Until January 2018 Carillion was a huge British conglomerate before going bankrupt. From its roots as a construction company, it expanded into a grand-scale facilities management company: The construction projects such as schools, prisons and road-building that it undertook were also operated by the very same firm. A practical symbiosis for the British government: construction and management of infrastructure and services of general interest could be outsourced along with responsibility for running them. That at least is how the basic model of the British Private Finance Initiative used by governments of either colour since 1992 looks.
Carillion was the second-largest UK construction firm with 43,000 global employees, 20,000 of them in Great Britain. Alongside its construction activities it managed on behalf of the state several prisons, the central listening post GCHQ (Government Communications Headquarters), made available some 11,500 hospital beds all told and was the daily supplier for tens of thousands of school kids. Whereas it is quite clear in the case of private sector companies how insolvency is to proceed it is quite a different matter when it comes to companies offering general interest services. The otherwise entirely neo-liberal British Conservative government immediately assured it would jump in and cover all outstanding payments.
New-Generation Entrepreneurial Risk
For the private sector, the concept is clear: just acquire facilities management for public infrastructure and your business risk can be cut to zero. It is insured via tacit state default liability: The invisible hand of the market supplemented by the protective hand of the state. That’s the way new-generation “entrepreneurial risk” works.
It works not just in Great Britain but far and wide in continental Europe where it is now socially acceptable. Public Private Partnerships, in which profit is privatised but loss socialised, are all the rage now. From a commercial point of view, a lucrative business model: This is how the so-called Juncker Plan (European Fund for Strategic Investment) also functions.
This model is unacceptable from a worker point of view. Taxpayers are the ones who are dispossessed in each and every privatisation of any former state infrastructure. Lucrative monopoly/oligopoly businesses (operating motorways, electricity generation, electricity distribution, water and sewerage supply, oil refineries, gas pipelines) are privatised, dividends are pocketed by shareholders now and no longer by the exchequer.
“Commoditisation” Of Sovereign Powers
Privatisation of state assets always means privatisation of socially relevant decisions. The greater the domination of private individuals over key utilities the more often economic policy decisions are removed from the democratic process and struck by private persons acting on the basis of profit maximisation.
Whereas in Europe the row over the economic sense of the “black zero” rages and, at the same time, the family silver is being sold off, sovereign funds, including those of Saudi Arabia, the UEA, Qatar, Singapore, China and Norway, but also big corporate groups are profiting. They are unimpededly buying up strategic interests in key European companies and core technologies.
This is ruled out within the EU. The EU Commission’s state aid notification regime (2016/C262/01) unilaterally extends the concept of state aid – with no involvement of the European Parliament – way beyond the original intention in the Treaty on the Functioning of the EU (TFEU). Accordingly, virtually every state activity that cannot be directly ascribed to sovereign command and control powers has to be seen as economic. An autocratic body examines whether social considerations justify the construction, improvement and reconstruction of public infrastructure or illegal aid is involved.
The Destructive Nature Of Fictive Competition
At the same time, secondary law levers out Art. 345 TFEU, which determines that property ownership remains in the hands of the member states. Thus, the internal energy market package and the railways package encroach upon the proprietary structure of member states by stipulating that unbundling and competitive public procurement are mandatory. The legal justification for this is seen in the buttressing of the competitiveness of these sectors. Competition in networked services such as railways, post, electricity but also scheduled bus/coach routes, however, makes little sense. Therefore, the simulation of competition is sought through opening up networks.
Once state-owned operators, when it comes to, say, rail, electricity and post, are in competition with private sector firms, EU competition rules are to apply. The logical result is inter alia that private sector companies only offer their services where profit is a given: cherry-picking rather than a comprehensive offer. This means that current well-functioning systems for delivering vital public services are destroyed or put at risk. The costs – such as investment in maintaining the infrastructure – are socialised while the profits from operating lucrative services are privatised.
Socialising Competition Law
Great Britain as the market leader in privatising what were once typical state activities has become a “worst practice” case. Insolvency of Carillion is not just about a business failure but should act as a warning signal about reckless and unfair business models and the collapse of public infrastructure. Even so, it is seen by many EU member states as a practical business model for “applying the debt brake” and meeting the so-called “stability criteria” while, at the same time, sliding out of any political responsibility for the quality of general interest services. The clear answer of British opposition Labour leader Jeremy Corbyn: “There must be an end to this policy of rip-off privatisation.”
The EU’s “economic governance” and competition law thereby interfere without any further legitimacy in the legal structures of the member states. This loss of creative power is perceived as loss of democratic participation by citizens. To defend the social character, democratic principles of the EU and European integration as a whole means counter-acting the systematic removal of public services. This requires a “socialisation” of competition law:
The DGB has set out a counter-concept with its Marshall Plan for Europe that is designed to introduce urgently required infrastructure initiatives for Europe. Unlike the Juncker Plan, the participation of private capital and undertakings is not mandatory. Precisely to avoid any privatisation of profits and socialisation of losses.
Competition law must be socialised and democratised. This means expanding the investigatory criteria of EU competition law to embrace the effects upon employees. Services of general (economic) interest must be removed from state aid control.
The reorientation of European economic policy must take place on the basis of strategic ownership instead of the slogan of a “black zero.” We do not need to give the debt brake constitutional status but rather strategic ownership (water/energy supply).
About Susanne Wixforth
Susanne Wixforth is Head of Unit in the German Trade Union Confederation (DGB), Europe and International Department, and former Senior Legal and Economic Adviser European Affairs in the Austrian Chamber of Labour (AK Vienna).
