We are experiencing a privatisation of the economy and society by stealth. We usually associate privatisation with the sale of state assets to a private company. But there’s a larger privatisation process at work, slowly squeezing the ‘public’ from our social life. It is ongoing and the Government has signalled it will continue up to at least 2018 and in all likelihood beyond.
In a previous post I pointed out the ‘real’ cuts to public spending the Government intends to pursue up to 2018 – the second phase of austerity. This phase will entail public spending falling below inflation levels, which means the value will be cut. This won’t mean Ministers standing up in the Dail announcing cuts as they have been doing the last six years. But it will mean a squeeze up to 2018.
But this is against a backdrop of substantial reductions in government spending over the last six years. Indeed, so severe have been the cuts that spending levels on public services and investment are hurtling back some 20 years.
The chart above tracks expenditure on public services (government consumption) factoring out inflation. We find that in 2018 expenditure per every man, woman and child is estimated to be only slightly above spending levels in 2000 (the red line represents the Government projections). There is a continued downward trend that we should expect to continue until the end of the decade.
You might notice a slight blip upwards in 2014. But that doesn’t represent actual expenditure. According to the Government:
‘Government consumption growth in the first half of 2014 (at 5.3 per cent) was particularly strong. This is largely a statistical effect due to the effect of longer hours worked under the Haddington Road Agreement.’
This is a once-off statistical effect. But our fiscal hawks shouldn’t be too worried. Between 2014 and 2018, real spending on public services per capita will resume its fall - by 8 percent. Continued austerity is safe.
Turning to public investment the situation is even worse.
We’re pretty much back at 1995 levels. No wonder we are in an investment crisis (wonkish note: this is based on the EU’s 1995 methodology; the recently introduced 2010 methodology will show up different numbers, the pattern will remain the same).
What does this mean? Squeezing the public life out of the economy will force more people to seek out basic services on the private market. We have seen this in health; we should expect more effective privatisation in other services. This won’t mean actually sell-offs (though there might be some). It will mean so decimating public services that people are forced, or enticed through tax reliefs, into private markets which will drive up costs for low-average income groups. WBS over at Cedar Lounge Revolution has a provocative piece on the campaign by the private pension lobby, claiming that we can’t afford state pensions; though this relates to social protection expenditure, the attack is the same.
The same applies to public investment. We should expect more incentives to the private sector (that is, public subsidies to guarantee profits) to take up the work of infrastructural investment. Public-private partnerships, tax breaks, all manner of interventions will be used which will actually end up costing us more.
This is the road-map laid out for us. We will be told that we can’t afford to provide goods, services and investment for ourselves; we will need the private sector to step in or we will have to do without. All those positive growth projections in years ahead? That’s not going to be used to increase social prosperity or living standards – because the Government intends to hollow out the public realm.
There is a big sign on the Government’s door: if you want European-style services, income supports and investment, don’t bother knocking.