The basis of
economics is not entirely on the study of economic trends, or on the efficient
use of scarce resources to satisfy unlimited wants, it is also based on using
this information to best meet the needs of society. If indeed this is true, the prospect of the
privatization of our most important industries is counter-productive to the
needs of society. It is like giving our most
important social services and programs to the hands the private sector, which
cares more about profits and shareholders (who provide their investment
capital) than they do about the people.
There are several instances both in Canada and around in the world when
privatization of essential industries has been attempted, and has failed
miserably to deliver the same productivity, reliability or high standards that
the government usually provided. The
quality of the service doesn’t rise, only the prices do. With the rising prices also come higher costs
to businesses as well as inferior services for workers, all signs leading to a
struggling economy in the future. Due
to the growing trend of privatization in Canada, it is evident our government
cares more about attracting investment/business to Canada, rather than on the
needs of society.
The
most important issue of privatization in Canada is the one that deals with
health care and the issue of whether we should “clip the U.S. recipe” and
switch to a private health care system.
With an article from the Toronto Star (“We won’t clip U.S. recipe”) as
well as an article from CUPE’s 2002 Annual Report on Privatization, the topic
of health care is indeed a controversial one.
Due to a rising demand for new technology, medicine and better service,
the Canadian government has to come up with a solution that doesn’t involve the
privatization of our health system into a two-tier health care system similar
to the one in U.S. In private hospitals
in the States and here in Canada, the level of service has decreased
drastically despite all the extra costs consumers are forced to pay. Where does all that money go? Certainly not to reinvestment in the
hospitals, as seen by 20-30% shortages in hospital beds, supplies and support
staff from when it was publicly handled.
It goes to the private companies charged with providing citizens health
care that is supposedly more “efficient”.
In a two-tier health system, the public funded hospitals experience even
more drastic shortages, not being able to service the needs of the
population. In addition to providing
poorer health care with additional costs, the private hospitals are often prone
to fraud as companies scam money out of the system. These crimes only serve to drive costs up
even higher. When you suddenly have to
pay for health care, you’d now think twice before going to the doctor. With a price being put on people’s health,
people will start to deteriorate because they can’t afford to go to the
doctor. That means an unhealthy labour
force and less productivity on the job due to inferior health. Companies suffer as a result of less supply,
less investment and less profits. The
economy of Canada is also affected, as foreign investors will be discouraged to
move to Canada when health care is no longer publicly provided. Less foreign investment means less economic
growth. While private health care
systems are often the most expensive, they are also the most inefficient and
unpopular.
In
the article “Rising power bills give consumers nasty shock” from the Globe
& Mail, it shows an example of the negative effects of privatization that
happened recently across Ontario when the provincial government split the
energy service between public and private.
With the energy being pumped out by the private sector, many people have
had to pay a large increase in their hydro/electric bills over the summer,
averaging 30-40% from when it was handled by the government. Before the Conservatives opened the market to
private competition, electricity costs 4.3 cents a kWh. The average since May has been at 5.6 cents a
kWh. There were even points during the
summer in which prices skyrocketed to $1 a kwh, more than 20 times that of
normal pre-competition price! On top of
the inflated price of electricity, consumers are also paying additional amounts
for the transmission/distribution of power, as well as a special levy to pay
off the debts of the old Ontario Hydro.
With the rise in prices, the service has not improved. In fact, electricity is even scarcer in the
private sector due to a record low rainfall, needed for hydroelectric
energy. The negative implications in the
economy are seen as businesses, the largest market users of electricity are
also being forced to pay more for their energy.
That means more production costs for businesses and less output. With less supply, the price of consumer goods
would skyrocket. Businesses would take a
cut in profits, leading to less investment and even a loss of jobs. All of this is damaging to an already fragile
economy. Ever since the privatization of
energy in the market, we’ve had to pay more money for the same service, all of
the profits going to the companies and their shareholders.
In CUPE’s annual report, the privatization of the
water supply in the U.K. was discussed.
Despite promises of lower costs and more efficiency, the privatization
has only lead from higher costs as well as lower water quality. As of right now, the U.K. is in a drastic
situation regarding the cleanliness of its water supply and over-flooding. These were never issues when the government
was still in charge of the water.
However, once the government handed it over to the private sector, only
the companies and their stockholders have seen any good come out of it, in the
form of profits and dividends. With the
major increases in water bills, you would think that this revenue was used to
reinvest in cleaning up the water supply.
Instead, the quality of the water has worsened substantially as
underground pipes continue to leak and sewage treatment plants in need of
serious maintenance. However, all the
funds go to the pockets of the companies while citizens are forced to live with
unsanitary water conditions. The money
isn’t even used to clean up the water supply, or provide better quality water
at cheaper prices for the consumer! Add
that to the fact that a rising water table in the U.K. has lead to floods and
the water issue is seriously becoming a national problem. The negative effects on the economy are even
more startling. As people are forced to
pay more for their own water, that means they have less money for
spending. Less consumer spending leads
to less economic growth. Also,
unsanitary water conditions would eventually lead to degradation in health. God forbid this could lead to an incident
like Walkerton, also caused by the irresponsibility of private companies. As I mentioned above, poorer health of
employees leads to less productivity and less profits for businesses. When the water is contaminated, residents,
tourism and businesses are driven away from the area. The people would have trouble selling the
property when the water there is unsanitary.
The economy of that area, like the one in Walkerton, will falter, as the
population of that area would drastically decrease. There would be no businesses or consumers
there. Money will have to be spent to
clean up the water (through gov’t loans) while the losses due to death and
illness can never be replaced. All the
while, the private companies and its stockholders are cleaning up from the
suffering, poor water quality and degradation of health as a result of
privatization of water supply.
Privatization
is like a plague in our society that often results in more costs and less
service for the
consumer,
no matter what industry is being affected.
Privatization, whether with hydro, health care, or
water
supply, has done more for the profits of faceless corporations than to the
people it has served. In
incidences
around the world, people have suffered and economies have faltered due to the
“efficiency” of
privatization.
Perhaps the largest casualty of
privatization is due to public services and programs, which
are
meant to help the struggling population.
It has simply meant higher costs for an inferior service. It is
the
private companies who benefit while others businesses, citizens and the economy
as a whole that
suffers. The government must stop offloading its
responsibilities to a private market that cares more about
dividends than people.
Privatization is slowly but surely strangling the economy of labour, technology,
businesses
and even foreign investment.
ECONOMIC ESSAY
NEGATIVE EFFECTS OF PRIVATIZATION
BY JUSTIN LIM AND MIKE VISCONTI
TO MR. BIANCHI
OCTOBER 3, 2002
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