Profit is squeez­ing ser­vices

CityPress - - Business - Terry Bell busi­ness@city­press.co.za

The still sim­mer­ing row about the fire­fight­ers’ strike in Canada has thrown into sharp re­lief a global re­al­ity: around the world, es­sen­tial ser­vices are un­der pres­sure as local, state and na­tional gov­ern­ments seek to cut costs.

Even in Canada and the US, where the In­ter­na­tional As­so­ci­a­tion of Fire Fight­ers is a well-es­tab­lished and mil­i­tant union, there is a con­stant bat­tle against creep­ing pri­vati­sa­tion – a fight against turn­ing a ser­vice that pri­ori­tises pub­lic good into one that serves profit.

In the UK, where city pop­u­la­tions have grown – along with, pre­sum­ably, the fire risk – the Fire Brigades Union re­ports hav­ing shed more than 7 000 jobs in re­cent years.

Even in Scan­di­navia, with its history of so­cial demo­cratic gov­er­nance, fire­fight­ing and re­lated emer­gency med­i­cal ser­vices are un­der pres­sure.

Ev­ery­where, pri­vate com­pa­nies – many with their bot­tom lines squeezed – are hov­er­ing, keen to pick up any lu­cra­tive pieces that may be on of­fer as var­i­ous lev­els of gov­ern­ment try to off­load their ser­vice de­liv­ery obli­ga­tions.

In so do­ing, the com­pa­nies are often ac­cused of be­hav­ing like vul­tures.

They are, but only be­cause this is what they are com­pelled to do.

It would, for ex­am­ple, be fool­hardy for any com­pany of­fered the op­por­tu­nity of new rev­enue streams to turn th­ese down.

And it would prob­a­bly be il­le­gal – and cer­tainly ac­tion­able – for com­pa­nies to de­prive their share­hold­ers of div­i­dends to pro­vide free or cut-price ser­vices to poor house­holds.

The same ap­plies should com­pa­nies re­tain those work­ers who are deemed to be an un­nec­es­sary cost.

This sums up the fun­da­men­tal con­flict of in­ter­ests within our so­ci­ety.

The eco­nomic frame­work in which we ex­ist is dom­i­nated by share­holder com­pa­nies and transna­tional cor­po­ra­tions.

The ex­ec­u­tives, man­agers and su­per­vi­sors merely po­lice the sys­tem to en­sure the flow of prof­its and div­i­dends, while gov­ern­ments ex­er­cise vary­ing de­grees of power to reg­u­late this.

Here history pro­vides us with some im­por­tant les­sons, one be­ing the land­mark 1919 case of Dodge v Ford in the Michi­gan Supreme Court.

The Dodge brothers, be­fore they started mak­ing their own cars, were 25% share­hold­ers in the Ford Mo­tor Com­pany.

When Henry Ford de­cided – as a good­will ges­ture in a vir­tual mo­nop­oly mar­ket – to re­duce the price of his cars, the brothers took him to court, ar­gu­ing that it was the fidu­ciary duty of the com­pany to max­imise re­wards to the share­hold­ers, not the con­sumers.

The Dodge brothers won. And, de­spite some lat­ter-day leg­isla­tive tin­ker­ing, that rul­ing re­mains, ba­si­cally, the le­gal duty of com­pa­nies.

The other les­son goes back to 1720 and the South Sea Bub­ble scam, which saw the fi­nance min­is­ter jailed and in­volved more than 500 MPs and mem­bers of the House of Lords. Bankers fa­cil­i­tated the cor­rup­tion. The re­sponse of the Bri­tish gov­ern­ment was to ban share­holder com­pa­nies for the next 105 years, on the grounds that they were in­her­ently prone to cor­rup­tion.

It may seem ironic, but this ban was sup­ported by Adam Smith, fa­ther of mod­ern lais­sez-faire cap­i­tal­ism.

Given this history, and the fact that the fire­fight­ers have high­lighted the ap­par­ently in­creased in­ter­na­tional drive to­wards the pri­vati­sa­tion of es­sen­tial ser­vices, we should all be very con­cerned.

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