OVER the past few weeks there have been many news items suggesting a growing trend of nationalism and protectionism. They seem to reflect the present state of world politics that is beginning to have an impact where it matters, in world and national economies.
The most spectacular example, of course, was the somewhat surprising vote of the people of Great Britain to leave the European Union at the end of June. Since then, there have been dozens of smaller hints, including two news stories just yesterday from opposite ends of the Earth, that globalism is on the ebb.
In Australia, Treasurer Scott Morrison confirmed that he would indeed block foreign bidders from buying 50.4 percent of Australia’s government-owned national electric grid, calling the proposed deal a threat to national security. And in the US, the Federal government announced it would end its 30-year experiment with private prisons, allowing the contracts on existing ones to expire over the next five years.
Both of these very different decisions are relatively minor at face value. Morrison’s decision was widely expected; in fact, he announced it a week ago, but gave the bidders—the State Grid Corp. of China and Cheung Kong Infrastructure Holdings Ltd. of Hong Kong—several days to present a revised bid. In the US Federal prison system, the decision to close the privately-run facilities only affects about 11 percent of the Federal system’s 194,000 inmates, most of whom are in wholly government-owned prisons.
Both decisions, however, are likely to have outsized implications. As part of its largely geopolitical objective to extend its influence to other parts of the world, China has aggressively invested in infrastructure in foreign countries—roads, railroads, dams, airports, seaports, and utility networks—mostly in developing economies. The State Grid Corp. of China, for instance, owns 40 percent of the National Grid Corp. of the Philippines. Although it is not a serious setback, it is a setback nonetheless. China’s being rejected by the Australian government, and for the very security risk reason that most critics of letting China (or any other country) have significant control over strategic national resources are vocal about, is likely to embolden China’s critics in other countries.
In the US, the decision of the Federal government to end privatization will transfer about 14,000 inmates back into government facilities. But the decision may lead to a collapse of the private prison industry in the US, which is very large at the state level; according to Justice Department statistics, about 131,000 inmates are held in privately-run facilities in the state systems. The Justice Department gave a scathing justification for its move: The private prisons do not provide better security or inmate care, and do not actually reduce costs to the government. As one expert interviewed by the Washington Post pointed out, states tend not to be first in making a bold move, but are great followers; under the circumstances spelled out by the Justice Department, states would almost look foolish not to end their own private prison contract arrangements.
In these two cases, governments made largely objective decisions that the neoliberal axiom that things are better the more borderless and privatized they are is not actually the best option. For a country like the Philippines, in which successive governments have swallowed hook, line, and sinker the assertion that private is always better than public—after all, the Aquino-era programs to privatize most infrastructure, much of the public health system, and the prisons are still live plans, despite the personality of the current occupant of Malacañang—the news should give us pause. When the country where the world’s aspirational economic model was actually invented begins to say “it’s not a good idea, after all,” our policymakers ought to take it seriously.