Thursday, February 27, 2014

Private Finance Initiative (PFI)

This little essay is sourced from a book I wrote a few years ago.

A speculative fantasy dreamed up by some British economists in the late twentieth century and elevated to a policy by a succession of right-wing governments.

PFI aims to relieve the state of many of its public service obligations by transferring responsibility for delivering and maintaining them to the private sector. Under PFI public buildings are built with private funds, social care provision for the elderly is delegated to corporations, private clinics replace state hospitals, management firms take over the running of “failing” schools” while successful ones are encouraged to sell off their playing fields before being demolished to make way for private academies. Little by little, government withdraws from its traditional role - indeed from the role for which it was elected. Instead it becomes an intermediary between the people and the private sector - receiving petitions from the former and contracting the latter to resolve them. In a curious reversal of classical economic theory, the state thereby emerges as the largest single source of business profits, and an efficient recycler of funds from taxpayers to the pockets of company directors and shareholders.

Politicians justify PFI on the grounds that because companies are stiffened by market discipline they can build and operate public facilities more cost-effectively than government. Regrettably, no element of this mantra stands up to the mildest scrutiny.

First, most governments can raise capital more cheaply than companies because they tend to have higher credit ratings and at least some control over domestic interest rates. More important, debt is usually less expensive than equity[1]. What this means is that the private sector pays more for its money than the state and will charge the cost back to the taxpayer.

Second, no evidence exists that companies have a genetic capacity to run public services more efficiently than governments. The supposed superior efficiency of the private sector is a favoured fantasy of business executives looking to secure government contracts because they find it peculiarly easy to drill into the mush that passes for the brains of incompetent politicians.

A useful corrective might be to recall from time to time a few items of our collective history that votaries of neo-liberalism are inclined to overlook. Universal access to health and education services, construction and maintenance of most of the world’s road and rail networks, the BBC, the CBC, MOMA[2], Sydney’s Opera House, the Louvre, the Library of Congress, police and fire services, pensions for retirees[3], sewerage and water supplies, the allied victory over Hitler and fascism, the US and Russian space programs, and parliamentary democracy, figure among the numberless initiatives and successes of the now derided public sector - the sector that citizens are told works badly on the infrequent occasions when it works at all.

In a competitive world, companies have to be efficient in order to survive. Those that fail either go under or pass into the hands of their competitors. Public services can’t be allowed to go under, however, because without them neither we nor the country in which we live could keep going. Instead, whenever the companies that run them get into trouble, the State bails them out, rewarding their inefficiencies with subsidies, allowing them to hike prices on a nod and a wink, and turning a blind eye to the inflated salaries of their executives. In place of market discipline, we get sequential rip-offs under government licence while they - the companies - get increasing profits for diminishing levels of service.

[1] Although companies usually borrow funds to finance a project, they still pay dividends on the profits, bonuses to their executives, and interest on the the debt. Dividends are more expensive because they are paid after tax, whereas debt is tax deductible. But, of course, governments don't pay tax or dividends to shareholders.

[2] New York Museum of Modern Art

[3] We have Napoleon to thank for this one.

Parting as friends...?

Some nationalist comments on Scottish independence come laced with a good dose of venom directed not just against Westminster but against the English who have been variously described as, torpid, bovine, smug, complacent, nasty (add your own epithet) toffs. Plenty more examples have appeared recently in the media, so I won’t trouble the reader with additional references. These barbs - largely from Scottish nationalists - seem to me like the painful cries of an anxious lover, for they come accompanied by entreaties more often than not for the English to listen to what the Scots are saying. They are in other words, calls for attention, for evidence that the English care about keeping the union together.
We can, I think, dismiss the possibility that nationalists want the rUK Brits to persuade them not to leave. More likely their aim, perhaps subconscious, is to draw expressions of affection from the English (in particular) as a prolegomenon to inflicting on them the maximum of discomfort - hurt feelings - when, as they hope, Scotland chooses to go its own way. In short, they want the separation to matter to the abandoned partner. Anyone who has been involved in a conflictive divorce will be familiar with the complex emotions at work.
One or two recent polls suggest that at least as many English as Scots want the separation to take place. A much larger proportion of English, however, appear not to care. My own casual inquiries over the last year - mainly though not exclusively - in London and the South West (notably Devon and Cornwall where I work) have yielded very little beyond a sense that Scottish independence appears to be a very long way down anyone’s list of priorities. The most widespread opinion I have heard voiced - and this only after I had insisted on hearing one - is that “ won’t make any difference…”
It would be easy - and false - to dismiss this response as evidence that the English deserve to be speared for their intellectual laziness and smugness. For behind this apparent indifference to Scotland lies a much more profound aspect of the character of the English which I would summarise as an unthinking confidence in their own identity.
Robertson Davies, the great Canadian writer, was once quoted as saying that to understand the English you needed to know that they don’t give a damn what anyone thinks of them. Like most exaggerations this one harbours a kernel of truth. Rarely outside the confines of a football stadium (and adjacent pubs) do the English proclaim their national identity. The barmy army, whose members seem to have enough cash and leisure to follow the England cricket team round the world, acquired its name because, to most of their compatriots they are - literally - barmy. Often against the evidence, the English (drunks excepted) naturally assume that they are on good terms with everyone. Moreover, they seldom if ever compare themselves with other nations, not because they think themselves superior, but because they do not consider that the qualities of other nations diminish them. This is notably true of the “home” countries. If England gets knocked out of the World rugby cup, the English will cheer Wales, or Scotland, or Ireland. They can be horribly chastened by the kind of ashes thrashing recently administered by the Australian cricket team; but they will think no less of the Australians for the beating. They treat it as a game and to a large extent treat life itself in much the same way. They are genuinely perplexed by the ABE (Anybody but England) t-shirts enthusiastically sold in Scotland on international sporting occasions; but, despite the occasional efforts of the tabloid press to whip up a furious reaction south of the border, they are only too happy to ignore the intended slight, and to cheer Andy Murray, Chris Hoy and other Scottish champions as their own.
Contempt and distrust are not alien to the English temper but they tend to direct such sentiments not at the people of other nations, but at faceless bureaucrats and city bankers, and especially at politicians. They know that the country has been grotesquely ill-served by successive governments; they are only too conscious of the litany of ills so forcefully described in Robin McAlpine’s recent piece for Open Democracy; the majority who live outside the self-indulgent, myopic bubble of Westminster and Canary Wharf feel both utterly marginalised and, ever since the New Labour betrayal, bereft of political choice. Many are furious about the damage inflicted on the social fabric of this country by neoliberalism and its acolytes, among whom are numbered all the political leaders who have been in charge since Thatcher. But anger and indignation are expressions of love; and they can be and one day surely will be catalysts for action and change. England has been through such periods before - as anyone will know who has studied earlier periods of our history. Disaffection with the status quo, however, is not the same as self-doubt. The English - and I include all those who were born in England or live there by right of citizenship - do not define their identity with reference to their neighbours. In fact they rarely bother to define themselves at all; they take what they are as a given. My sense - a purely personal view - is that they feel generally closer to the Welsh than to the Scots (in literary terms closer to Dylan Thomas than to Robert Burns) and are rather mystified by the tribal hostilities in Northern Ireland; but they are entirely comfortable with the larger identity of Britishness which I believe they view as a kind of brother/sisterhood
From whence does this English self-confidence arise? Part undoubtedly stems from territorial integrity, the long history - almost a thousand years - of borders that no foreign army has crossed except by invitation. No one has better expressed the English sense of geographical security than Shakespeare when he wrote the famous “sceptred isle” speech for John of Gaunt:
“This precious stone set in the silver sea,
Which serves it in the office of a wall,
Or as a moat defensive to a house,
Against the envy of less happier lands.”

Though in the same speech old John rails against the corruption of politicians in their willingness to sell out the country in return for power:
”…this dear dear land,
Dear for her reputation through the world,
Is now leased out…
Like to a tenement or pelting farm:”

It could have been written yesterday.
Another portion of self-confidence without doubt arises from the depth and richness of the culture: in literature from Chaucer and Shakespeare to Harold Pinter and Doris Lessing; in painting from the Wilton Diptych to Constable, Turner, Bacon and Lucien Freud; In so-called classical music from Tallis and Purcell to Walton, Vaughan Williams, Britten; in popular music, from Dowland to the Beatles, the Rolling Stones, David Bowie…..In science from Newton to Stephen Hawking and Peter Higgs (of boson fame), in technology and engineering from Brunel, to Frank Whittle (turbo jet engine), Charles Babbage….Alan Turing (computers), Clive Sinclair (electronic pocket calculator), Tim Berners-Lee (WWW) etc. etc. These are mere examples drawn from a seemingly endless list of contributors not just to the nation but to the world. For whatever reasons - good and bad - English has become the lingua franca of international discourse and the most widely spoken and taught on the planet.
In short, England’s cultural bags are heavy with achievement, and though most of us have had no part in filling them, we carry them subconsciously in the language we speak and the way we think.
David Bowie is currently under attack in cyberspace for having politely asked the Scots to “stay” in the Union, a backlash that would seem to reflect more on the attackers than on their target. Snarling at those with whom you disagree in an attempt to silence them has about it a sulphurous whiff. It reminds me of a personal experience that occurred during the lead-up to the Quebec independence referendum in 1995. I found myself sharing a meal with a group of writers and intellectuals in a Toronto restaurant. Several Quebecers were present, one of whom sat next to me, a young university professor. Inevitably the subject of conversation turned to Quebec and someone made a disobliging remark about the people of anglophone Canada. I said softly, in reply, that the opinion just expressed was not very charitable. The professor turned to me, eyes blazing.
“You can stuff your effing charity up your arse.” I recall this incident as way of suggesting that there is no need to be nasty. Regardless of what the largely right-wing London-centric press may claim, the English people will not think less of the Scots for separating. If independence induces the Scottish people to cease blaming their discontents on the English there will likely be polite applause from south of the border.
What the Scots should not expect is lamentation for their departure. Politicians and their friends in the media may bleat for a while but they’ll soon get used to the new dispensation, which will, of course, include Scottish entry into the EU as an independent nation. If Scots do vote for independence, the English will wish them well and hope that they too will gain sufficient confidence in their identity that they no longer feel a need to proclaim it or to compare themselves with others.
As Gandhi is said to have remarked as India moved towards independence from Great Britain, “we have come a long way together; so we must part as friends.”

This article was first published in Open Democracy.