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Privatisation, politics & PPPs

Christopher Sheil

At the beginning of his famous essay, Politics and the English Language, George Orwell cited five passages of text as examples of mental vices. Each of the passages had faults of its own, but Orwell noted two qualities common to them all: 'The first is staleness of imagery; the other is lack of precision.'1 This 'mixture of vagueness and sheer incompetence', Orwell argued, was 'the most marked characteristic of modern English prose, and especially of any kind of political writing'.

Today, the word 'partnership' has become an unlikely if pedestrian instance of Orwell's complaint. 'Partnership', as used in the policies known as 'public-private partnerships', has been employed in a slovenly and inaccurate way by state governments generally to describe their private infrastructure policies. Does this matter? Who cares what the policies are called? After all, virtually every utterance of every government today seems at least partly the work of spin-doctors, public relations firms, communications strategists, perception managers, info-tainers, focus groups and opinion polls. Instead, should we not direct our attention to analysing the substance of the policies?

This essay stands with Orwell, who urged everybody to be 'constantly on guard' against the 'invasion of one's mind by ready-made phrases'. This was not just because 'every such phrase anaesthetises a portion of one's brain', but because he believed political decay is connected with the decay of the language. Orwell accepted that the 'swindles and perversions' in the English language ultimately have political and economic causes. But he argued that 'an effect can become a cause, reinforcing the original cause and producing the same effect in an intensified form, and so on indefinitely'. His crux was that language is a place where vigilant resistance is both feasible and regenerative.

Orwell's dynamic is evident in the case of public-private partnerships, the internal substance of which has faced many sharp critiques, with few tangible results. In a demonstration of Orwell's general proposition, the soft embrace of the PPP heading lends support to the driving interests behind the direction, reinforcing their capacity to absorb even the strongest of blows to the body of the policies. In this paper, therefore, we will approach the policy terrain, not from the dense interior, but through the front door. We will commence by tracing the phrase 'public-private partnership' to its ideological homelands. The aim is to show what a bastardised concept 'partnership' is within our particular Australian context.

We will then explain in a precise technical sense why the word is incorrectly used to refer to the current infrastructure policies, which will lead to a clarification of the changing shape of privatisation. Finally, after we have cleared away the debased language associated with this topic, we will engage with the policy substance, reviewing the main technical objections to the directions described by 'public-private partnership'. While the argument refers to Australia's state infrastructure policies generally, we will colour the story with particular reference to the Victorian government's policy.

What's in a name?

The idea of 'public-private partnerships' has been pressed into service in many places around the world, but Australia's state governments have taken the term from the UK, where it was promoted within policy circles by the Blair government following the 1997 election. The Bracks government, which published its Partnerships Victoria policy in June 2000, appears to have been the main borrower, acknowledging that it drew 'upon experiences in other countries, including the Blair government in the UK'.2 In New South Wales, the Carr government followed in November 2001, and despite formally adopting a different hierarchy of terminology, the distinctions were soon lost in the media.3 Aided and abetted by the national private infrastructure lobby group, AusCID, and with the other state Labor governments falling in line behind the Victorian rhetorical thrust, 'public private partnerships', or PPPs, became the universal Australian description for private infrastructure policies. The original UK policy has since become controversial and unpopular, but for our purposes two comparative points about the origins of the terminology are pertinent.

First, the UK's application of the phrase is different from Australia's, both in scope and meaning. In Blair's usage, the concept of 'partnership' was employed to describe the government's preferred relationship with the UK's financial houses. In Blair's usage, 'public-private partnership' embraced policies ranging from authentic partnerships in the form of public-private joint ventures, through to privatisation in the form of public asset sales, and onto privatisation in the various permutations of contracting-out and long-term concessions - the so-called 'private finance initiative' (PFI).4 As this diversity of potential deals compels us to conclude, Blair's rhetoric not only covered a broader range of policies compared to the later Australian policies, his use of the term 'partnership' itself was not technical, but strategic and ideological. It described not how, but where the UK's public and private sectors would join. By contrast, Australia's states have ignored and denied the range and character of Blair's usage. Grasping the opportunity to legitimise their policies through a rhetorical association with the formerly popular UK Labour leader, our governments have simply torn the phrase from its British context and stuck it on the covers of their private infrastructure policies. Being conceptually displaced and more limited in practice, Australia's usage was destined for incoherence from the beginning.

Secondly, we can, perhaps, imagine why Blair adopted the term 'partnership' as the preferred perception of his government's relationship with British finance. On a pragmatic plane, the Blair government initially faced the potentially destabilising expectations of the commercial interests in his public service: the lobby nourished in the City of London as a legacy of the Thatcher-Major Conservative government, which of course invented the idea of privatisation and its PFI variant. The utility of the partnership rhetoric lay in its capacity to disarm and incorporate the City within Blair's political tent. On a higher plane, the concept also dovetailed with Blair's mainstream rhetoric. Declaring socialism dead and appealing to the imperatives of globalisation and modernisation, Blair has become renowned for cutting across the grain of British Labour's tradition of social democracy, overlaying his neo-liberal policy inheritance with a rhetoric of communitarianism. Riff upon riff, his government has emphasised the decentralisation and devolution of power, social cohesion, co-operation and inclusiveness, self-organising and self-disciplining communities and, especially, the obligations of citizens. Gathering all the notes, the prime minister and his ideological handmaidens wax about the need for the state and civil society to act in 'partnership'.5 Whatever the Third Way meant in the round, echoing through this rhetoric is the sound of the conventional corporatist model of the state and society. In political philosophy, corporatism entails the idea of co-operative, self-managing interdependent parts, combining their complementary contributions to complete each other in the whole body. The model is classically associated with countries such as Germany, Austria, France and Italy, and is the ideological homeland of social partnership.6

Blair's use of the PPP rhetoric thus has a certain integrity, or at least consistency, both with his pragmatic instincts and his soft-corporatist or neo-communitarian philosophy, which anticipates government facilitating business to encourage social cohesion. By contrast, the concept is foreign to liberal philosophy, which emphasises a neutral role for governments between competing interests, with the aim of encouraging individual freedom. Likewise, the concept is foreign to social democracy, which emphasises the need for governments to intervene on behalf of classes and groups that are exploited or disadvantaged in market relations, with the aim of encouraging equality.

This broad ideological context helps further explain why Australia's usage is so incoherent, for in this country the states variously present their PPP policies as practical, ideology-free initiatives, or as evidence of Labor business credentials, or they are bracketed under neo-liberal pieties (reform, efficiency, competition, and so on). Presented generally as a mix of all three categories, where the Victorian government's policy ideologically fits is typically obscure. Treasurer Brumby has even thrown in the claim that the imitation policy will ensure 'a showcase of Victorian innovation'!7

Partners, principals & agents

Drawn from an alien setting for narrow political reasons, divorced from the ideological architecture that gave it a coherent resonance, and applied to a narrower content area, there should be no surprise that 'partnership' in Australia's private infrastructure policy context is also technical nonsense.

The concept of partnership has come down to us from pre-modern times, and in liberal and social democracies it persists almost exclusively within the private domestic and business spheres. In both these contexts, the concept carries connotations of an alliance of two or more parties sharing, or pursuing joint goals, in something. More sharply, it can be distinguished from other relationships, such as random relationships, competitive relationships, kinship relationships and, most pertinently, the many species of principal-agent relationships. A principal-agent relationship arises when one party (the principal) binds another party (the agent) to act in the principal's interest. A conventional list of examples would include master and servant, employer and employee, landlord and tenant, lender and borrower, and so on. With one disturbing exception at the margins, nothing within the present PPP policies can be reasonably described as providing for the formation of partnerships, apart from the frequent rhetorical assertions that the policies do have this aim. On the contrary, with the one exception which we will discuss shortly, the detail of the policies describes the formation of conventional, commercial, principal-agent contract relationships.

There is no room for discretionary interpretation here. The terms of principal-agent relations are explicit throughout PPP policy statements, sitting cheek-by-jowl with the flummery about partnerships. The policies all stipulate that participating private firms will be, and will only be, contracted to supply specified 'outputs' for and on behalf of the governments. Sometimes explicitly, sometimes implicitly, but always necessarily, this means that the governments will continue to remain solely responsible for all the policy outcomes in the areas where PPP deals are struck. There is no shared interest or ownership. The governments remain solely responsible for the public interest, the firms purely for their own private interest. Whatever the outcomes, beyond the terms of the contracts, the governments remain responsible for all the residual risks, including the risks in the effectiveness of the contracts. Whatever the outcomes, provided they supply the outputs within the terms of the contracts, the firms receive a secure income, including all the residual income. The policies thus provide for the formation of starkly asymmetric, commercial, principal-agent relationships, and an asymmetric, commercial, principal-agent relationship is not and cannot be described as a 'partnership'. If we were to accept that it can be, we would need to invent a new word to stand in partnership's formerly distinctive place.

The true nature of the PPP relationship is also cast into relief by the sole exception to the otherwise theoretically clear division of interests, roles and responsibilities. The exception is the standard PPP provision for the governments to share in any unanticipated windfall profits that might come the private party's way in the course of the contracts.8 Profit-sharing certainly does denote a characteristic associated with genuine partnerships, as it gives the governments a joint stake in the performance of the private parties. Although the profit-sharing provision appears as a mere codicil to the main thrust of the PPP policies, it tears at the central principal-agent relationship. Indeed, the partnership relationship signified in the profit-sharing provision carries implications which, were they to be pressed to their conclusion, would entirely undo the central contractual scheme. This is because profit-sharing opens thorny horizontal public accountability issues. As notoriously demonstrated in the 'WA Inc' episode during the 1980s, when ever governments have a financial stake in the performance of private firms, this opens up the risk that commercial objectives will outweigh the public interest in government decision-making. Moreover, if profits are to be shared, they must be measured. Implicitly, therefore, the PPP profit-sharing provision dictates the need to apply symmetrical public accountability arrangements to the participating private firms, including charging auditors-general with rights of access to private premises and the underlying private financial records. This, in turn, implies input monitoring, and input monitoring would completely destroy the central contract design.

Chocolate is vanilla

When government actions do 'not square with the professed aims of the political parties', Orwell argued, 'political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness'. Herein is the explanation for the incoherence of Australia's private infrastructure policies. 'Partnership' is simply a term that was made fashionable in the UK and has been picked up as the official Australian Labor government euphemism for 'privatisation'.

The reasons appear obvious enough. Countless Australian opinion surveys have testified to the deep unpopularity of privatising public services. Most recently, Jonathan Kelly and Joanna Sikora distilled the results of 11 national surveys stretching from 1986 to 2002, conducted by the International Social Science Survey/Australia (IsssA).9 Consolidating the results over 15 years, they found that the proportion of Australians 'definitely' in favour of privatisation across the usual range of industries is only between 7 and 10 percent. Combining those who are 'definitely' in favour with those who are 'probably' in favour, 'support' peaks at between 26 and 36 per cent, but the authors find that even this has been dropping by about 1 percentage point per annum. Remarkably, while there is slightly more opposition among women and older people, the differences are very small, and there is practically no difference between urban and rural, union and non-union or on the basis of education and occupational status. Where the big differences in opinion kick in is on a party political basis, particularly at the Liberal/Labor extremities, where the difference is likely to be 33 percentage points. In this context, 'partnership' serves to disguise a privatisation policy that has small mainstream public support, and is deeply opposed by the members of the Labor Party.

The most telling evidence of the sensitivity of the Labor governments to the suggestion that their privatisation policies are in fact privatisation policies is the contorted lengths to which they (and the PPP lobby groups) have gone to insist that this is not the case. With the sole exception of the Victorian government's policy (about which more later), all the PPP statements explicitly insist that they do not involve privatisation. There are several strands to the PPPs-are-not-privatisation case, but the burden falls on the invention of retrospective definitions of privatisation, fabricated so as not to square with some features of PPPs. Perhaps the most ridiculous defence is the insistence that privatisation is not privatisation when it does not involve so-called 'core services' (the definition of which is always conspicuously slippery). Almost as ludicrous is the proposition that privatisation means selling equity in an existing public asset, whereas PPPs involve the creation of new assets; a proposition that conveniently overlooks whether or not the activity in question has traditionally been the preserve of the public service.

Another defence is to make much of the frequent PPP provision for privatised assets to revert to public ownership after 25-30 years (that is, after the current dealmakers are retired or dead). The reasons for - and the basis for calculating - the reversion provision are not transparent, and nor does reversion itself make economic sense. If private firms are best able to provide a service for 30 years, why not 35 years, or 40 years, or whatever? This suggests that the deals are not driven by promises of enhanced efficiency and effectiveness, but by tax accounting considerations such as depreciation allowances; that is, effectively this argument appears to be that PPPs are not privatisation because the assets are only privatised for the length of the tax department's estimate of their effective lives. To the extent that this is not a rort, all the public receives of the privatised asset at the conclusion of the contract is scrap!

The most popular defence, however, is that PPPs are not privatisation because they provide for governments to remain responsible for the policy outcomes (with the private parties only being responsible for delivering the contracted outputs). To restate the same proposition, the argument is that privatisation is only privatisation when governments completely discharge their responsibility for the outcomes. This proposition is rich in irony, as one of the major objections to past privatisations is that, whenever they have involved functions or activities that embody essential service, public goods or natural monopoly or near monopoly characteristics, governments have never been able to shed their responsibility for the outcomes.10 By making the historical incompleteness of privatisation explicit, PPPs do represent a welcome and substantive advance on past privatisation policies. But selling or transferring functions and activities that have traditionally been the preserve of the public service to private firms remains privatisation by any other name.

'The great enemy of clear language', wrote Orwell, 'is insincerity'. We may safely conclude that the resort to the rhetoric of partnership in place of privatisation, and the consequential incoherence of the polices, can only be understood as a bid by our state governments to maintain and perhaps extend the privatisation policies they inherited from their neo-liberal predecessors.11 Like the fall of a soft pillow, 'partnership' is an unthreatening word, which passes gently by the listener, emitting a vaguely collective and participatory sound, reducing the public consciousness of the policies, and thereby pre-emptively chloroforming objections. As the US economist, Paul Krugman, wrote of the Bush administration's current plans to privatise US social security - which the administration insists is not privatisation, but the establishment of a 'personal accounts' - this is a 'chocolate-is-vanilla' tactic, designed to intimidate the media into avoiding the unpopular term.12

Beyond bad language

Once we get past the euphemisms that encase the present private infrastructure policies we can, as Orwell maintained, 'think more clearly'. And once we face up to the fact that we are still only dealing with forms of privatisation, there can be no surprise that we are once again only dealing with many of the longstanding policy problems associated with this direction. Here we will focus on four of the most outstanding issues.

First, there is the general concern about the viability and integrity of the public sector under the continuing assault of the privatisation lobbies - the 'net worth' question. 'Privatisation' is of course an issue that social democrats view with automatic suspicion. Born of Margaret Thatcher's world prototype neo-liberal government with the aim not of improving economic performance but reducing the size of government 'to reclaim territory for freedom', the concept directly challenges social democratic aspirations to employ the public sector as a major defence against the inequalities generated by the market economy.13 No one can sensibly oppose the continuing consideration of ways and means of providing better public services; but assenting to shifting the balance of the mixed economy will always be a matter of deep concern. The deep privatisation-for-its-own-ideological-sake suspicions that have always been associated with the concept remain indelibly stamped.

It follows that a threshold concern with the current private infrastructure polices in general is their ill-defined scope. The most notorious government diversion is the appeal to the idea of 'core services' as placing a limit on the scope of the privatisations. While the 'core services' defence is wielded in a vague way by all the present Australian governments to conjure up the impression of policy limits, the Victorian policy is the most open-ended of all. As advertised, the policy states that the government has promised (and only promised) to remain directly responsible for 'core' services. The problem with this pledge is that, when one goes to the fine print on the definition of 'core', we find that this does not necessarily even encompass basic public education and hospital services, or any other services for that matter. The Victorian policy does not make a clear statement that education and hospital services are 'core services', and that they are therefore not subject to the privatisation policy. Rather, what the policy actually says is that these tasks 'are widely regarded as core services'. Note, the policy does not say that the Victorian government regards these services as 'core', only that many others do. Once we notice that the paper also explicitly states that the definition of core services will be decided on a 'case by case' basis, strictly, there is no way to read the policy other than to conclude that it remains utterly unlimited.14

This is, perhaps, a form of 'stealth', as is often said. Yet it is not 'privatisation by stealth'; rather, it is pure and simple privatisation plus a good deal of 'stealth' in defining the limits of the policies.15 The uncertainties embodied within the policies are compounded by the fact that the term 'infrastructure' is also notoriously difficult to define. The term has only been in widespread use since WWII, after coming into English from French, where it literally meant a structure 'beneath' or 'within' a society or economy (as distinct from 'superstructure', which sits 'over' and 'above'). The imprecise and elastic nature of the term is illustrated by the observation that it may just as easily be applied in relation to entirely uncontested roles of government, such as defining and protecting property rights, as it can be to functions such as providing and maintaining roads and bridges. Indeed, the provision of infrastructure is not a bad description for the core function of Australia's state governments at large. In sum, and let us be clear about this, read at its widest, the Victorian PPP policy ultimately amounts to a pathway to a New Right Utopia.

This broad concern about the maintenance of the mixed economy and the limits to privatisation appears acute in Australia, where reports of inadequate and failing services abound in the daily media. There is nothing surprising about this. As Stephen King has noted in the opening chapter of a recent review of privatisation by the Committee for the Economic Development of Australia (CEDA), our governments have pulled off privatisation deals valued at over $100 billion since 1990.16 In the same volume, Louise Sylvan reports that Australia's privatisation program has been 'in dollar terms ... second only to the UK'.17 An important qualification that further highlights the extent of the great sell-off is that Australia has always had a much smaller post-war public sector than the UK. The threshold issue that is therefore inevitably associated with the latest round of privatisation policies has recently been expressed by the Australian Auditor-General, as follows:

Outsourcing and privatising areas traditionally considered public sector activities indicates that the size of the core is shrinking. A broader issue is whether, over the longer term, the public sector might diminish to a point at which it no longer constitutes a credible, effective or viable arm of sound governance.18

The second major issue of policy substance is the comparative cost of public and private capital, which automatically creates the likelihood that the privatisation of infrastructure is an exercise in fleecing taxpayers and, or, workers. The burden of this suspicion falls on the fact that the observable public cost of capital (raised by issuing government bonds) is significantly less than the private cost. In the absence of inherent efficiencies that materialize simply by virtue of a change from public to private hands, generally it follows axiomatically that the higher costs of private capital (private debt and equity) must be subsidised by the public or workers if private firms are to operate the infrastructure profitably, or services must be reduced.

This is a difficult issue to explain briefly and succinctly. Because the higher private cost of capital presents such a substantial barrier to private firms taking over traditional public functions; and because we live in a country where privatisation has been bipartisan policy in an era where the practice has been at the forefront of the prevailing neo-liberal policy orthodoxy; this is one of the most hotly contested and obfuscated issues in contemporary public policy. As Orwell would have appreciated, the rarefied nature of this debate has actively served to shield privatisation against public scrutiny, and this is not the place to pursue the arguments through into their baroque recesses, a challenge that has in any event been more than competently taken up by John Quiggin, Bob Walker and Betty Con Walker, among others.19 While aspects of the underlying theoretical debate contains unresolved problems and remains contested, suffice here to say that the differences in the cost of capital stem, on the private side, from capital market inefficiencies and transaction costs, and on the public side, from the high degree of security and liquidity of government bonds. The bottom-line, John Quiggin has suggested, is that the cost difference amounts to around 6 percentage points.20

To bridge the gap, the privatisation lobby has waged a strong campaign to convince the Commonwealth government to grant more tax breaks, a campaign that has been strongly supported by the states, and in particular Victoria.21 In the meantime, the states themselves have introduced novel policy twists to conjure up the appearance that the privatisations represent 'value for money'. This basically involves a two step process.

In the first place, the policies have invoked the concept of project 'risk' to artificially bloat the cost of public project provision. This is the downside of the welcome advance in making the historical incompleteness of privatisation explicit, which was mentioned earlier. In the past, so the argument goes, the apparent low cost of public provision has disguised embedded risks, which the new policies now insist must be dug up, defined, costed, and then added to the so-called 'public sector comparator', against which private bids are measured. While the principle has merit, the convenient deception has been the abandonment of any economically reputable and empirically verifiable definition of 'risk', in favour of encompassing and costing any and all possible uncertainties that can be conceivably imagined.22 Just how undisciplined this process is within the Victorian policy is particularly stark: a 'brainstorming session Â… is strongly advised', emphasises the policy; 'value all material risks, even those that appear difficult to quantify'; 'a flexible approach Â… is required'; 'commonsense approximations may be used'; 'if the required data does not already exist, the collection Â… should begin'; 'it may be useful to talk to people Â…'; 'above all, ensure the public sector comparator exceeds the likely private bids'.23 Only the last quote is not taken from the Victorian policy documents, but the instruction may as well be added.

The second step has been to artificially bloat the public cost of capital, which is expressed in the 'discount rate' and is taken to reflect the generic or systematic capital risk; that is, general economic risks beyond those embodied within the specific project. The higher the discount rate, the more the public sector comparator will approximate the private cost of capital, which in combination with the bloated cost of public project provision can create a justification for privatisation. John Quiggin, Australia's most accomplished privatisation economist, has argued that the real pre-tax discount rate should be no more than 1 per cent above the government bond rate. For what seem obvious reasons, the Victorian government has raised this by 3-4 per cent.24

The third major issue of policy substance associated with the policies is the vexed issue of accountability and transparency. It is ironic that advocates of privatisation often draw on 'public choice' theory that supposes inherent propensities for 'government failure' to justify their stance, when the truth is that there are few more gaping opportunities for government failure than in negotiating privatisations. This follows from the opportunities privatisation provides for governments to gain higher sale prices by immunising or manipulating risks in favour of private proponents, in contexts where contract details are shrouded in secrecy by the doctrine of 'commercial-in-confidence'. In most states, the policies merely provide for summaries of the contracts to be made available to the auditors-general and parliament. This is repugnant to the idea of good governance, and appears to have been avoided in Victoria. Commendably, the Bracks government has made a strong global commitment 'that contractual confidentiality will not inhibit the Auditor-General, the Ombudsman or Parliamentary Committees from exercising their investigative powers'. The premier has committed the government to ensuring 'the Auditor-General and the Ombudsman will have access to all contracts and tender-related documents, regardless of their confidentiality'.25 Other state governments would do well to follow the Victorian lead on at least this issue.

The fourth and final area of major concern is the accounting treatment of privatisation, where much public commentary on the current polices has centred on the different treatment of public debt and the contract liabilities that typically arise from PFI-style privatisations. These deals are often referred to as 'off balance sheet financing' mechanisms, as the fees payable are entered into the public accounts as 'expenses' and the long-term liability that is incurred as part of the contract is not counted as debt. In the UK, PFI-style privatisation was originally explicitly introduced to circumvent constraints on public borrowing, and reducing public debt has often been used as a populist Australian justification for privatisation, perhaps most notably in Victoria. Under the present circumstances, where pressure for public infrastructure investment is intense, these deals thus present as superficially attractive because they offer governments a way to take on debt-equivalent obligations, while avoiding the appearance of having done so. The solution here has been agreed in principle between the NSW and Victorian Treasuries:

Even though social infrastructure may be financed by the private sector, the government through payments made during the contract's life, will ultimately fund it through payments for services provided. These payments commitments are as real as those associated with servicing balance-sheet debt and, in the context of a government's fiscal strategy need to be considered in a similar manner.26

This agreement must be carried forward into state accounting standards. Action along these lines is the only way the governments will be able to rule out the common assumption that the official appeal of PPPs primarily derives from the obligations they incur being kept 'off balance sheet' to hide or understate public debt.

Whither partnerships?

We can, perhaps, understand why the Bracks government persevered with private infrastructure polices when it was first elected. Like the Blair government, it came to office following the most determined privatisation program in Australia's history and inherited a strong local privatisation lobby. A narrow and surprising election win understandably led to an emphasis on caution and consolidation. But following the government's overwhelming re-election, there is now no apparent reason why it needs to pursue a high profile on this deeply unpopular front. This is not at all to say that there is, or should be, no role for private firms in the provision of public infrastructure. They always have and no doubt always will, and most obviously they will in cases where industries operate under conditions that tend to approximate genuinely competitive markets. Rather, it is only to point out that there is no impediment to the government adopting a policy to maintain a stable ratio of net public sector worth to state domestic product; to explicitly ruling out privatisation in areas which it considers 'core' functions of government; to adopting a reputable, empirically verifiable approach to risk allocation; to utilising a discount rate that is not tilted in favour of private proponents; and to including long-term financial obligations within the measures of public debt. That the Bracks government has not already adopted policies along these lines speaks volumes for the political immunity the state's Treasury has enjoyed, irrespective of the election of a Labor government.27 The deeply embedded continuity of the Treasury's neo-liberal orientation is the only conceivable reason why, of all Australia's sub-national governments, Victoria is the only one that has not at least made a rhetorical commitment to ruling out asset sales, however unreliable such commitments may be.

Reform must begin with an end to the rhetoric of 'partnership'. Importantly, this should not be interpreted as suggesting the concept of partnership has no place in public policy. Although scarcely free of difficulty and ambiguity, feminist and postmodern scholars have, for example, posited partnership models of policy processes which aim to transcend the limitations of communitarianism, involving ongoing participation, representation, dialogue and co-production by all involved parties, including the real service deliverers (workers) and consumers. In this model, the terms of partnerships do not precede their establishment, but are constituted in the practice. The model is contrasted with executive models of policy making, as exemplified by dualities such as the principal-agent contractualism that is central to the design of the current privatisation policies.28 As used in the current raft of public-private partnership policies, however, the word is not only vague and inaccurate, but by virtue of these very qualities positively assists privatisation advocates in disguising the direction and therefore ignoring the substantive critiques of the policy content. Social democrats in particular should refuse to be complicit in the rhetoric of 'partnership'. 'Political language' wrote Orwell:

is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind. One cannot change all this in a moment, but one can at least change one's own habits, and from time to time one can even, if one jeers loudly enough, send some worn-out and useless phrase ... into the dustbin where it belongs.


Christopher Sheil is a visiting research fellow in the School of History at the University of New South Wales and a member of the Evatt Foundation's Executive Committee. This paper was originally published as a chapter in Visions for Victoria (Vulgar Press, 2003, pp 67-85), edited by David Hayward & Peter Ewer, and is republished with the author's permission.



1. This essay is a revised and extended version of an essay by Christopher Sheil 'Partnerships, politics and the English language', published in Dissent, No. 11, Autumn/Winer 2003, pp.46-49. George Orwell's 'Politics and the English Language' was first published in Horizon in April 1946 and was reprinted in the collection Shooting an Elephant and Other Essays in 1950.

2. Partnerships Victoria, Department of Treasury and Finance, Melbourne, June 2000, p. 1.

3. Working with Government: Guidelines for Privately Finance Projects, NSW Government, Sydney, November 2001.

4. Public Private Partnerships: The Government's Approach, HM Treasury, London, 2000, p. 10.

5. See, for example, Anthony Giddens, The Third Way; The Renewal of Social Democracy, Polity Press, Cambridge 1998, p. 79.

6. See the classic work by Gosta Esping Anderson, The Three Worlds of Welfare Capitalism, Polity Press, Cambridge, 1990, or more recently, R. E. Goodwin, B. Headley, R. Muffels, & H-K Dirven, H-K, The Real Worlds of Welfare Capitalism, Cambridge University Press, Melbourne, 1999.

7. Partnerships Victoria, op cit.

8. This provision is in all the states' policies. The Victorian reference, which is more carefully expressed than most, can be found in Partnerships Victoria: Risk Allocation and Contractual Issues, A Guide, Department of Treasury and Finance, Melbourne, June 2001, p. 23.

9. Jonathon Kelly and Joanna Sikora 'Australian public opinion on privatisation, 1986-2002', in Margaret Mean and Glenn Withers (eds), Privatisation: A Review of the Australian Experience, Committee for Economic Development of Australia, Melbourne, December 2002, pp. 54 -58. See also: David Hayward, 'The public good & public services: What role for the public sector?' Dissent, No. 8, Autumn-Winter 2002, pp. 8-12.

10. For a general discussion of this issue, see Christopher Sheil, Water's Fall: Running the Risks with Economic Rationalism, Pluto Press, Sydney, 2000, pp. 75-81.

11. Note the polices also simultaneously seek to legitimacy by claiming they are not new. In this sense, they echo the globalisation debate.

12. Paul Krugman, 'The Bully's Pulpit', New York Times, 6 September 2002.

13. Margaret Thatcher, The Downing Street Years, HarperCollins, London, 1995, p. 676.

14. Partnerships Victoria: Risk Allocation and Contractual Issues, A Guide, Department of Treasury and Finance, Melbourne, June 2001, p. 5.

15. See also Christopher Sheil, 'Muddy waters as tail tries to wag dog', Australian Financial Review, 7 December 2001.

16. Stephen J. King, 'Why privatisation? Lessons from Australia', in Margaret Mean and Glenn Withers (eds), op cit, p. 14.

17. Louise Sylvan, 'Privatisation: the impact of consumers', ibid, p. 50.

18. P. J. Barrett (Auditor-General for Australia), 'Implementing adequate supervision - What kind and how much', Address to a laboratory for politicians and top managers from different public institutions in Europe, Regione Lombaredia, Italy, 6 April 2002.

19. For John Quiggin, see: Great Expectations: Microeconomic Reform and Australia, Allen & Unwin, Sydney, 1996, pp. 147-55; (with Simon Grant), 'Public Investment and the risk premium for equity', Economica, 70 (277), pp. 1-18; See also Bob Walker & Betty Con Walker, Privatisation: Sell off or Sell Out? The Australian Experience, ABC Books, Sydney 2001, Ch 5 & Appendix.

20. John Quiggin, 'Submission to the Victorian Parliament Public Accounts and Estimates Committee Inquiry into Private Sector Investment in Public Infrastructure', 3 May 2002.

21. See Christopher Sheil, 'Coonan's next can of worms', Australian Financial Review, 6 December 2002.

22. Ever since Frank Knight (1921), conventional economic literature has defined risk as an actuarial concept, applying to randomness that may affect returns that can be specified in terms of insurable numerical possibilities (as with the likelihood of rain, or lottery tickets). Beyond this strict definition, the probability of random occurrences affecting returns is a matter of subjective belief, or the concept shades into the broader concept of 'uncertainty'. For a recent general discussion, see Robert J. Shiller, The New Financial Order: Risk in the 21st Century, Princeton University Press, New Jersey, 2003, esp. chs 2 & 4 ('Dealing individually with all our separate risks is impossible because there are too many of them to comprehend', p. 58.)

23. Partnerships Victoria Guidance Material: Public Sector Comparator, a Technical Note, Department of Treasury and Finance, Melbourne, June 2001, pp. 239, 33, 35, 39, 41. For the comparable problem with the UK policy, see also: Allyson Pollock, Jean Shoal & Neal Vickers, 'Private finance and 'value for money' in NHS hospitals: a policy in search of a rationale?' BMJ (British Medical Journal), 18 May 2002; 324 (7347): 1205-9.

24. John Quiggin, 'Submission to the Victorian Parliament Public Accounts and Estimates Committee Inquiry into Private Sector Investment in Public Infrastructure', 3 May 2002.

25. Victorian Government, 'Ensuring Openness and Probity In Victorian Government Contracts: A Policy Statement', 11 October 2000. On the general issues here, see also: See Barrett, op. cit.; Walker & Con Walker, op. cit., pp. 218-23.

26. J. Pierce and I. Little, 'Taxpayers need value from partnerships', Australian Financial Review, 8 April 2002.

27. See Christopher Sheil, 'An Un-Australian Episode: The State of Victoria', in Christopher Sheil (ed), Turning Point: The State of Australia, Allen & Unwin, Sydney, 1997, p. 219.

28. See, for example, Anna Yeatman, Postmodern Revisionings of the Political, Routledge., New York, 1994


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