Explaining Iemma’s privatisation obsession

Why would a Labor government push ahead with a power privatisation plan opposed by 85 per cent of voters, rejected by a massive majority at its own party conference, and needing (but not getting) the votes of the Liberal/National Coalition to get it through parliament?

In March 2007 Labor was easily re-elected in New South Wales despite huge dissatisfaction. Premier Morris Iemma promised things would change and that under his leadership NSW was “heading in the right direction”.

Electricity unions were told that privatisation was not being considered, and poured assistance into the ALP. The Liberal leader, Peter Debnam, also assured voters he would not privatise the state’s largest asset, responsible for 37 per cent of NSW’s carbon emissions.

Yet six months later Iemma’s treasurer, Michael Costa, began moves to privatise the electricity generators and retailers.

Bald claims

Iemma and Costa claimed the state will face a power supply crisis without privatisation. Yet private ownership may not bring on new investment. Profit can be maximised by limiting supply, so the spot price shoots up during summer (aircon) and winter (heating) peak demand periods, according to academic Sharon Beder.

The Greens MP John Kaye denies there is a supply crisis, pointing out improved efficiency will make more capacity unnecessary. Unions NSW argue that completing existing power stations would ensure supply. Fundamentally what is needed is a plan for a rapid move to clean and renewable energy, but we heard nothing of this from Iemma and Costa, a fervent climate crisis denier.

At the same time the state is suffering from decades of under-investment in infrastructure. With Treasury demanding no new borrowing to maintain the sacred AAA credit rating, the simple answer then is that the Cabinet saw privatisation as a way to buy itself out of this mess after 13 lazy self-serving years in office. While a power sell-off would deprive the state of $1.5 billion in annual returns, it would inject many billions (Costa claimed $10 to $15 billion) into Labor’s pre-election war chest.

This commitment to privatisation, public-private partnerships and budget surpluses gives the Liberals a real chance of winning the March 2011 election. This will be a disaster for workers in NSW. Opposition leader Barry O’Farrell is committed to privatisation and public sector cuts in general. But the public hasn’t bought the logic of flogging off power to temporarily fund other services.

Behind the scenes

Resistance inside Labor has been so determined that retired party heavyweights have come out to promote the idea. It has thrown a spotlight on how the “ALP elite” move through union and party staffing positions into or around the parliament and eventually into the top end of private corporations.

Some examples of the privatisation pushers:

  • Paul Keating, treasurer then prime minister 1991 to 1996, is now the international chairman of consulting group Lazard Carnegie Wylie, a company chosen to co-advise the NSW government on electricity privatisation. His business partner, John Wylie, is reported to have collected $20 million in fees for advising the Kennett government on Victorian energy privatisation in the 1990s.
  • Bob Carr, the former ALP premier now “works” for Macquarie Bank as a part-time consultant on $500,000 a year specialising in China and public-private partnerships. Chinese government-owned Shenhua Group is a frontrunner for buying up electricity assets.
  • Michael Easson, former secretary of Unions NSW, has made a lucrative career in property investments along with his former-senator wife Mary and their Macquarie Bank friends.

Their trajectory is a reflection of how dominant neo-liberal ideas have become within the leadership of the party.

Left without a program

Following the end of the long post-war boom and the defeat of the Whitlam government’s reform agenda, recession created high inflation and higher unemployment than had been seen for decades. In response the defeated Labor Party accepted the conservative idea that the Whitlam government had gone too far, too fast and in the 1980s surrendered to the new worldwide consensus that neo-liberal policies were the solution. Neo-liberals around Howard captured the Liberal Party and free market ideas became dominant in the senior public service, especially in Treasury in Canberra.[1]

The Hawke-Keating period (1983-1996) saw Labor privatise state owned businesses, notably Qantas and the Commonwealth Bank. At the same time the Accord between Labor in power and the Australian Council of Trade Unions (with the crucial support of the Communist Party[2]) demoralised rank and file resistance among workers[3]. As the level of open class struggle rapidly declined and the Labor leadership pushed for free market solutions, the Labor left abandoned its platform in the party.

The lack of coherent policy alternatives from Labor‘s left faction has made it easier for the neo-liberals to take over the party. Much of the Labor left as well as Communist Party members in the unions accepted the need for “economic restructuring” and supported the Accord. The collapse of the Soviet Union in 1991 helped undermine the Labor left’s belief that any alternative to free market policies was possible.

Now “left” ministers in NSW, adapting to the Right and the Liberals and putting career prospects ahead of the demands of their constituents, have defied their faction by inventing a new “principle” of Cabinet solidarity, justifying their silence on power privatisation and Iemma’s defiance of the ALP conference’s decision.

Ideological fanaticism

Michael Costa has epitomised the embrace of neo-liberalism amongst the Labor leadership. Once a revolutionary socialist, much later the secretary of Unions NSW, he apparently has a photo of Friedrich von Hayek on his wall in Governor Macquarie Tower, overlooking Sydney.

Hayek, along with Milton Friedman, was the intellectual inspiration for the revival of classical economics in the 1970s. He believed in a minimal role for the state and that the free market was the ideal way to increase freedom in society. He and his followers played crucial roles in Margaret Thatcher’s Conservative government in Britain (1979-1990) and in Ronald Reagan’s Republican presidency in the US (1981-1989).

So in Costa we have a very strong convert to fiscal conservatism and privatisation. Before his sacking, he was pushing for Sydney Ferries and rail maintenance to be privatised too. Add to this the lack of an alternative policy from the Left, connections with the corporate world via the “Labor elite”, plus the bucket of money the former premier had hoped to throw around before the next election and we have an explanation for their suicidal stubbornness.

By Bruce Knobloch


1. See Michael Pusey’s Economic Rationalism in Canberra (1991)

2. See Tom O’Lincoln’s Into the Mainstream (1985) www.marxists.org/subject/stalinism/into-mainstream/

3. See Rick Kuhn’s Militancy Uprooted (1986) www.anu.edu.au/polsci/rick/militancyuprooted.htm


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