A while ago, I caught up with an old friend who I was close to…
Time for a debate about re-nationalisation
In the wake of further Covid angst in Australia, the airlines are once again laying off thousands of workers. One of the airlines, Qantas, formerly the publicly-owned national carrier announced last week major job cuts soon after it secured a rather substantial rescue package from the Federal government. Qantas makes a habit of crying poor despite paying its executives slavishly large salaries and aggressively using its market power to undermine smaller regional airlines that have served Australia for years. Mainstream economists, who were cheer boys for the privatisation in the first place, continue to extol the virtues of selling off the airline at bargain prices to private interests. The reality is however different. The airline provides an overpriced service and can no longer be considered the ‘national carrier’, even though it continues to trade on that reputation. So, today, Scott from Griffith University, who has been one of my regular research colleagues over a long period of time, reexamines the case in the light of recent evidence to bring the airline back into public ownership. Over to Scott …
With all the celebrating coming out of the Tokyo Olympic Games these past few weeks, we Australians have once again seen our unofficial sporting mascot, the boxing kangaroo, out and about in the media.
At the same time, there has also been another iconic kangaroo getting its fair share of media attention.
Amongst all the daily news about the Olympics, Covid-19 counts and lockdowns, the flying kangaroo (aka Qantas), our so-called national carrier, was in the news across several stories.
The ‘successful’ privatisation of Qantas?
First, we had an Sydney Morning Herald article (August 2, 2021) – Why government reforms often do more harm than good – by Ross Gittens the economics editor.
On face value, we can certainly resonate with that title.
But, in the same article, he argued that the privatisation of Qantas was a successful example of the government’s program of asset sell-offs.
For context, you can read about the history of Qantas and its privatisation in this blog post – Qantas should be nationalised (again) (November 3, 2011).
That blog post, documents Bill Mitchell’s experience in the 1980s researching and writing out the case to retain Qantas in public ownership – there was never a convincing case made by the Federal government – their case was all about not having enough money to recapitalise the airline that required some new planes.
Anyway, back to the story.
I am not sure what Ross Gittens’ definition of success is.
If it includes lining the pockets of senior executives, radically reducing the level of service, undermining the employment conditions of thousands of workers and removing services from regional communities, then yes, the Qantas privatisation has been a huge success.
If not, then it has been a huge failure!
You don’t need to look too far to see the damage that has been done as a result of Qantas’ journey into the private sphere.
The blog cited above tells us that the damage was there from day 1 in the 1980s when the Labor Government (acting as modern labour governments do – that is, against the interests of workers) privatised the national airline and transferred massive public assets to the private sector for hardly any return.
Fast forward to 2021 and things aren’t looking much better.
The corporate greed of highly paid senior executives continues (albeit at a much-reduced level thanks to Covid), the neo-liberal mantra of cost-cutting in the name of efficiency reigns supreme and the very same executives that complain about government interference in big business, beg the government to regulate landing rights in order to give them an edge over foreign government owned airlines.
Moreover, in times of national emergencies such as the Covid-19 pandemic, Qantas has reduced services to communities, often cutting flights at short notice, and placing more stress on local regional communities already reeling from the negative economic and health outcomes.
Help for the struggling airline industry
The second mention related to airlines more generally and came when our Deputy Prime Minister, Barnaby Joyce, announced on August 2, 2021 that a domestic airlines would get a significant boost from the federal government as a consequence of the on-going lockdowns that have grounded planes.
The UK Guardian article (August 2, 2021) – Morrison government unveils another airline lifeline as Queensland’s Covid outbreak worsens – reported that:
The Morrison government has unveiled a $100m program to help domestic airlines retain their staff through lockdowns and border closures …
… domestic airlines would be able to access a $750-a-week payment for 50% of their workforce if they could show a 30% downturn in their business since Sydney was declared a Covid-19 hotspot.
Two key pieces of Barnaby Joyce’s statement were that:
… the government had chosen to top up existing support for the sector to avert significant layoffs … [and] … This is a crucial sector of the economy, and it is crucial to keep a sovereign airline capacity.
So, the government is providing extra payments to the airline industry because it is an important industry for the economy and they want to avoid layoffs.
This is a nice sentiment from the government.
Pity it isn’t more widespread.
What about other ‘crucial’ sectors of the economy such as tertiary education and research (aka the university sector).
Here the government has refused to step in and help despite the fact that some of the very same reasons the airline industry has faltered (lack of international visitors) has also impacted on the university sector (lack of international students).
But I digress, the lack of support for other industries is a story for another day.
The airlines in Australia have already received significant government support.
During the height of the first wave of the COVID-19 pandemic the federal government announced a number of support packages including its ‘Job Keeper’ wage subsidy program as well as airline specific payments.
The Sydney Morning Herald article (September 18, 2020) – Alan Joyce’s pay falls to $1.7 million as pandemic clips Qantas’ wings notes that Qantas:
… collected $267 million in payments through the Job Keeper scheme last financial year, with most of that going to employees who were stood down from work, and the company receiving a $15 million net benefit from the wage subsidy and other government support packages.
All the while the Qantas CEO pocketed a mere 1.7 million dollars in salary (poor bloke he took a ‘pay ‘cut’) and:
… could still collect another $1.3 million worth of Qantas shares after the company decided to award executives half of their long-term equity bonuses, despite it falling to a $1.9 billion annual loss, standing down 20,000 staff, announcing almost 8000 redundancies and collecting Job Keeper payments.
Our former national carrier is another typical neo-liberal case of the senior executives doing really well while thousands of workers get shafted.
Qantas lays off workers
The third mention for our ‘national carrier’ was when Qantas announced on August 3, 2021 that in response to the prolonged COVID-19 lock-down of Sydney (due to the bumbling of the NSW state government and the inability of the federal government to administer quarantine and the vaccination program) it would be standing down 2500 employees for at least 2 months (source).
Hang on.
Didn’t Barnaby Joyce just announce (as above) a support package so airlines wouldn’t have to stand down staff?
Apparently, he did.
Perhaps the airline’s senior executives missed that memo.
From the sparse details it is not clear if the 2500 stood down workers will be eligible for the government payment, but it does appear that many will be ineligible.
The ABC Report (August 3, 2021) – Qantas stands down 2,500 staff due to Sydney lockdown – pointed out that:
There is also uncertainty as to which workers will be eligible for government COVID support payments, with only air crew and cabin crew eligible for the latest aviation-specific payment, and only ground crew living or working in COVID hotspots, such as Greater Sydney, eligible for the government’s general COVID relief.
One thing is for sure, the senior executives will still be sitting pretty and rewarded for doing such a great job presiding over a significantly reduced venture.
Only one solution for privatisation craziness
These 3 media spots all lead us to a common conclusion.
The privatisation of Qantas all those years ago has, like other privatisation examples, been less than a success.
If we really want sovereign airline capacity, as our nation’s leaders have suggested, then the answer is straight forward.
The government should immediately re-nationalise Qantas.
No questions.
Just do it!
(Bill butts in: And sack Joyce and create a sensible pay structure)
A re-nationalised Qantas would support Barnaby Joyce’s call for a “sovereign airline”, one that worked for the benefit of the nation.
At the same time, it would provide improved service for the traveling public, increased routes and wouldn’t involve the government pumping money into the bank accounts of CEO’s and the like.
There would of course be the usual handwringing about the government bankrupting our grandchildren and how the government run airline will be oh so inefficient.
Wrong on both counts.
The federal government could easily buy out the equity in Qantas and return it to public hands.
Some legislation would be required and some logistical matters dealt with, but then it is a matter of typing numbers into a computer and voilà job done.
There would never be any question about bankrupting our grandchildren, in fact our grandchildren would be better off as they would be well served by a truly national airline.
On the efficiency front, this is just the old neo-liberal smokescreen used to justify the sell-off in the first place.
The truth is, there are plenty of government owned airlines that are constantly ranked above the flying Kangaroo in terms of performance.
In this blog post (also cited above) – Qantas should be nationalised (again) (November 3, 2011) – attention is drawn to the SkyTrax World Airline Awards.
We read:
For those that think that publicly-owned corporations are inherently inefficient then it is worth considering the 2011 SkyTrax World Airline Awards … Qantas ranked number 8 in 2011. Seven of the top 10 were either wholly or partly government-owned.
The most recent – SkyTrax World Airline Awards 2021 – deliver a similar result.
Even Qantas boss, Alan Joyce (no relation to Barnaby, our deputy PM) appears to recognise the efficiencies of government owned airlines.
When there was talk about the Australian government taking a major stake in Virgin Australia (our other major carrier) Joyce (March 20, 2020) was quoted as saying (Source):
It would be completely unfair to our sector. We’d be competing against the Australian government. Qantas couldn’t do that …
Mmmm. But I thought that the private sector was more efficient than the government?
Perhaps Alan Joyce actually knows the truth and is just playing along with the neo-liberal mantra so he gets to keep his well remunerated job?
Then there are those that argue (erroneously) that the government, facing inevitable fiscal constraints, would be (Source):
… reluctant to provide the extra capital needed to keep up with innovation and changing consumer needs.
Again, typical rubbish.
Any decisions like these would be based on political point scoring not fiscal pressures.
An airline owned by the federal government would be able to provide whatever upgrades and innovations needed to remain competitive in the global airline industry (hint: look at Singapore Airlines and Emirates for examples).
Conclusion
Two of Australia’s marsupial ‘icons’ the boxing kangaroo and the flying kangaroo made appearances in the media this past week or so.
For the boxing one, the news was associated with cheering and (false) nationalism surrounding the Olympics. The news about the flying one was a little more sobering.
The privatisation of Qantas back in the 1990s was a recipe for disaster and should be reversed.
A re-nationalised Qantas would ensure we actually had a ‘national airline’ not one that just pretends to be so.
It would bring life back to struggling communities and open up opportunities in tourism and other sectors.
A re-nationalised Qantas, together with other entities that were once government owned (banks, electricity generation etc), should be part of a blueprint to ensure that Australia develops into a just and sustainable society and economy that we all collectively need and deserve.
We could all then begin cheering for the flying one and the boxing one.
That is enough for today!
(c) Copyright 2021 William Mitchell. All Rights Reserved.
Qantas has been a crap airline for the last twenty years and probably much longer. In my experience most international frequent fliers avoid Qantas for decent airlines. It only takes one international flight on a reasonably good airline and you never go back to Qantas.
When it hits the fan, as it sometimes does, you need an airline that will help and that is certainly not Qantas. Qantas management regard the source of most of their corporate income with extreme distaste. If asked management would say Qantas would be a great airline if they didn’t have to deal with passengers.
A re-nationalised Qantas is never going to happen.
If Australia wants a government owned national carrier it would be better to create a new domestic /international airline from scratch to go head to head with Qantas. But realistically even if that happened the government would stack the board with clueless political appointments, mates, donors, and the usual dross found on the boards of most Australian companies. Sadly all you would end with would be a crap Qantas lite that nobody wants.
It’s the reality of today’s neo-liberal Australia. If you have to travel overseas save your money and book tickets with Singapore Air when the pandemic finally runs its course.
Domestically it’s six one half dozen the other cross your fingers and hope for the best.
@Ross
Why would a nationalised Qantas have to be burdened with the travelling cocktail circuits known as corporate boards?
The public service can quite happily run the public service under the direction of parliament.
Re-nationalising should be both easy and cheap, and we don’t even need to ask.
When the hand goes out, instead of handouts or bailouts, we give buyouts. Only way to deal with the financial sector too…
It is indeed high time for political pressure for regulation (not self-regulation) and nationalisation. Here in the UK, I guess much the same story could be written for BA, but in terms of prioritisation for nationalisation, it would have to come well behind the water companies that extract profit while discharging colossal amounts of shit into our rivers and seas. My area one is called Affinity Water, as it’s on the side of the people (not). It’s currently owned by a consortium of Allianz, HICL and DIF Tamblin. Prior owners were Morgan Stanley and M&G. Monopoly merry-go-round.
There’s an article in today’s FT titled “UK government to probe retail energy ‘greenwashing'”. WTF is energy ‘retail’? Retail businesses provide a range of goods to purchase. There is no range of ‘energy’ goods. This is the nonsense which capitalism promotes.
Re-nationalisation in Portugal is more of a re-re-nationalisation.
Indeed, our main airline company – TAP – was born private and nationalized in the fallout of the 1974 revolution.
Portugal was, back then, a country without capitalists.
All the oligarchs ran away scared of the revolution, and the state was forced to take their place in the economy.
So, many private monopolies were nationalized, including the major airline company.
But, the socialist revolution was overthrown and buried in the day Portugal joined the EU, and, in the aftermath of the GFC, the company was re-privatized, but in a quirky kind of way.
It was more of a given away.
Seems like the new owners didn’t pay much besides the wheels of the planes (looks like the new private owner of the logistics branch didn’t pay a single cent for the thing).
So then came the pandemic, the planes rested on the parking lot and everything got bankrupted.
The private owners solution to the bankrrupcy was to sack everyone, sell everything and get away with the money to the Bahamas.
By then, the government realized that the country needs the company, as it usually carries thousands of tourists that feed the only industry that thrives in the economy – tourism.
And then… another bailout came out of the public hat.
Whether the bailout money goes to the rescue of the company, or if it gets lost in some tax haven is something yet to be seen, because the shadow of the neoliberal EU keeps hauting the whole thing.
Above all, they hate anything beeing run by the government.
They rather have some oligarch ruin a company, than having it as a public service.
It’s a creed.
Or maybe, it’s greed.
For sure, we need re-nationalization. I would advocate in principle the re-nationalizing of;
(1) The Commonwealth Bank;
(2) Australia Post and ALL broadband and Mobile Tower services;
(3) QANTAS;
(4) CSL;
(5) Power generation and transmission;
(6) Roads, bridges, tunnels; and
(7) Railways.
Plus, we would need to set up a Ministry of Industry and Technology and greatly increase state funding of R&D. We would also need to consider state manufacturing in technology, medium industries and some heavy industries, including an extensive import replacement scheme, coupled with a full employment agenda via a job guarantee.
However, this would be a long and gradual program over many years. Each issue would need to be progressed by a case by case analysis process. The imperatives and most efficient ways to nationalize each of the above would be different. It would require a comprehensive strategic re-nationalization plan. And up front, neoliberal dogma and its holds on government, public institutions and the public would all have to be comprehensively dismantled.
@ikonoclast. Australia definitely need denationalisation of the industries you list. It will be very difficult to achieve as we are so far into the neoliberal rabbit hole and most younger people have no experience of pre neoliberal times.
Additionally we have such concentration of media ownership that such “socialism” would be relentlessly attacked if a social democratic federal government tried to renationalise.
Having said that, these are unusual times which have highlighted the economic and social vulnerabilities as never before but it will require the ejection of the rightist coalition and a willingness of the neoliberal-lite Labor party to propose and win electoral support for the rollback in a measured way.
Vote Green as it is their policy to renationalise the electricity utilities/companies, toll roads, ports, Qantas, railways and a few others. They also have comprehensive policies to improve the ethics and competence of politicians and government bureaucrats and to repair our corrupted democracy.
Monopolies and competition authority with some teeth or re-nationalisation ?
It is a no brainer because what are the chances of getting a monopoly and competition authority with some teeth ?
Due to the pandemic the budget deficit increased the household saving ratio as the non government sectors either decided to use these increased savings on paying off credit cards, loans and their debts. Whilst others were forced to save more as there were less opportunities to spend their earnings.
If you are a energy company and you want a piece of the action and want your fair share of those increased savings sitting in bank accounts then what are you going to do. Exactly What has just happened here in the UK. The typical gas and electricity customer is likely to see their bill go up by £139 to £1,277 a year. BT and other privatised public services have done the same.
You can do it as you have a big 3 or big 4 in every sector who get together on a regular basis and act like a monopoly. The infrastructure that these monopolies use is normally owned by one of them. So any new entrants to the market have to pay rent to one of them just to access the infrastructure. So real competition is diluted further.
Not only will these price increases eat away at the household saving ratio. The knock on effect will be small to medium size companies that don’t have monopoly power will probably have to increase some of their prices to cover the increased cost of broadband and energy etc….. Public services that used to be given at low cost via privatisation has made doing business more expensive.
The monopoly/ rent seekers are licking their lips as they stare at the savings held by households thinking how much of that can they take. How much will the government subsidise low pay workers so they can take even more.
Just think what those household savings could have been spent on instead when the economy returns to normal. How many goods and services could have been produced instead to create jobs. Instead of going to shareholders and top management of rent seeking ( pretend to be in competition) companies.
When we talk about the size of government budget deficits. We only have 2 choices – Monopolies and competition authority with some teeth or re-nationalisation. To stop monopoly rent seekers from taking household savings when they feel like it. That has a detrimental effect on the economy and everybody else.
Once the household savings are gone we know what happens. Households are pushed into the arms of the banks and pay day lenders just to make ends meet. Household debt instead of savings begin to rise which means even less is spent on goods and services until the debts can’t be serviced anymore.
Exporters to your country will also be looking at the pile of household savings wondering how much they can take. Foreign companies who own privatised public services in your country will also be licking their lips wondering how much they can take before locals stop buying their goods or using their service as it becomes too expensive.
Everybody is after a piece of the action and the Monopolies and competition authority are not fit for purpose and either poachers who have became gate keepers or run by the other big 3 – Wall street, the city of London or Frankfurt.
Rent seekers have to be run out of town and nationalised and taken back under government control. It is imperative that a Monopolies and competition authority with some teeth. That promotes jailing offenders and stripping them of licences to stop monopoly power from forming as companies grow is put in place.
Otherwise what is the point of creating net financial assets for households and small to medium size companies if they are just going to be taken from them. That does nothing for the economy and makes your country both an expensive place to live and an expensive place to do business.
So when an MMT government is carrying out its inflation analysis on its spending and working out if there are enough real resources available to absorb the spending or tax cuts. When they set the job guarentee wage.There are other things they must do first or all the benefits from such measures will be swallowed up whole by the parasites on your own shores and from abroad.
Just announced this morning that train companies are wanting a piece of the action at 4.8%.
If nationalised fares could be cut not increased leaving more savings in households. At this rate the household saving ratio increases are not going to be there for very long.
Wasted on shareholders.
Once you have a Job Guarantee, “but what about the jobs” no longer holds any power – since people can always get another job.
At which point you can have a competition authority with teeth, because at that point we can treat businesses as cattle, not pets.
One of the reasons for having a Job Guarantee is so you can turn competition up to 11.
Inflation is a lack of competition issue.
While there may be a scope for a better run publicly owned airline, I do sympathise more with Ross and take the Schumpeter creative-destruction view. Sometimes corporations and their culture become so rotten to the core that the amount of people you’d need to sack and restructuring to undertake defeats the purpose of buying it in the first place. If they’d been allowed to go bust, and the government acquired the assets and had more flexibility over making a new airline from scratch… maybe.
But at the moment I think we’d need to rebuild more institutional competence in the Federal Government before doing something like that successfully. Neoliberalism has so compromised the national public sector’s integrity that it might take some years of institutional capacity rebuilding before those sort of options can be effectively executed. I suspect state governments might not be as compromised given the coalition achieves power less frequently at that level, and the public is more sensitive to maintaining state services that require an effective public service.
I’ve suggested this before, here or elsewhere.
One way to break up monopolies is to have a gradulated profits or revenue tax.
That is, have at least 2 rates. The normal rate for corps. that are in competive marlets, and a 4 times higher rate for corps. that are in a monopoly or concentrated market (less than 6 comp. in it).
I say ‘revenue’ because it is much harder to hide revenue than to hide profit in today’s mulit-national corporate structures. Frankly, I don’t care if taxing revenue is unfair to huge corps. Small corps. that opperate in 1 nation can’t hide profits overseas, while the huge corps can. So, tax profits of small corps, but revenue of huge corps.
The intention is to make it impossible for huge corps. to opperate, so they break themselves up to avoid the tax.
Of course, all fixes of any kind that will do the job are impossible until the power of the huge corps. is broken by the people.
.
“One way to break up monopolies is to have a gradulated profits or revenue tax.”
I’ve never understood this obsession with tax as a mechanism to do anything. It’s an appallingly useless and inaccurate tool.
It seems to be an outshoot of the nudge concepts so beloved by marketeers – along with categorisation of people into artificial groups. Probably an artefact of the push of advertising, marketing and PR and other mind manipulation services into the forefront of society rather than just getting what needs to be done sorted and doing something less boring instead.
The way you deal with monopolies is that whenever there is a price rise anywhere you assume it is due to a lack of competition and you either introduce a subsidised competitor into that market area, or you force the incumbents to be broken up into smaller companies.
If you have the power to introduce a tax, you have the power to do the job properly and break up the collusion that is generating the price rises or stagnation that is indicative of a monopoly effect.
Either you believe in markets and will force the conditions necessary to make them work (lots of firms, all about the same sort of size), or you don’t in which case why bother with PR nudges?
Don’t nudge. Instead smash or ban.
@ Neil Wilso,
IMHO, taxing the monopolies at a rate that is 4 times larger will be an example of smashing them.
Taxing their revenues, instead of profits, will at least double the tax rate, and then doubling it again makes it 4 times the rate for small corps.
Obviosly, there must be laws to make the Corp. Boards not be all the same people.
If it doesn’t work, then we can go to court and break them up. Taxing them will save time IMHO.
Given there is a “media diversity in Australia” inquiry happening at the moment, I wonder if this creates an opportunity to further expose the absurdity of everything??
Talk about using the media to force a narrative.