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Wrong way: How privatisation and economic reform backfired

Wrong Way: How Privatisation and Economic Reform Backfired

Damien Cahill and Phillip Toner (editors)

September 2018

La Trobe University Press / Black Inc. Books

Paperback ISBN: 9781760640385

eISBN: 9781743820605

In this collection ‒ edited by Damien Cahill and Phillip Toner from the Department of Political Economy at Sydney Uni ‒ Australia's leading economists and public intellectuals do a cost-benefit analysis of the key economic reforms, including child care, aged care, housing, banking, prisons, universities and the NBN. Have these reforms for the Australian community and its economy been worthwhile? Have they given us a better society, as promised?

Michael Pusey, author of the 1991 classic Economic Rationalism in Canberra, writes: "Cahill and Toner get it right. Neoliberal economic "reform" is indeed the wrong way because it undermines good governance, increases inequality and reduces our quality of life. Wrong Way is a finely crafted, clear and inviting analysis of all that is wrong with Australia’s experiment with neoliberalism."

Emeritus Professor Roy Green from UTS writes: "Australia has been subjected to a thirty-year economic experiment under the catch-all title of "neoliberalism". This important book is an audit of the outcomes and impact of this experiment. Has privatisation led to more productivity-enhancing competition, or less? Has deregulation increased economic welfare in energy, finance, health, education and labour markets, or not? Indeed, does the lived experience of Australians measure up to the promise of economic reform? The authors now have access to a comprehensive database with which to answer these questions. And they do so with conclusions that are both compelling and disturbing."

Academic economist John Quiggin writes in The Guardian:

"The Greens’ proposal for a publicly owned electricity retailer is the latest to emerge from across the political spectrum arguing for renewed public intervention. The Queensland Labor government has committed to the establishment of a publicly owned renewable electricity generator, to be called CleanCo. At the federal level, the Labor leader, Bill Shorten, has repeatedly stated that electricity privatisation was a mistake. The LNP government is still committed to the Snowy 2.0 hydro scheme, while the climate denialist faction wants public money for a new coal-fired power station.

"This renewed appetite for public ownership is accompanied by general recognition that the national electricity market has been a complete failure. As I discuss in my contribution to a new book, 'Wrong Way, How Privatisation and Economic Reform Backfire', microeconomic reform has failed in every part of the electricity supply system.

"Unfortunately, no one has much of an idea what to do about the problem. Restoration of public ownership will help but the system needs to be redesigned from the ground up. Before putting forward blueprints for a redesign, it’s important to consider, at a more fundamental level, what went wrong.

"Certainly, privatisation was a mistake and markets haven’t yielded the promised benefits but electricity systems with predominantly private ownership and designed markets have performed relatively well in some places. For example, the Electricity Reliability Council of Texas (Ercot) has done a good job in managing the transition from coal-fired power to renewables while holding prices down.

"Why has Australia done so badly? The reform process in Australia has treated markets and competition as goals in themselves, rather than as policy instruments designed to produce useful price signals and thereby guide investment and consumption decisions. ...

"Finally, there is retail competition. Retail price policy should have two goals. The first, obviously, is to keep prices as low as possible while covering the costs of supply. The second is to allow consumers to manage their demand so as to use more electricity when it is cheap. To achieve this with any accuracy, it is necessary to use smart meters, capable of allowing flexible pricing.

"As with everything else, Australia’s electricity reformers made a hash of this. After a ham-fisted attempted to force Victorian consumers to pay for new meters in 2009, the whole idea was soft-pedalled. Meanwhile, under the banner of choice and open markets, reformers pushed ahead with full retail competition."

Published in Chain Reaction #135, April 2019. National magazine of Friends of the Earth Australia.

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