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Why privatise? The case of the Post Office

Juan Torres López. Professor of Applied Economics at the University of Sevilla

In recent years, governments of neoliberal inspiration have carried out liberalisation and privatisation of many old companies and utilities. The reasons that have been given to justify them have always been the same: the state is a bad businessperson and provides goods and services in worse conditions than private enterprise. If services such as education, health, emails, television, communications, energy, transport, etc. are privatised, private initiative will surely supply them at the best price, with more competition, more innovation and lower cost for society and for everyone.

Now that years have passed since these privatisations were carried out, we are able now to rigorously assess what their real effect, if indeed the neoliberal promises were true or whether it was a hoax to put public capital in private hands. Precisely in the year just ended, in is now fifteen years under European Directive of 15 December 1997 on common rules for the development of the internal market for postal services in the Community and improving the quality of service. Therefore we have at our disposal experience and studies evaluating what happened in these years in Europe (which, incidentally, is not very different from what has happened elsewhere in the world).

To the contrary of what the European authorities and the neoliberals who defended privatisation and liberalisation assured us, after all these years there is little competition in the marketplace. In most countries, what has been done with the liberalisation and privatisation has been to "chop" the former national postal network for private businesses to position itself in the most profitable segments. Studies show that competition hardly reaches a maximum of 10% of the total market in the best case.

The private is dedicated to finding profitable niches

To the contrary of what the European authorities and the neoliberals who defended privatisation and liberalisation assured us, after all these years service has not improved. The former national operators that are still in the market have less income (because they receive less state funding and because they operate only in the less profitable or unprofitable segments. Because of this, they provide worse service, with fewer offices and fewer staff, as we shall soon see.

For their part, the new private operators have not been dedicated to improving the service as a whole, but rather to finding profitable niches. They have succeeded in this, mainly specializing in large corporate clients; largely also to devoting themselves to sending millions of unwanted letters to everyone. And in almost all countries many post offices have closed (90% in the Netherlands which was the most advanced country in the liberalisation and privatisation), which has hindered ordinary customers' access to the service.

Consequently, in most cases and countries, the average time of delivery and collection network has deteriorated and the services rendered are worse, just the same as has happened in general with other activities also privatised in recent years.

To the contrary of what the European authorities and the neoliberals who defended privatisation and liberalisation assured us, after all these years we have not lowered the prices of postal services in most of the services and countries, except in the case of services to large clients who can negotiate prices with companies. In some countries such as Austria, the price of stamps for shipments increased by up to 90% (one country, by the way, which has encouraged the conversion of postmen into police officers in exchange for 10,000 Euros per head). And in others, such as Belgium, the price of some types of shipments has risen 200%.

To the contrary of what the European authorities and the neoliberals who defended privatisation and liberalisation assured us, after all these years the employment situation in the sector has not improved. Data from different European countries show that the process of liberalisation and privatisation has led to very significant cuts in employment and, more specifically, the replacement of full-time jobs with part-time or self-employed contracts.

Employment and wages have fallen

In some countries, the decline in the number of jobs has reached 50% (Portugal) and in most of them, the reduction is between 20% and 30%. In Spain, the loss of jobs is roughly equivalent to the new ones that have been created in the privatised sector, but the latter are overwhelmingly part-time, representing a net loss of employment and job income.

Wages have also fallen as a result of this in almost all countries. In Germany, whose new postal sector is plagued by so-called "minijobs", it is down about 30%, reaching about 5 Euros per hour in a particular type of service. In Spain, it is estimated that up the time the crisis began, the wage decline was 30% and after it, possibly up to 50%.

To the contrary of what the European authorities and the neoliberals who defended privatisation and liberalisation assured us, after all these years there has not been a breakthrough, except the saving in jobs and labour costs, and businesses compete primarily through price rather than quality of service.

Privatisation, then, has not provided more efficiency and lower costs for governments and the public. It has just been a pure business for private capital, which only benefited the owners of new companies, large customers and not the whole of society. On top of this, when public enterprises have been privatised, as in other areas, states have not even earned competitive income because they were sold at bargain prices.

In Spain, the Popular Party launched the implementation of the privatisation policy and then the Socialists, as in many other areas, and did not have the political courage to reverse the process, and much less to seize the opportunity and create a public bank from old Postal Savings Bank, which would have been a way decisive to deal differently with the crisis, with more employment and social welfare.

From all this, it follows that an issue facing the Spanish citizenship is to rigorously assess what has been behind these privatisations, determining who benefited from them and how, and to hold accountable those who spend all day talking about patriotism, when in fact they were giving away our national wealth to the most powerful.

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