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UK's Royal Mail Privatized and Sold to Investors


John Weeks: The privatization of the Royal Mail will enrich investors but leave workers worse off. -   October 3, 14
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Bio

John Weeks is a professor emeritus of the University of London's School of Oriental and African Studies and author of Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy. His recent policy work includes a supplemental unemployment program for the European Union and advising the central banks of Argentina and Zambia.

Transcript

UK's Royal Mail Privatized and Sold to InvestorsJESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore.

Britain's postal service, the Royal Mail, was recently privatized, as the government sold a majority stake to investors in an initial public offering. The Royal Mail and Communication Workers Union canceled a massive strike planned for Monday, with the exception of 4,000 Crown post workers.

Now joining us to discuss the issue is John Weeks. He is a professor emeritus of the University of London and author of the forthcoming book The Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy.

Thanks for joining us, John.

JOHN WEEKS, PROFESSOR EMERITUS, UNIV. OF LONDON: Well, thank you very much for inviting me. It's always a pleasure.

DESVARIEUX: So, John, let's just break down who are the winners and the likely losers of this privatization of the Royal Mail.

WEEKS: I think in order for an American audience--I think it should be obvious to everyone that I'm an American, But I've lived in Britain for a while. But I go back and forth. It took me a while to adjust to the role of the postal service.

Let me briefly explain to people the nature of it, so it--easier for you to understand who wins and loses, because it's not just a financial question. The postal service in Britain has, ever since the end of World War II, played a very major role social role. Small communities have post offices. We have a cottage in a village of 500 people. It has a post office. Another village next to us, a post office closed a few years ago because of budget cuts.

Now, to that post office elderly people can go and collect their pensions. They can actually collect it in cash, rather like collecting your Social Security in cash. They don't have to have bank accounts. If they want a bank account, they can have it through the Postal Service. They don't have to pay the fees that you would in a normal bank. And it has always been completely safe, because the government guaranteed money that was deposited in the postal service bank.

In addition, the post office would usually be in a shop, and the people that ran it would live in the community. And so they would know people coming in and out. So it played quite an important function. Several years ago, an elderly woman in a village here was ill, and the postmistress noticed that she hadn't been coming in for several days and called the emergency services. So that's not an unusual function for the post office to play.

Okay. So one of the big losers will be all the people who use the post office as a source of their, you might say, link to the wider community, because it will become more commercial. In fact, many of the local post offices will become de facto in private hands. That is, not only will they be a privatization process which has occurred in which shares are sold out, but the premises will be owned privately and the functions will be owned by a rather large company, which will then hire the postmaster, the postmistress to run the activity. So to a certain extent this privatization is an extension of what has occurred before.

So the first thing is that a very large number of people in Britain will have worse local services. And this applies to cities, too. There are--it's quite common where we lived in London. There is a post office within walking distance. And most people have a post office within walking distance. I think almost certainly with the privatization there will be fewer post offices. This will be downsized. And it's also a place, I should add--not our local post office, but in London, where you can use a computer--if you don't own the computer, you can go along and use the computer in the post office. Or you can have your photograph taken to get a passport. A whole range of things. There will be fewer of them. It will mean that either you'll have to have an automobile or you will have to travel by public transport, rather long distances, in order to access these same services.

I would say there the primary [incompr.] purely financially. Part of the shares, of course, are sold--well, are granted to the postal workers. But the controlling share has been sold off to private companies. Five percent of it is owned by a hedge fund. Then that 5 percent, usually, with a corporation, is enough to have control of it, particularly if the government is not particularly zealous about using its part, which I'm sure this government will not be. So then the big corporations that buy it out, I suspect what they will do is they will begin to run down the services in order to make less competitive with the same functions privately. As in the United States, there are many private providers (if I can use that, you know, neoliberal term) of postal services, delivery services, all of these things--American Express being--not American--Federal Express being the most obvious one. And so they will be [incompr.]

Then, in addition, there are the short-term gains. This is, you might say, the dirtiest part of the whole deal. When you privatize something well, when those who are prone to privatization--governments are prone to privatization, privatize [incompr.] they have to decide how much they're going to sell the shares for. The post--then you have to value what you're selling. And private consultants are hired, and the government on the basis of their advice valued the Postal Service at £10 billion. The shares went for about 40 percent more than that. So people were able to buy the shares at, say, a pound, and then the same day they were able to sell them at 40 percent more. Okay. This is a real scandal. Did the government do it on purpose, so that the big brokerage houses would make a killing? Well, I don't even think they have to do it on purpose. It comes so natural to them, 'cause this has been characteristic of previous privatizations under conservative governments, under Margaret Thatcher's government of valuing a public asset well below its market's price. And then the people who buy up the shares, most of whom are the wealthy, are able to resell them almost at once and make a large profit.

DESVARIEUX: Okay. John Weeks, thank you so much for joining us.

WEEKS: Well, thank you very much for having me. And I hope that next time I see you I'll be able to say that there's a strong movement against this privatization. I'm not terribly optimistic, but I hope so, because there is some opposition. It's not very strong now.

DESVARIEUX: Well, we'll certainly be tracking the story as well, John.

And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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