Consolidating Neoliberalism through Privatisation: The Case of the EU after the Eurozone Crisis/Neoliberalizmin Ozellestirme Yoluyla Pekistirilmesi: Avro Alani Krizi sonrasinda AB.

• Author: Duman, Ozgun Sarimehmet
• Position: Case study

Introduction

The 2008-2009 global economic crisis posed a severe challenge to the world economy. As a quick response to the devastating effects of the crisis in the Eurozone, the European Union (EU) increased its emphasis on international competitiveness to tighten its economic integration and become a stronger economy in the world market. It introduced new mechanisms to promote competitiveness, market efficiency and private enterprise in public goods and services. In striking contrast to the pre-crisis practice, the EU put greater emphasis on privatisation in debt repayment, revenue collection and economic restructuring.

This article scrutinises how the EU put privatisation policies at the top of the agenda in the post-crisis era. It presents an analysis of the origins of privatisation with reference to methodological individualism, commodification and free market capitalism. It discusses the increasing importance of privatisation policies within the paradigm change in economic policy from Keynesianism to monetarism in the late 1970s. Within this framework, it analyses the increasing importance of liberalisation and marketisation based on data on the increasing privatisation activity in the 1980s and the 1990s.

The article elaborates on the impact of the Eurozone crisis in the promotion of liberalisation and privatisation policies in improving the economic indicators in the member states. It offers a comparative analysis of the neoliberal market values in the pre- and post-crisis periods in the EU with a precise focus on privatisation. It argues that, following the emergence of the economic crisis in the Eurozone, the EU started to explicitly promote liberalisation, marketisation, deregulation and privatisation policies by a)introducing new policy mechanisms for its own restructuring, and b)setting conditionalities in economic recovery programmes and international bailout packages. It concludes that the Eurozone crisis served to consolidate the neoliberal market values in Europe.

Origins of Privatisation

The intellectual roots of privatisation go back to the very initial stages of the capitalist mode of production--when "product becomes a commodity". (1) By definition, privatisation is a very broad concept describing the transfer of various economic activities from the public to the private sector. (2) It denotes the "displacement of the public sector by the private sector along four modes: ownership, financing, management, and service/product delivery". (3) Withdrawal of the state from the economic arena opens the market to wider opportunities of capital accumulation in the private sector. It implies direct transfer of capital resources from the public to the private sector, and hence, connotes more than just to the change of ownership from the state to the market. Contrarily, it signifies a transfer of certain responsibilities, ownership, assets, services and rights. Privatisation alters the society's relationship to commodities, services and rights in that it introduces "a social intensification of capitalism and a shift in state-society relationships". (4)

Privatisation is highly related to the concept of commodification, which, in turn, requires an analysis of use-value and exchange-value. Marx presents a detailed inquiry into how use-value transforms into exchange-value in the capitalist market economy, converting a product into a commodity: whereas use-values are "realized in use or in consumption", exchange-value is characterised by commodities' abstraction from their use-values. (5) Put plainly, a commodity is distinct from a non-commodified good or service such as a pure public good or public service: a non-commodified good or service has no exchange-value but only use-value. (6) Hence, as Mandel summarised in his contribution to the introduction to Capital, "the contradiction between use-value and exchange-value [is] inherent in every commodity". (7)

The transformation of a product into a commodity, i.e. commodification, is "a process integral to capitalist expansion and central to the marketisation of all aspects of life". (8) It describes a process in which "use values are subjugated to exchange values" and brings along strict obedience to market dependency. (9) Privatisation, in this sense, is peculiar to the capitalist mode of production with strong emphasis on market competition, efficiency, productivity and private sector enterprise. Proponents of privatisation suggest that private sector enterprises bring greater competitiveness and efficiency to the economy by undertaking innovations, offering diversity of products and decreasing costs. (10)

On the other hand, there is also important research relating privatisation with transfer of capital from the public to private sector--a number of scholars claim that the existing evidence "does not allow us to conclude that privatization per se has been the key in boosting the financial and operating performance of firms". (11) Critical research on the transfer of public goods and services to the private sector enterprise states that privatisation does not necessarily lead to better operating performances. (12) Strikingly, liberalisation and privatisation policies lead to a fundamental transformation in employment and working conditions so that higher levels of competitiveness are based on the reduction of wage costs rather than the improvement of quality and innovation. (13)

Intellectual deliberation on methodological individualism and free market capitalism also are revived with arguments promoting privatisation in the market. The three processes of privatisation, liberalisation and marketisation are often evaluated together, despite carrying certain analytical distinctions. These mutually reinforcing processes transform non-capitalist spaces into capitalist ones, which is also defined as accumulation by dispossession. (14) It describes the absorption of public goods and services by capitalism, creating profitable opportunities for the private sector. (15) In this respect, privatisation is also tightly related with the processes of liberalisation and marketisation.

Accumulation by dispossession became central to neoliberalism, (16) and the three processes of privatisation, liberalisation and marketisation became explicitly interconnected. Economic breakdown in the early 1970s triggered a "paradigmatic change" in economic policy from Keynesianism to monetarism, replacing protectionist state-interventionism with competition-based market capitalism in favour of "less government and more market freedom". (17) The origins of privatisation trend lied in this "paradigm change" in economics as the start of neoliberal thinking. (18) The "ideological shift [towards] efficiency and market-led economic policies" (19) by "faster growth, higher efficiency and wider competition" (20) prioritised active privatisation policies. It altered the balance between the public sector and the private sector by commodification processes to achieve four main purposes: managing public enterprises more efficiently, making markets more competitive, offering new opportunities to invest, and assisting the growth of enterprises. (21)

Privatisation played a significant role in the process of commodification in an intensified and extended capitalism. (22) It changed the outlook of the economy and industrial relations by introducing new disciplinary mechanisms--it altered the attainability of commodities. (23) Privatisation reversed the common property rights won through years of class struggle, and hence, represented a new wave of "enclosing the commons". (24) Dozens of governments across the globe implemented comprehensive privatisation programmes in the last two decades preceding the recent economic crisis. (25)

The emergence of the US-originated 2008/2009 global economic crisis (26) in the Eurozone operationalised the opening up of "new fields for capital accumulation" in the EU. (27) Commodification played a central role in capital accumulation by "creat[ing] the conditions for goods and services to be captured by the logic of the market". (28) Under the unique circumstances of the Eurozone crisis, which highlighted the promotion of capitalist expansion for overcoming the economic bottleneck, there existed an increased focus on competitiveness and market efficiency in the EU. (29) Economic recovery policies prioritised privatisation for commodification purposes, i.e. conversion of public goods and services to products with exchange-values, to minimise the burden on the public sector by debt reduction and revenue collection. This also served to consolidate neoliberal market values in the economy. (30)

Based on this, an empirical analysis of how the EU responded the Eurozone crisis in terms of its privatisation policies provides some hints about the role of privatisation in economic recovery and its impact on the consolidation of neoliberal values in Europe. The next section will provide a comparison of privatisation policies before and after the economic crisis in the EU with some empirical evidence from its member states.

Privatisation in the EU

The process of agenda setting for competitiveness and liberalisation is two-way in the EU: (31) top-down and bottom-up. Similarly, the EU's acts and the member states' commitment to privatisation policies have been mutually reinforcing. The EU's initiatives have shaped the free market policies whereas the leading privatisers in the EU such as the UK, France, Italy and Germany have been influential in the design of economic competitiveness in Europe. Admitting the difficulty in drawing a line between the EU and national competences on the preference to introduce privatisation policies, this paper supports the argument that being a member state is "associated with a positive and statistically significant effect" in pro-market liberalisation and privatisation policies. (32)

Privatisation has been an important policy instrument...