A Corporate Aristocracy

Market values are in direct conflict with the ethics of public service

By George Monbiot. Published in the Guardian 21st March 2001

“All too often the education process is entrusted to people who appear to have no understanding of industry and the path of progress,” the European Roundtable of Industrialists complained in 1998. “The provision of education is a market opportunity and should be treated as such.”

Companies have not been slow to respond. Some have donated free exercise books to British schools. Interleaved with the blank pages are such salutory exhortations as “Stand up for your beliefs and values; Take responsibility for your own actions; [get] spot protection by simply washing daily [with] Clearasil”. Others have handed out teaching materials. A pack about “puberty and menstrual health”, kindly provided by Tampax, warns girls that sanitary pads are uncomfortable, unhygienic and environmentally damaging; Tampax tampons, by contrast, are good for you and good for the planet.

A school newspaper partly sponsored by Nestle asked pupils to “rearrange these anagrams into famous Nestle chocolates” and published a page of children’s poems and stories about Nestle products, such as “Nestle chocolate is the best/Eat it for a hairy chest”. A teaching pack from Coca-Cola instructs pupils that non-refillable bottles are more environmentally-friendly than returnable ones.

But the sponsorship of teaching materials is the least of the market opportunities education now provides. The government’s education action zones are clusters of schools run by committees on which businesses must be represented. Last year the government launched a network of “city academies”: urban secondary schools partly run by the private sector. Next month schools in Leeds will be outsourced to a “joint venture company”.

The market, the champions of privatisation argue, is keener and leaner than the public sector. With a vested interest in cost-effectiveness, companies are more efficient than the bureaucracies handling other people’s money. The opponents of commercialisation argue that market efficiency and social efficiency are very different matters. Company directors have a “fiduciary duty” towards their shareholders: they are legally obliged to put their interests first, even if these clash with the interests of society.

Some parents fear, for example, that companies running schools will seek to exclude failing pupils in order to improve their ratings, and hence their market value. The firms involved in education action zones are likely to be more interested in training a pliable corporate workforce than turning out well-rounded citizens.

This is not to say that public and private interests are always in conflict. Few would argue, for example, that telecoms worked better when they were controlled by the state. The government nationalised the railways in 1948 partly to avoid paying the compensation necessary for reinvestment after the war. They have been run down ever since. But re-privatisation in 1996 merely compounded the damage, as the operating companies were also relieved of the responsibility to invest.

The problem is that market values are now intruding into almost every aspect of public life, whether or not they are appropriate. When aristocrats enjoyed inordinate power in Britain, they insisted that they were the only ones who had the expertise needed to run the country. Today business people make the same claim, and governments seem prepared to believe them. There are two principal means by which the market is coming to run the country.

The first is the establishment of quasi-corporate systems in public services. Management structures and pay scales mimic those of the private sector. Public provision is tested according to “best value” criteria. If it’s found wanting, it’s sub-contracted to the private sector. New accounting procedures, such as “capitation” in the NHS and “producer choice” in the BBC, enable public services to become interchangeable with private ones.

Interestingly, many of the new accounting methods would never be tolerated in a real corporation, as staff who should be saving lives or making programmes are instead buried in paperwork. New auditing systems, such as “research assessment” in the universities, tend to measure the price of everything and the value of nothing.

But the most effective means of subjecting public services to the rigours of the market is to privatise them. In the past they were simply sold off. Now the process is both subtler and more pervasive. The “private finance initiative” was described by one of its architects as “the Heineken of privatisation – taking the private sector to the parts of the government machine not reached by previous privatisations”. Though most of us have yet to notice, corporations are gradually taking over almost every public service in Britain.

The government claims that by attracting private money it can start building more hospitals, schools, prisons, roads and underground stations than it could have funded by itself. Private companies, it adds, are likely to build and run these services more efficiently than the public sector.

The first problem is that the private sector will only invest in schemes which make money. It’s not interested, for example, in renovating hospitals, as the budgets are too small to be worth pursuing. It’s more interested in knocking them down, selling off the valuable city centre land they sat on, then rebuilding new facilities on greenfield sites, for which they can charge big rents.

So the NHS has redesigned its modernisation programme to attract private money. The £30m scheme to renovate Coventry’s two hospitals, for example, was transformed into a £174m plan to knock them both down and build a new one. Instead of paying £30m once, the NHS will now have to pay the private contractors £36m a year for the next 25 years. This money has to come from somewhere: to pay for the unnecessary new hospital, the NHS will have to cut the number of beds in Coventry by 25%, and the number of doctors and nurses by 20%.

Even when private companies offer the same services as the public sector was providing, it’s not clear that the savings they make could really be regarded as “efficiencies”. As Richard Tilt, director-general of the prison service, remarked in 1996, “the great majority of the cost reduction comes from the payment of much lower wages and poorer conditions of service for staff working in the private sector”. What this means is more prison riots, less rehabilitation and more crime when the inmates are released. The costs the service would have carried, in other words, are dumped instead onto society.

Corporations also use their growing control over public life to reshape society to suit themselves. In the United States, for example, private prison companies lobby state governments for tougher sentences, in order to increase the size of their market. In Britain too, the purpose of imprisonment appears to be shifting. As the former head of the private finance initiative taskforce remarked, “the prison sector is becoming a commodity product. It is almost on a production line.”

The aristocrats who once ran Britain failed to distinguish between their interests and those of the country as a whole. Today, our business leaders appear similarly confused. The market and the public sector can live together only when the interests of business are subordinated to the interests of society.