 years ago,”
David Rinebolt, a public-interest attorney told MintPress, adding:
“Electricity usage nationwide is going down, but these companies
promise their shareholders an annual return of somewhere between 9
and 11 percent. So what do you do? You go to the regulator and you
say, ‘I’ve got these pipes and these wires in the ground and I
have to cover my fixed costs no matter what you use.’”
Worsening
matters for consumers is that, while increasing technological
efficiency does drive usage down, utilities are typically
monopolistic enterprises selling a basic necessity to a captive
market, William Lazonick, an economics professor at the University of
Massachusetts at Lowell, told MintPress. That’s important, he said,
because it indicates that, in economic terms, utilities are highly
inelastic — meaning that a rate increase doesn’t significantly
lessen the demand for the product.
Typically,
Rinebolt said, corporations will agree to maintain employment at a
steady level for a few years after buying a public utility, but then
workforce layoffs are fair game. With the cost of acquiring
electricity and gas fairly static, and labor costs at a minimum, the
biggest barrier standing between shareholders and optimal profits is
the state regulator, which must approve rate hikes. And that,
Rinebolt said, is usually an easy lift: “There is something in
the industry called ‘regulatory capture,’ which states that
monopolies often take over their regulators. These companies are so
politically powerful that they usually get their way or something
very, very close to it. There’s really not much risk for [private
utilities]. Their returns are pretty much guaranteed.”
Similar
to his predecessor in the White House, President Donald Trump has
proposed selling off federally financed New Deal-era energy projects
— including the Tennessee Valley Authority and Bonneville Power
Administration in the Pacific Northwest, each of which provides some
of the cheapest and most reliable electricity in the U.S. Lobbyists
have descended on Capitol Hill in the scramble for power, literally.
Sue
Kelly, president and CEO of the American Public Power Association,
which represents 2,000 nonprofit utilities serving 49 million
customers in 49 states, told the Washington Examiner last month:
“It’s a bad bipartisan idea.”
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