privatisation momentum with, inter alia, the partial sale of Telstra, the Australian National. Railways and other assets, the contracting out of the federal public ...
Svensen and Teicher
The Privatisation of the Australian State and its Implications for Trade Unionism Stuart Svensen and Julian Teicher Monash University This paper examines the various privatisation processes at work in Australia, with an assessment of the significance of these for the employment relationship and organised labour. We argue that privatisation—the process of transformation whereby state assets and state institutions are moved from the state sector to the private sector — is a key element in the process of state restructuring that is taking place in Australia. The various Australian governments have pursued distinctive policies towards state restructuring; and the objective, content and consequences of privatisation programs have thus been divergent. We argue that although privatisation has been promoted largely within a discourse confined to its supposed practical benefits, the privatisation phenomenon cannot be understood in isolation from its ideological background. By recasting the relationship between governments and organised labour, privatisation establishes the basis for heightened control of labour power and, thereby, the more ‘efficient’ extraction of surplus value. We examine recent outcomes from privatisation on labour and unions. Introduction This paper takes as its starting point the themes identified by Fairbrother, Svensen and Teicher (1997) associated with the adoption of privatisation policies and programs by the various federal and state governments in Australia, and expands on the generalisations we made in relation to the effects of privatisation upon the employment relationship and industrial relations. The first section, which provides a brief overview of the privatisation processes within Australia, is based entirely on Fairbrother, Svensen and Teicher (1997) which contains a more extensive discussion and relevant references. The second part explores the impact of privatisation on employment, workers and unions. Privatisation in Australia - an overview Privatisation transfers ownership of an asset or function from the public to the private sector, a process which redraws the boundaries between the state and the economy in distinctive ways, laying the foundations for a transformed state. The process can take various forms, commonly including the partial or complete sale of equity in a public enterprise to private investors or companies, the contracting-out of services formerly performed within the public sector to the private sector, and the approval of privately built and operated public infrastructure projects such as tollways and hospitals. While the focus of this definition is on the question of ownership, it is recognised that privatisation is located within a wider project of state restructuring in which all Australian governments have argued the case for improved competitiveness in all sectors of the economy. Underlying many theories about privatisation is an assumption that private ownership produces more efficient outcomes than the public sector. Arguments about bureaucratic inefficiency, the importance of competition and the desirability of introducing market mechanisms have also been developed in the context of debates about ‘reinventing’ government. The stress in these arguments has been on increasing managers’ accountability and responsibility for publicly-provided services. This means removing bureaucratic constraints of the traditional public services and creating the conditions for competitiveness
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and consumer choice. In this process, it has been argued, citizens have been redefined as customers, and have as a consequence lost power vis-à-vis economic elites.
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Unions are a key target of attack for neo-liberal ideologues. Malleable and compliant workforces facilitate cost reduction objectives. Disempowerment of workers, and the recommodification of their labour power may be achieved by shifting state functions into the private sector, by placing state activities under the control of private capital, or by organising sections of the state as if they were in the private sector. Contradictions and tensions may arise in cases of ‘social democratic’ governments, especially in Australia, where the Australian Labor Party has close ties with the trade union movement. The process of privatising the Australian state began slowly, and on a small scale, with the Hawke Labor government, elected in 1983. From modest beginnings in 1985, the government’s privatisation program accelerated in 1991 with the sale of telecommunications satellite operator Aussat and the sale of 30 per cent of the Commonwealth Bank. A further acceleration took place under the Keating Labor government of 1993-1996, with the sale of the remainder of the bank, the airline Qantas and other assets. Labor’s position on privatisation was marked by division and confusion. While the privatisation program reflected in part the growing influence of neo-liberalism within sections of the Party, the process was driven mainly by pragmatic considerations. The initial Commonwealth Bank part-privatisation was part of a package to the rescue the troubled Savings Bank of Victoria by absorbing it into the Commonwealth Bank. Most of the other privatisations appeared to be motivated by the need to shore up a deteriorating budget position. However, the debate on privatisation within Labor circles centred upon notions of efficiency, although it was not always clear exactly what was being argued. The Howard Liberal-National Coalition government elected in 1996 has continued the privatisation momentum with, inter alia, the partial sale of Telstra, the Australian National Railways and other assets, the contracting out of the federal public service’s entire information technology infrastructure, and the opening up to competition of services provided by the Commonwealth Employment Service. In contrast to Labor, the Coalition has a clear ideological preference for private sector operations, and the government has escalated the downsizing of the size of the public service begun by Labor. At the state level, patterns of privatisation have been more divergent. One common thread has been the sale of assets in the banking and insurance sector. All State-owned banks have been sold except Tasmania’s Trust Bank, which will be privatised in 1998. Only the Kennett Coalition government in Victoria and the Liberal government in South Australia have pursued extensive privatisation programs outside the finance sector, although other governments have been weighing up the costs and benefits of following suit. The Kennett Coalition government in Victoria, elected in 1992, has embarked on the most extensive privatisation program of the States. The state’s electricity industry has been broken up and sold, and the same fate will shortly befall the natural gas industry and Melbourne’s train and tram systems. The state’s water supplies have been corporatised and may be privatised after the next state election. Privately owned and operated prisons, hospitals and tollways have been built or are planned. The government has increased the proportion of public services contracted-out and has introduced Compulsory Competitive Tendering (CCT) in local government. The only other State so far to have embarked on an explicit privatisation program is South Australia. This three-year program raised $A2.2 billion from the sale of the State Bank, gas pipelines, a timber processor, a meatworks, printing shops, clothing factories and a Melbourne office building. The South Australian program differed from that of Victoria in that most of the businesses sold were trading in competitive private sector markets and thus were not regarded as core government activities. The government has ‘outsourced’ Adelaide’s water and sewerage services to an Anglo-French consortium and has refused to rule out the privatisation of the state’s electricity industry.
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The 1995 ‘National Competition Policy’ agreement between the Federal Labor government and the States and Territories encourages the spread of privatisation from State to State. This is demonstrated clearly by recent developments in New South Wales. Key figures within the state’s Labor government, including Treasurer Michael Egan and Premier Bob Carr, sought party approval for a plan to sell the State’s electricity industry in order to eliminate the State’s $13.2 billion debt and provide $3 billion for infrastructure and social programs in time for the next election. While the plan was endorsed by a Party Committee of Inquiry, it was rejected by the October 1997 State Conference of the Labor Party, and by the union movement. The issue is far from settled, and the Opposition have promised to privatise the industry on their return to government. The National-Liberal Coalition government in Queensland, which governs with the general support of an anti-privatisation independent member from a regional electorate, deals with privatisation on a ‘case-by-case’ basis. The Western Australian government has also adopted a ‘case-by-case’ approach to privatisation: little outside the financial sector has been sold, but the sale of the Dampier to Bunbury natural gas pipeline has been announced. In Tasmania, the 1997 Nixon Inquiry into the Tasmanian Economy recommended the privatisation of the Hydro-Electric Corporation, forests, ports, airports, railways and other public assets. Subsequently, the Tasmanian minority Liberal government established consultancies to investigate the partial sale of the Hydro-Electric Corporation’s and the mooted Basslink underwater connection to the national grid. Victoria excepted, most assets sold to date have been businesses operating in competitive markets. Victoria has embarked on a radical program of privatising as many government functions as possible. NCP-engendered competition will encourage other governments to follow suit. Overseas trends suggest that the Australian utilities market will rationalise through convergence, or the creation of ‘multi-utilities’—large foreign-owned corporations which would supply electricity, gas, telecommunications, and even financial services. Such organisations are expected to be enormously profitable. It is this prospect which has inspired companies in search of the necessary customer base to bid large amounts for the electricity distribution businesses in Victoria, and made the privatisation of the NSW industry appear financially attractive. The privatisation program embarked on by the Kennett government from the time of its election in 1992 owes much to plans developed by a group known as ‘Project Victoria’, formed initially by 13 Victorian employer associations who engaged the services of two rightwing think-tanks, the Tasman Institute and the Institute of Public Affairs. Other sponsors of the project at various times have included 12 unnamed major corporations, the Westpac Banking Corporation, and the consulting firms KPMG Peat Marwick and Ernst & Young. The consultancy firms which invested in Project Victoria have been rewarded with substantial financial benefits. In particular, KPMG has been involved in many major Victorian privatisations and has so far earned $26.1 million for work performed on electricity privatisations. The architects of Project Victoria argued that the recessed economic conditions of the early 1990s provided the opportunity for community acceptance of radical change necessary for the re-drawing of the boundaries between public and private sectors, with a view to reducing public expenditure and increasing the market allocation of resources. ‘Specific Action Plans’ were provided for the privatisation of electricity and gas supply and distribution, water supply, transport and ports, health, education and local government. Differences in privatisation policies between States cannot be explained solely by ideological differences. A geo-political pattern can be discerned in which the balance of political power between city and country influences privatisation outcomes. Victoria is largely a metropolitan State, in which rural interests have a low political influence in comparison with other states. Rural interests are much more powerful in Western Australia, the largest State 364
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geographically; and Queensland, the most decentralised State. Rural interests are influential in NSW and South Australia, but not to the same extent as the geographically larger states. As privatisation threatens the provision and cross-subsidisation of public services enjoyed by rural consumers, resistance to privatisation is likely to be stronger in decentralised states. In addition, the fiscal position of the various polities has played a role in privatisation policy. Governments are attracted to privatisation as a means of balancing budgets or reducing deficits, and in some cases have exploited supposed financial crises to justify the imperative for privatisation.
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Privatisation and the employment relationship It is often difficult to separate the effects of privatisation from associated means of restructuring the state, and from changing economic and legal environments. The downsizing of workforces usually takes place prior to privatisation. Telstra, for example, received Australian Industrial Relations Commission approval to force redundancies in a drive to reduce total numbers from 78,500 to 53,000 by the year 2000 in order to make the organisation more attractive to investors (Davis, 1997a; Norrington, 1997; Simpson, 1997). Telstra management is also seeking significant changes to its enterprise agreement in a bid to make conditions more like those in the private sector (Davis, 1997b, 1997c, 1997d; Davis and Lewis, 1997). Similar patterns are observable in other public enterprises earmarked for privatisation such as the Victorian transport industry and the NSW electricity industry. Experience in Britain and elsewhere indicates that privatisation has led to increased casualisation and irregularity of working hours. The invisible hand of the market invariably causes remuneration to change inversely along a hierarchical continuum, with senior management receiving large increases, and unskilled employees no increase or wage cuts. Less skilled employees are also more likely to see their jobs disappear through work intensification or contracting out. One outcome is that the negative effects of privatisation on working conditions are felt disproportionately by women and minority groups (Casale, 1992; Haskel and Szymanski, 1994; Pendleton and Winterton, 1993; Ranald, 1996). Under privatisation, the location of bargaining is shifted from the industry level to the company level and often to the level of the individual workplace or even the individual employee (Ferner and Colling, 1993; Harris, 1995). Privatisation is often, but not invariably, accompanied by union de-recognition, de-unionisation and greater managerial assertiveness. The key determinant of whether or not this will happen in any particular case is the extent to which the union is active at the workplace level (Bacon, Blyton and Morris, 1994; Fairbrother, 1994; Parry, Waddington and Critcher, 1997). Evidence is emerging of a similar pattern in Australia. The Williamstown Dockyard privatisation was followed by the victimisation of union delegates, and eventually the dismissal of the entire workforce, which numbered 1500 prior to privatisation (Bottomley, 1990). Privatisation and pre-privatisation rationalisation have contributed to Australia’s very high rate of retrenchment. About 3.3 million full-time employees have been laid off in the last 12 years, a rate 2.5 times higher than the USA (Cleary, 1997; Trinca and Cleary, 1997). To date, the worst affected area has been the La Trobe Valley, Victoria’s electricity generation district, where mass retrenchments have contributed to the creation of a burgeoning underclass trapped in a vicious cycle of poverty, demoralisation and drugs. The town of Moe now has an unemployment rate of almost 14 per cent, about 50 per cent above the state average (Heinrichs, 1997). Some foreign owners of privatised companies have shown little regard for, or understanding of, Australian industrial relations practices and laws, as shown by the 15 week strike of maintenance workers at CitiPower (a subsidiary of the US Entergy Corporation) a dispute which was in part about the employment by management of outside contractors without consultation with the union as required by award and agreement provisions. The dispute was settled by the company agreeing to abide by its legal responsibilities, but only after widespread blackouts (blamed by the company on sabotage by strikers) which caused consumer anger and the threatened loss of contestable customers (Davis, 1997e; Lyon, 1997). CitiPower management has also alienated unions by its intransigent attitudes to enterprise bargaining, in which the company attempted to reduce long service leave entitlements, abolish weekend penalty rates, reduce overtime penalty rates, introduce a job evaluation scheme that could see employees lose pay, and remove location allowances (Georgiou, 1997). Unions have successfully negotiated agreements with other privatised power companies. Compared with agreements reached with publicly-owned electricity companies, these place much greater emphasis on performance-based pay adjustments (APESMA, 1997). Some employees in the 366
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industry have been pressured to sign individual employment contracts, in which conditions of employment are downgraded significantly (NSW Labor Council, 1997). Since privatisation, Qantas has extended the use of outsourcing and competitive tendering to almost every area of operation, increasing uncertainty and undermining the morale of staff (Thomas, 1997). Outsourcing, in combination with individual employment contracts, has been used to reduce the pay of hospitality workers at the Australian National Railways. While some of these workers were granted an award, it did not reinstate all their former conditions (Davis, 1997f; Long, 1997a). The Federal government has decreed that that all employees engaged by contractors for a defence contract be hired on individual employment contracts, and allegations have been made that the successful private sector bid was substantially higher than an in-house bid (Long, 1997b). As might be expected in a system which relies on the power of the market to determine the allocation of resources, outcomes for participants in a privatised world depend on market power. This process is assisted by labour market deregulation through the Workplace Relations Act 1996 and corresponding state legislation which winds back award protections and encourages individual contracts. Each budget saving comes at a cost, and those costs are being borne disproportionately by workers who are most vulnerable to exploitation at the best of times—the less skilled, women and migrants. Following the privatisation of the NSW Government Cleaning Service, remaining staff experienced increased abuse, harassment, fatigue and injuries, and worked extra unpaid hours to complete tasks because fewer staff were employed to do the same amount of work (Fraser, 1997). Even in cases where wages and conditions have been maintained, it is often on the condition that the guarantees apply only to existing employees, while new employees may be hired on whatever terms the market will allow, creating a two-tiered system of wages and employment conditions at the workplace (e.g. Gascor Transition Agreement 1997, AIRC Print G0661). The mere threat of privatisation is sometimes sufficient to optimise the extraction of surplus value. Queensland school cleaners were notified in 1996 that they would be dismissed at the end of the school year and their jobs privatised. The cleaners, with the support of their union and independent member of parliament Liz Cunningham, campaigned successfully to keep their jobs, but were required to agree to productivity targets (Public Sector Voice, August-September 1996; Federation News, July 1997). Similarly, employees at the NSW State Rail Authority workshops at Chullora voluntarily adopted a ‘Best Practice’ program of efficiency improvement, which had been devised by the Amalgamated Metal Workers’ Union in a bid to prevent privatisation (Metal Worker, March 1996). Employees preparing in-house bids for their jobs are often ‘advised’ to accept lower pay and/or worse conditions to make their tenders competitive with those which might be received from private sector companies. In Victoria, where CCT has been implemented, downgrading of conditions are often achieved through Local Area Workplace Agreements, which are often unregistered as they would not be able to pass the ‘no-disadvantage’ test of the Workplace Relations Act. As in other cases of privatisation, it is mostly the less skilled, female and migrant employees who lose the most (ASU, 1995). The evidence therefore supports those like Quiggin (1995) who argue that the budget savings that can result from privatisation come largely or entirely from the pockets of workers. In unguarded moments, the champions of privatisation concede this and indeed, explain the process through which it occurs. The Victorian Minister for Transport, Robin Cooper, argued that the sale of the Melbourne public transport system was essential because the budget savings obtainable through public sector management of the system were beginning to flatten out. He added:
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In other words, the public sector does not (yet) permit secret, unregistered individual employment agreements which undercut statutory and award standards, and this is seen as an impediment to achieving further budgetary savings. Privatisation therefore redistributes wealth and power in regressive ways and presents unions with enormous challenges. Many unions have organised or participated in campaigns against privatisation. These have been mostly unsuccessful, with the notable exception of the NSW electricity industry, which may prove only a temporary victory. Whether they like it or not, unions have to negotiate the best deals they can for their members with the managements of privatised organisations. In some cases, the managements of foreign-owned companies have shown a reluctance to negotiate with unions, and an increase in anti-union tactics can be expected to accompany the further spread of privatisation. Conclusion Privatisation policies in Australia have been varied and diverse, reflecting particular approaches by governments, which have in turn been shaped by the circumstances of varied economies, ideologies and polities. This diversity has not resulted from differences between traditional political positions; rather, it has arisen despite a general convergence of policy between Labor and the Liberal-National Coalition. Privatisation policies have been advanced by both major parties, as part of a restructuring of the relations between state and economy, where the goal is the restriction of direct state involvement in the economy in order to reposition the economy in the context of similar developments internationally. In no Australian case has there been a concerted appeal by politicians to justify privatisation in terms of ideological factors or the supposed superiority of private enterprise. Instead, it is the practical virtues of privatisation which have been emphasised—the supposed efficiency and fiscal benefits. The decisive point is the way in which these policies are cast in terms of inevitability and necessity, thus undermining the possibility of developing alternative strategies and genuine public debate. This non-ideological veneer masks and conceals what is clearly an ideological agenda. In this respect, the influence of neo-liberal ideology and business-financed think tanks is not difficult to detect, most transparently in the case of the conservative parties, and especially in Victoria. The NCP agreement provides a ratchet-like mechanism under which progress towards greater deregulation and privatisation is much easier than movement in the opposite direction. Conventional wisdom suggests this is likely to lead to a greater convergence of privatisation policies in the near future. On the other hand, there is an increasingly vociferous opposition to privatisation fuelled by public scepticism and the effects of privatisation on workers, their communities and society. References APESMA (1997) ‘Enterprise agreements in the power industry’. ASU (1995) Submission, AIRC Matter C No. 10437. Bacon, N., Blyton, P. and Morris, J. (1994) ‘Steel, state and industrial relations: Restructuring work and employment relations in the steel industry’, In T. Clarke (ed.) International Privatisation: Strategies and Practices, Berlin: de Gruyter, 139-152. Bottomley, J. (1990) ‘The privatisation of the Williamstown Dockyard: Lessons for trade unions in the government sector’, Labor College Review, 9: 37-57. Casale, G. (1992) ‘Trade union action and privatisation in Western Europe: Recent dilemmas’, Labour, 6: 107-125. Cleary, P. (1997) ‘How the axe fell on 3.3m, Sydney Morning Herald, 20 October. Davis, M. (1997a) ‘Telstra go-ahead for massive job cuts’, Australian Financial Review, 7 October: 7. Davis, M. (1997b) ‘Telstra seeks union consent to break with heavy award legacy’, Australian Financial Review, 21 July: 5. Davis, M. (1997c) ‘Telstra engages unions on hours’, Australian Financial Review, 15 August: 13. Davis, M. (1997d) ‘Unions warn of action on conditions’, Australian Financial Review, 11 September: 3. 368
Svensen and Teicher Davis, M. (1997e) ‘Peace package offered in CitiPower dispute’, Australian Financial Review, 20 August: 5. Davis, M. (1997f) ‘Private rail workers win award bid’, Australian Financial Review, 10 November: 3. Davis, M. and Lewis, S. (1997) ‘Telstra, unions draw their lines’, Australian Financial Review, 18 July: 4. Fairbrother, P. (1994) ‘Privatization and Local Trade Unionism’, Work, Employment and Society, 8: 339-356. Fairbrother, P., Svensen, S. and Teicher, J. (1997) ‘The withering away of the Australian state: Privatisation and its implications for labour’, Labour and Industry, Ferner, A. and Colling, T. (1993) ‘Privatisation of the British utilities: regulation, decentralisation and industrial relations’, in T. Clarke and C. Pitelis (eds.) The Political Economy of Privatization, London: Routledge, 125-141. Fraser, L. (1997) Impact of Contracting Out on Female NESB Workers: Case Study of the NSW Government Cleaning Service, Belconnen ACT: Research and Statistics Branch, Department of Immigration and Multicultural Affairs. Georgiou, M. (1997) ‘Citipower wired for an outage’, Professional Update, July. Harris, C. (1995) ‘Employees and the privatization of the water industry in England and Wales’, in P. Morgan (ed.) Privatization and the Welfare State, Aldershot: Dartmouth, 219-239. Haskel, J. and Szymanski, S. (1994) ‘Privatization and the labour market: Facts, theory and evidence’, in M. Bishop, J. Kay, and C. Mayer (eds.) Privatization and Economic Performance, Oxford: Oxford University Press, 336-351. Heinrichs, P. (1997) ‘A battered Moe fights for its working survival’, Age, 6 August. Houston, M. ‘Trainstopping’, City Weekly, 6-12 November: 8-10. Long, S. (1997a) ‘Rail contractors “cut pay”’, Australian Financial Review, 15 October: 8. Long, S. (1997b) ‘Outsourcing cost taxpayers over $50m, says MUA’, Australian Financial Review, 10 October: 4. Lyon, K. (1997) ‘Power struggle as dispute bites’, Age, 13 July. NSW Labor Council (1997) Submission to the Committee of Inquiry into Electricity Privatisation in New South Wales, http://www.labor.net.au/lcnsw/papers/electric.html. Norrington, B. (1997) ‘Union warns Telstra of industrial turmoil’, Sydney Morning Herald, 30 August. Parry, D., Waddington, D. and Critcher, C. (1997) ‘Industrial relations in the privatized mining industry’, British Journal of Industrial Relations, 35, 173-196. Pendleton, A. and Winterton, J. (1993) Public Enterprise in Transition: Industrial Relations in State and Privatised Corporations, London: Routledge. Quiggin, J. (1995) ‘Does privatisation pay?’, Australian Economic Review, No. 110, 23-42. Ranald, P. (1996) ‘Redefinition of the public sector: Serving citizens or customers?’, in A. Farrar and J. Inglis (eds.) Keeping it Together: State and Civil Society in Australia, Leichhardt: Pluto Press, 92-111. Simpson, K. (1997) ‘Telstra, union deal on big cuts’, Age, 10 May. Thomas, I. (1997) ‘Qantas set to outsource key airport services’, Australian Financial Review, 4 August: 1, 10. Trinca, H. and Cleary, P. (1997) ‘Households reeling from dismissals’, Sydney Morning Herald, 21 October.
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