Changes and additions to the Law on Public Utilities implemented early this year are leading to increased prices and decreased quality of services. Additionally, both local and international examples show that what follows is layoffs of workers in this sector, as well as harder access for the poorest to important services such as water supply or heating.
Since January 1st public utilities have been pushed completely into open market through two laws. Near the end of last year Serbian Parliament urgently adopted the Law on Changes and Additions to the Law on Public Utilities. Simultaneously, the Law on Changes and Additions to the Law on Public-private Partnership was also adopted. These two will lead to more efficient usurpation of public resources and services by private interests.
These laws were adopted without much noise and public debate on consequences of liberalization in the sector of public utilities. Their speedy adoption was justified by the need to create better business climate, but pressures from Brussels and the IMF were also a factor. Despite the official claim that the new law on public utilities will ensure better service with lowered expenses, there are many reasons why this argument should be doubted. Mainly if we consider numerous examples from neighboring countries where similar laws led to catastrophic results in the sector.
Public utilities serve common interest. This sentence remains in the Law’s introduction, but common interest has been transformed into private through continual legal changes. Public infrastructure and public services were developed from common resources to provide for the whole society’s needs. Starting from 1980s every new law on public utilities kept opening space for influence of private interests while increasing marginalization of the most endangered parts of the society. While awaiting the end of the “transition” we have arrived to the point of pushing into market public goods and services. Common interest became just an empty phrase at the time when we were left to cruel laws of market.
What is the new Law on Public Utilities?
New Law on Public Utilities could, among others, place water supply, heating, garbage collection, maintenance of roads, cemeteries, public lighting, streets and parks into private hands. From the total number of fifteen different public utilities, nine are anticipated for concession in which private contractors would deliver services as concessioners of natural resources in public ownership, while the model of public-private ownership is anticipated for the remaining six.
However, it seems that the law can be creatively interpreted so that the field of public utilities can expand to additional services the law does not even mention, as officials see fit. For example, Belgrade’s City Assembly adopted a decision which places responsibilities of Belgrade Land Development Public Agency under the umbrella of public utilities. The Ministry of Construction, Transport and Infrastructure and the Ministry of Finance instruct that local government units can independently decide on which services they will define as public utilities. Such statements only add to the confusion and can lead to abuse of an already inferior law.
After the privatization of production plants has been almost completed, the new Law on Public Utilities opens the door widely to private capital to continue the process of its accumulation through public-private partnerships and concessions. Commodification and privatization of the public utilities sector, which should satisfy basic needs of all citizens, inevitably leads to increasing prices, marginalization of the poorest users, decrease in quality of services and layoffs of workers for profit to be maximized.
Public-private partnership and concessions in practice are almost always beneficial for only one of partners, the private one. Private partner usually takes over only the profitable part, like charging or some parts of distribution, and extracts profit from them, while much more expensive and unprofitable parts of the process remain in hands of the public partner. Incurred losses on one side are socialized, while the profit is privatized, resulting in individuals who are shamelessly getting richer while losses are paid for by the whole citizenry, region or the state, depending on the size and significance of partnership or concession.
Partnership regarding the charging system of public transportation between City of Belgrade and privately owned Bus Plus is an example of such practice. A private company extracts profit from public good while quality of the service is suffering and the price is increasing. Bus Plus ensured its profit when it took over the charging system, while due to the increase in transportation costs and increased number of ticket inspectors needed for charging the city’s public transportation company is at a loss, meaning all citizens as well.
Same logic can be discerned in the agreement made by the Electric Power Industry of Serbia last year for reading the electricity consumption which caused the price of this service to rise a record high (from 10 to 30 dinars per device it jumped to 39.99 dinars). As many complaints from citizens about the unjustified price hike of December bills testify, the service quality did not improve.
The new law leaves some services in public hands, still, as some of the articles state that local governments have an obligation to organize public transportation with trolleys and trams, for example. It is a well-known fact that in Serbia only Belgrade has trolleys and trams as its means of public transportation, where the charging system is already privatized. Once again, private profit is the priority.
According to one media report, the largest interest of private companies is for the water supply system since its charge margin is the highest, and water is absolutely necessary. Other states also had experiences with privatization of water supply, and we could learn much from these examples. Destructive privatizations are numerous, from Paris, where the price jumped 260% with massive layoffs and worsening of service, through Athens and Thessaloniki, to Manilla, all are examples of catastrophic privatizations. Some of the indebted peripheral states (Greece) or those conditioned by the EU accession process (Romania, Bulgaria) privatized the whole sector of private utilities.
Bulgarian and Romanian cases of privatization of public utilities are extremely negative. These two states privatized almost everything, from power industry, through garbage collection to water supply. Consequences are catastrophic, incurring price hikes of service which is vital for a normal life, thus rendering it almost inaccessible for a large majority. The price of public utilities is one of the main reasons for mass social unrest and protests in Bulgaria. Not a single case of successful privatization in the sector of public utilities can be found.
New layoffs, done in accordance to the creed “optimization of the work process”, can be expected along the privatization of public utilities. Optimization always results in the exploitation of workers who are lucky enough to keep their jobs. Terrible work conditions in the sector of public utilities will most likely become even more inhumane. In the future we can expect more of public transportation drivers having to work wearing gloves and winter hats, or frozen workers who maintain green surfaces for minimum wage. Warning strike of employees of the city’s cleaning services whose contracts are for temporary and infrequent jobs and done through employment agencies is just a reflection of labor rights in the sector of public utilities. Precariousness of jobs and the everincreasing number of laborers who are employed through agencies is a picture which we will see more often as liberalization and deregulation continues in this sector.
The alternative to privatization
As previous examples show, commodification and privatization in the sector of public utilities lead to increase in socio-ecological problems, but it is important to emphasize that the current state is not sustainable. Since the public utilities companies have become factories for party employment, together with long systemic implosion and lack of investment, all public utilities systems are threatened and in need of urgent reconstruction, not because they are a part of the public sector but because they have been economically abused for decades. Years of neglect have led to citizens’ dissatisfaction, so that regular protests for lower price of heating in Niš have spilled into other cities, which culminated in a series of protests from Majdanpek and Negotin to Zrenjanin.
Recommunalization as an idea of returning basic services necessary for functioning of society into public ownership is being mentioned more often, but also realized in different countries. Even in the US, center of capitalist power, cities are more often turning to recommunalization and are returning public utilities to public ownership. Director of a big urban system in the US famously retorted when asked whether he was considering the privatization of the water supply – would you sell your bloodstream?
It is necessary to think and act even beyond recommunalization of public utilities. Problem of party employment can be resolved through non-hierarchical, common, democratic control over public companies and public resources. In order to accomplish this public utilities need to be directly governed by communities whose needs these services address. Workers’ and direct users’ control could counterbalance the urge to profit and build trust in chosen representatives who would lead the process. If decision-making is brought to the basic level, problems would be recognized better, process could be improved, since no one can understand better what is needed than the local community itself.
Translation from Serbian: Nenad Porobić