The Carillion Plc logo sits on hoarding surrounding the Midland Metropolitan Hospital construction site, operated by Carillion, in Smethwick, U.K., on Thursday, Jan. 18, 2018. The Wolverhampton, central England-based company filed for liquidation on Monday after failing in last-ditch efforts to get support from lenders and the government. Photographer: James Beck/Bloomberg
The Carillion logo on hoarding surrounding the Midland Metropolitan Hospital construction site in Smethwick in the UK / Bloomberg

Carillion's collapse shows corporations are not always vested in the public good



In the 1980s, Margaret Thatcher, the UK’s then prime minister, along with US president Ronald Reagan, so discredited socialism, one of the main political philosophies of the 20th century, that it seemed almost unbelievable that a man calling himself a democratic socialist – Bernie Sanders – could come so close to becoming a presidential contender in 2016.

Along with socialism went suspicion of the state, because socialists were naturally “statists”. They liked nationalising industries. They thought that government was the solution, or at least key to co-ordinating the solution, perhaps alongside leading corporate figures and the trade unions.

So tainted did these ideas become that Mr Reagan’s statement that “government is not the solution to our problem: government is the problem” became the mantra for a whole generation of politicians and not just on the right. The triangulation practised by Bill Clinton and Tony Blair was premised on the acceptance that the free marketeers had won the battle of ideas; they would just tinker at the edges.

This is the context in which Britain's Theresa May could say, with a straight face, about the collapse of Carillion, a private firm which had a huge range of government contracts from massive construction projects to catering and cleaning at hospitals, schools and prisons: "We were a customer of Carillion, not the manager of Carillion".

About 41,000 jobs could be at risk. Up to 30,000 smaller companies are thought to be owed money; insolvencies are anticipated. Carillion leaves a $1.3 billion pension deficit. But according to Mrs May, after handing over contracts worth $2.8bn to the firm so that it could provide "good quality service at the best value to the taxpayer", the government could wash its hands of any responsibility – because heaven forbid the idea the government might actually do these jobs itself.

Not only is that a shameful passing of the buck; the Carillion disaster surely explodes the myth that the private sector is always to be preferred, will always be more efficient and that if only the dead hand of government is removed, animal spirits will be free to produce economic growth far more stellar than any stodgy old corporatists could manage.

Firstly, it ignores the fact that what all private companies do – unless regulated or helmed by executives with social consciences – is put profits and rewards for senior executives, not the customer, first. And if a private firm is making a profit on a contract, which can largely be assumed, that means that (in theory at least) the government could provide the same service at lower cost to the taxpayer.

Free marketeers will scoff that statist governments can never be efficient, nor can they ever be good stewards of the economy. They should try looking at the growth China continues to enjoy or the past success of Singapore, whose rapid rise in just a few decades was, according to the book Socialism That Works, edited by its third president, Devan Nair, an example of just that. (People tend to forget that the city-state's ruling People's Action Party was a member of the Socialist International until 1976.)

Moreover, government-owned or government-linked companies are some of the most prominent in thriving economies such as the UAE and Malaysia. So the idea that state involvement is automatically bad is a misconception that ought to be dispelled, a rigid ideology whose failings ought to have exposed it to ridicule after the global crisis of 2008, brought on by reckless behaviour by a seemingly unaccountable private sector.

But secondly, the automatic preference for the market to take over whatever government functions can be stripped from the state ignores or dismisses pretty much all motivation apart from money. In doing so, it downgrades some notions that we ought to treasure, such as service and duty.

I meet a lot of diplomats and whatever their rank and whether they are from South Korea, Singapore, Laos, the Philippines or the UK, one thing regularly strikes me about them: they are talented and energetic people who have chosen to serve their country. The free marketeer might look at them and say they have made an irrational choice. Most could probably earn higher salaries in business. Why don’t they?

The free marketeer can come up with no satisfactory answer, placing little or no value on concepts of duty, public service or altruism. Now, this is not to take an anti-business stance. Entrepreneurs are vital for growth in any society. But if they are primarily profit-driven, they are not necessarily the answer to every question.

The American author Andrew Ross Sorkin once put it this way: “Do we, as a country, want our most highly qualified employees from the private sector to pursue public service? The answer, I would imagine, should be yes.”

To which I would add: do we want vital public amenities and provisions to be performed by men and women whose motivation is to provide the greatest service to their fellow citizens – or to earn as much cash for themselves and their company? The answer, I would imagine, would be the former.

In that scenario the government is not on the people’s back – it is the true servant of the people and it is by, for and of the people. The tragedy of Carillion’s collapse is that the UK government, along with many others, had stopped believing the best of its people; only the private sector was to be trusted. In the aftermath, it is sincerely to be hoped that they realise that more government is not the problem: it is the answer.

Sholto Byrnes is a senior fellow at the Institute of Strategic and International Studies Malaysia

Spare

Profile

Company name: Spare

Started: March 2018

Co-founders: Dalal Alrayes and Saurabh Shah

Based: UAE

Sector: FinTech

Investment: Own savings. Going for first round of fund-raising in March 2019

The specs

Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 7-speed dual-clutch auto
Fuel consumption: 10.5L/100km
On sale: Now
Price: From Dh129,999 (VX Luxury); from Dh149,999 (VX Black Gold)

Indoor Cricket World Cup

Venue Insportz, Dubai, September 16-23

UAE squad Saqib Nazir (captain), Aaqib Malik, Fahad Al Hashmi, Isuru Umesh, Nadir Hussain, Sachin Talwar, Nashwan Nasir, Prashath Kumara, Ramveer Rai, Sameer Nayyak, Umar Shah, Vikrant Shetty

Race card

5pm: Handicap (PA) Dh80,000 (Turf) 1,600m; 5.30pm: Maiden (PA) Dh80,000 (T) 1,400m

6pm: Handicap (PA) Dh80,000 (T) 1,400m; 6.30pm: Handicap (PA) Dh80,000 (T) 1,200m

7pm: Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 2,200m

7.30pm: Handicap (TB) Dh100,000 (PA) 1,400m

match info

Southampton 2 (Ings 32' & pen 89') Tottenham Hotspur 5 (Son 45', 47', 64', & 73', Kane 82')

Man of the match Son Heung-min (Tottenham)

COMPANY PROFILE

Name: SmartCrowd
Started: 2018
Founder: Siddiq Farid and Musfique Ahmed
Based: Dubai
Sector: FinTech / PropTech
Initial investment: $650,000
Current number of staff: 35
Investment stage: Series A
Investors: Various institutional investors and notable angel investors (500 MENA, Shurooq, Mada, Seedstar, Tricap)

COMPANY PROFILE

Company name: Klipit

Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

Based: Dubai, UAE

Industry: Digital receipts, finance, blockchain

Funding: $4 million

Investors: Privately/self-funded

The biog

Name: Mohammed Imtiaz

From: Gujranwala, Pakistan

Arrived in the UAE: 1976

Favourite clothes to make: Suit

Cost of a hand-made suit: From Dh550

 

MATCH INFO

Liverpool v Manchester City, Sunday, 8.30pm UAE

Torbal Rayeh Wa Jayeh
Starring: Ali El Ghoureir, Khalil El Roumeithy, Mostafa Abo Seria
Stars: 3

Structural weaknesses facing Israel economy

1. Labour productivity is lower than the average of the developed economies, particularly in the non-tradable industries.
2. The low level of basic skills among workers and the high level of inequality between those with various skills.
3. Low employment rates, particularly among Arab women and Ultra-Othodox Jewish men.
4. A lack of basic knowledge required for integration into the labour force, due to the lack of core curriculum studies in schools for Ultra-Othodox Jews.
5. A need to upgrade and expand physical infrastructure, particularly mass transit infrastructure.
6. The poverty rate at more than double the OECD average.
7. Population growth of about 2 per cent per year, compared to 0.6 per cent OECD average posing challenge for fiscal policy and underpinning pressure on education, health care, welfare housing and physical infrastructure, which will increase in the coming years.

Afghanistan fixtures
  • v Australia, today
  • v Sri Lanka, Tuesday
  • v New Zealand, Saturday,
  • v South Africa, June 15
  • v England, June 18
  • v India, June 22
  • v Bangladesh, June 24
  • v Pakistan, June 29
  • v West Indies, July 4