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The Real Oil Shock: How Oil Transformed Money, Debt, and Finance

By R.C. Smith - PhD Dissertation, September 1, 2022

Oil and finance have long played central roles in defining how the global economy has developed and this is especially true of the modern neoliberal economic system. One factor of their relationship that is often unexamined is how oil industry profits and liquid capital influence the developments of finance. Understanding their relationship during the modern period first requires understanding this petrocapital cycle, how it influences economic development, and the ways that its rise to prominence in the 1970s transformed the global capitalist financial system.

We are living in a world that has been shaped by the demands of oil and finance. Under the neoliberal capitalist order these two sectors enjoyed central roles in setting the pace of the global economy. Shocks in the price of oil, as recent events like the record-high oil prices experienced following Russia’s 2022 invasion of Ukraine have reminded us, tend not to stay confined to the fuel pump and radiate throughout our economic system. One particular avenue of influence that is often not seen but is widely felt is the reinvestment of oil profits in global financial markets. This question was first thoroughly examined in Mahmoud el-Gamal and Amy Myers Jaffe’s Oil, Dollars, Debt, and Crises: The Global Curse of Black Gold which traced the relationships that formed the endogenous petrocapital cycle, which is the reinvestment of the profits reaped by oil exporters in financial markets and how this changed global credit and financial markets. The Real Oil Shock builds on their earlier work by digging deeper into the birth of this process in the Oil Shocks of the 1970s. It will do this by examining how OPEC’s windfall capital fundamentally changed financial markets, practices, and the creation of money.

What The Real Oil Shock is examining is not a new phenomenon in economic history. The human experience abounds with instances where dramatic redistributions of wealth and resources created significant changes in the existing social and economic order. An excellent example comes from the Spanish colonization of the Americas. Exploitation of gold, silver, and other precious metals in the Americas provided the Spanish monarchy with an enormous windfall of liquid capital. This was spent by the Spanish monarchy on projects of the state, fighting wars, and expanding their influence in Europe. This put increasing quantities of Spanish doubloons in circulation outside of domestic markets. Spanish gold had become the capital for Dutch, English, and French merchants for financing their own commercial, industrial, and colonial enterprises whose activities were the foundation of early modern capitalism in Europe.

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What nationalising energy companies would cost; and how to do it

By Andrew Fisher - Open Democracy, August 17, 2022

When 62% of Conservative voters want energy run in the public sector, it’s fair to say the left has won the argument (75% of Labour voters agree, 68% of Lib Dems).

Yet public ownership is opposed passionately by the Conservative government, while the leader of the opposition has said he is “not in favour” of it – despite his election on a platform that committed to “bring rail, mail, water and energy into public ownership to end the great privatisation rip-off and save you money on your fares and bills”.

Public ownership is on the media’s radar, too. When Labour leader Keir Starmer announced his policy to freeze bills this week, he was asked why he wouldn’t also nationalise energy, replying that: “In a national emergency where people are struggling to pay their bills … the right choice is for every single penny to go to reducing those bills.”

But so long as energy remains privatised, every single penny won’t. Billions of pennies will keep going to shareholders instead.

The energy market was fractured under the mass privatisations of the Thatcher governments in the 1980s. It contains three sectors: producers or suppliers (those that produce energy), retailers (those that sell you energy), and distribution or transmission (the infrastructure that transports energy to your home).

It is important to bear this in mind when we’re talking about taking energy into public ownership. We need to be clear about what we want in public ownership and why.

Towards a Public Pathway Approach to Energy Transition

By various - Alternative Information Development Center, August 15, 2022

On Wednesday, July 27th, 2022, representatives of unions and social movements met in Johannesburg to discuss the country’s energy crisis. The representatives agreed to form a united front to resist privatisation of the power sector and to propose alternative ways to address both the immediate crisis and the longer-term challenges posed by the decarbonisation of South Africa’s energy system. What follows is a work-in-progress statement that captures the discussion and conclusions reached at the end of the meeting:

Statement of the United Front to Address Loadshedding:

We acknowledge the multiple economic and social problems associated with load-shedding (particularly for the working class and poor communities in both rural and urban areas). We agree with President Ramaphosa when he says government must take bold measures to address load-shedding as expeditiously and efficiently as possible. We agree that load-shedding is a national crisis that requires decisive action on the part of the government.

However, we believe that the proposals aimed at addressing load-shedding that have been put forward by government ministries, the private sector, consultancies and think tanks are unrealistic and are extremely unlikely to succeed. These proposals reflect the interests of the Independent Power Producer (IPPs) and their desire to secure subsidies as a means of securing guaranteed returns on investments and to grow their businesses at the expense of Eskom. Their needs also reflect the privatisation designs of the World Bank, the IMF, and the European Commission.

Equally important, the actions proposed by the government will impede South Africa’s transition to a low-carbon energy system and expose the country to a state of energy dependency. South Africa has no wind industry and its solar industry is negligible. There is currently no means to produce lithium-ion batteries. South Africa will surrender energy decision-making to multinational companies that produce these technologies.

We believe that it is foolish to entertain the idea that the private sector and market liberalisation can provide a workable alternative to load-shedding. The solution to load shedding and the achievement of a just energy transition in the coming decades depends on a well-resourced national public utility.

Mick Lynch on the Rail Strikes and Climate Crisis

Leaping Backwards: Why is Energy Poverty Rising in Africa?

By Sean Sweeney - New Labor Forum, July 18, 2022

How can the world end energy poverty in the Global South and simultaneously reduce greenhouse gas emissions to fight climate change? In 2021, 860 million people had no access to electricity. [1] Today, a third of all humanity lacks access to reliable power. Roughly 2.6 billion people heat their homes with polluting fuels and technologies, and using traditional stoves fueled by charcoal, coal, crop waste, dung, kerosene, and wood.[2] The majority of families in the Global South are today able to turn on an electric light—and therefore have “access to electricity” for at least some hours in the day—but for many that is as far as it goes. For other basic needs, dirty and perhaps life-threatening energy continues to be the norm.

The urgency of providing energy to the great numbers of people in the Global South who lack it runs headlong into the necessity to divert climate disaster by reducing worldwide carbon emissions. It is this challenge that sits at he center of current debates on “sustainable development.” For some years, the standard answer from the climate policy world has been the following: the Global South is well positioned to “leapfrog” the phase of centralized energy and jump feet first into the transition to modern renewables, in the same way as mobile phones have proliferated in the developing world without first having to install traditional land-line infrastructure.[3] Whereas large nuclear, coal, and gas-fired power stations and hydroelectric dams take years to build, by comparison wind, solar, and battery technologies are small, easy to install, and, the argument goes, increasingly affordable. Rural communities without electricity can set up stand-alone “micro-grids,” so there is no need for traditional transmission and distribution grids which are expensive and inefficient. The Global South—which refers broadly to Africa, Latin America and the Caribbean, the Pacific Islands, and the developing countries in Asia—is blessed with so much sun and wind, there is no reason why energy poverty cannot be consigned to history relatively quickly.[4]

That is the good news. The bad news is that it is not happening, and there are few signs that it will.

Leaping Backwards: Why is Energy Poverty Rising in Africa?

By Sean Sweeney - New Labor Forum, July 18, 2022

How can the world end energy poverty in the Global South and simultaneously reduce greenhouse gas emissions to fight climate change? In 2021, 860 million people had no access to electricity. [1] Today, a third of all humanity lacks access to reliable power. Roughly 2.6 billion people heat their homes with polluting fuels and technologies, and using traditional stoves fueled by charcoal, coal, crop waste, dung, kerosene, and wood.2 The majority of families in the Global South are today able to turn on an electric light—and therefore have “access to electricity” for at least some hours in the day—but for many that is as far as it goes. For other basic needs, dirty and perhaps life-threatening energy continues to be the norm.

The urgency of providing energy to the great numbers of people in the Global South who lack it runs headlong into the necessity to divert climate disaster by reducing worldwide carbon emissions. It is this challenge that sits at he center of current debates on “sustainable development.” For some years, the standard answer from the climate policy world has been the following: the Global South is well positioned to “leapfrog” the phase of centralized energy and jump feet first into the transition to modern renewables, in the same way as mobile phones have proliferated in the developing world without first having to install traditional land-line infrastructure.3 Whereas large nuclear, coaland gas-fired power stations and hydroelectric dams take years to build, by comparison wind, solar, and battery technologies are small, easy to install, and, the argument goes, increasingly affordable. Rural communities without electricity can set up stand-alone “micro- grids,” so there is no need for traditional transmission and distribution grids which are expensive and inefficient. The Global South—which refers broadly to Africa, Latin America and the Caribbean, the Pacific Islands, and the developing countries in Asia—is blessed with so much sun and wind, there is no reason why energy poverty cannot be consigned to history relatively quickly.4

That is the good news. The bad news is that it is not happening, and there are few signs that it will.

Australia’s Recent Power Market Crisis and the Struggle for Public Ownership

By staff - Trade Unions for Energy Democracy, July 8, 2022

This past June 15th, Australia’s Electricity Market Operator (AEMO) announced the suspension of wholesale electricity spot markets in all regions covered by the country’s National Electricity Market (NEM). The NEM typically provides 80% of Australia’s electricity, mainly in developed coastal areas around the eastern third of the country.

The market suspension came in response to soaring wholesale electricity prices and serious shortages in supply — a combination of factors that, according to AEMO, made it “impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers” in line with national regulatory requirements.

Key unions in Australia have recognized for years that the NEM does not serve the interests of unions, working people, or the public in general. According to Michael Wright, acting national secretary of the country’s Electrical Trades Union (ETU):

The ETU has been sounding the alarm about the NEM for years. This vindicates our long-held concerns that the market is broken and beyond repair.

The experiment in synthetic markets, trying to deliver essential public services through profit-motivated, tax-avoiding multinational energy corporations, has failed shockingly.

Similarly, Colin Long, Just Transitions Organizer for Australia’s Victorian Trades Hall Council (VTHC), points out that such markets only function when they ensure profits for private owners and investors. As Long states in a background document he has written on the current crisis:

The NEM [like other market-based systems] is designed to deliver electricity in a way that is profitable to generators, mostly privately-owned, not in a way that maximises public or social benefit to Australians.

As Long further explains:

Privatisation was supposed to lead to lower prices for consumers. In fact, the opposite has occurred. Reinstating public ownership would eliminate rentier behaviour by transmission and distribution companies and the need to concede to the profit demands of big overseas investors. It would enable us to plan the energy system transformation, with a clear schedule for closure of fossil fuel generators to give certainty to workers, their communities and electricity grid managers. It would enable us to schedule fossil fuel generation replacement by renewables in a way that guaranteed supply, efficiency and reduced cost – and ensures we meet decarbonisation targets. It would enable us to ensure that workers are guaranteed a just transition to new opportunities and new industries.

Readers who would like a copy of Long’s background document can contact him at clong@vthc.org.au.

Both ETU and VTHC are part of the TUED network, and have played key roles in advancing the project.

Firings, Evictions, Broken Promises: How Yellowstone Tour Guides Are Building Momentum for Change

By Ted Franklin - Capital and Main, July 1, 2022

Recently, former President Obama launched a Netflix series celebrating national parks and their breathtaking views. One of the parks he zoomed in on was the 2.2 million acre Yellowstone National Park, describing it as a park that is “fundamental to our national identity.”

But underneath the beauty of Yellowstone lies an ugly history of union-busting and intimidation by government contractors of National Park Service workers, the ones who labor to keep the park beautiful — a legacy that Obama failed to curb as president and one that Joe Biden has yet to address as the current occupant of the White House.

“I never had anyone spit or threaten to beat me up until I tried to unionize at Yellowstone,” says former Yellowstone tour guide Ty Wheeler.

In February of 2020, Wheeler and six of his co-workers were fired when they attempted to organize a group of 80 tour guides at Yellowstone National Park employed by the giant contractor Delaware North. Workers were paid only $12 an hour plus tips with infrequent scheduling, leading some into poverty while trying to get by in an area known for its generally high prices and expensive housing. In addition, Yellowstone had begun reporting cases of COVID, and workers were concerned about what they claim was the lack of training and personal protective equipment.

However, when the workers attempted to unionize, they claim they were not only fired but kicked out of company housing in West Yellowstone, Montana, during the middle of a frigid Yellowstone winter. The next month, the workers filed an unfair labor practice complaint with the National Labor Relations Board, which ruled in a settlement that all of the workers should be rehired and that organizing activities should not be prevented in the park.

But Delaware North broke the agreement and to this day has never rehired the workers, say the former employees, who are currently appealing to the NLRB about the failure to enforce the settlement.

Union organizers are citing their firings and forced eviction from company housing to help build momentum for Biden to take executive action and strip companies like Delaware North of federal contracts for violating the National Labor Relations Act, now that the PRO Act — which would penalize employers for violating workers’ rights, and force employers to disclose how much they spend on union busting — is stalled in the Senate. Similar rules, including the High Road policy, which would boost labor-friendly companies’ chances of winning federal contracts, and an order that federal contractors disclose two years of political donations, faltered during the Obama administration.

Union organizers are pushing Biden to call out Delaware North’s union-busting activity in the national park, just as he did recently with Kellogg’s and Amazon’s efforts to halt organizing efforts by their workers.

“Biden should get directly involved and do something about this,” says union organizer Wheeler. “These are our national parks, our national treasures, and these private contractors are treating them like company towns.”

Solidarity With Mexico's Fight For Energy Sovereignty

Amid Rolling Blackouts, Energy Workers Fight For Clean Public Power In South Africa

By Casey Williams - In These Times, March 31, 2022

Can South Africa transition from a reliance on coal to clean power while maintaining jobs? The energy workers fighting for a just transition think so.

The lights went out around Johannesburg on a Monday morning in November 2021, not to flicker back on until early that Friday in some areas. It marked the last rolling blackout of a year troubled by more outages than any in recent memory. The fate of Eskom, the beleaguered power utility behind the crisis, is now at the center of South Africa’s struggle for a just energy transition — a break from fossil fuels without leaving behind frontline communities or energy workers.

As a public company, Eskom has a constitutional mandate to guarantee electricity as a basic right. But the utility struggles to meet that mandate with its aging equipment, staggering debt, corruption and rules that require it to break even, which drive exorbitant rate hikes. Moreover, the electricity running through Eskom’s wires comes almost entirely from coal, smothering the country’s eastern coal belt in deadly pollution and adding planet-warming emissions to the atmosphere — and putting the utility at odds with South Africa’s decarbonization commitments and global calls for renewable energy. South Africa, the 26th-largest country by population, ranks 14th in carbon output worldwide and is responsible for 1% of global emissions, because of this reliance on coal.

Few believe Eskom will survive in its current state, and what comes next is the subject of a high-stakes debate — and is about more than the climate. The state-owned company employs 45,000 workers and supports 82,000 coal jobs in a country where more than a third of the population is out of work. Eskom is a union shop, as are South Africa’s biggest coal mines.

The government’s plan, already underway, is to invite private companies into the energy sector on the dubious grounds that clean energy is bound to win in a competitive market. The powerful miners and metalworkers unions oppose privatization, which they worry will hobble their organizations, if not eliminate the jobs they’re entrusted to protect. 

The unions have reason to worry. European multinationals have installed most of South Africa’s wind and solar capacity so far, importing technicians and hardware. The local jobs that come with them are often low-paid and temporary, vanishing once plants get up and running. Workers with permanent jobs, meanwhile, have struggled with for-profit energy companies over the right to strike.

While some union leaders and workers have responded to the threat of privatization by defending coal mines and the union jobs they offer, unions also say they support decarbonization efforts. There are currents within the labor movement organizing for a just transition to turn Eskom into a unionized, public and clean power utility, run by and for the South African people.

This tug-of-war holds lessons for workers everywhere: The South African labor movement has largely succeeded in making the public debate about ownership and power— about who owns energy resources and who decides how they’re used — rather than simply about renewables versus coal. Still, the temptation for labor to double down on coal jobs remains strong as the South African economy flags and unemployment spikes, emblematic of how hard it can be to fight for long-term goals if jobs are under threat.

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