Downward Stress on Cash-Market Charges Continues; Delta Variant Hits China Companies Sector

Good day. The Federal Reserve’s primary tool for controlling economic dynamism is ticking down again, increasing the possibility that officials may need to take technical measures to get it going again. Meanwhile, China’s service sector suffered an unexpectedly severe blow in August when a wave of coronavirus infections across the country triggered new lockdowns and sent an official measure of non-manufacturing activity to a contraction area.

Now for today’s news and analysis.

Top news

Covid-19 Delta variant beats up China’s service sector

China’s official non-manufacturing purchasing managers’ index, which tracks activity in construction and services, slumped to 47.5 in August from 53.3 in the previous month, according to data released Tuesday by the National Bureau of Statistics. The value of 47.5 – which fell far short of what economists had forecast for a value comfortably above 50 – marks the measure’s first break into contracting territory since February 2020, at the height of the initial coronavirus explosion that led to the lockdown Hubei Province.

Derby’s Take: Funds rate is softening, adding to the specter of technical rate boosts

By Michael S. Derby

The effective key interest rate has been slipping since around mid-August after it was raised by the Fed at the beginning of summer following a technical rate hike. The key interest rate, which had been around 0.10% for most of the summer, fell to 0.9% on August 18 and again to 0.8% on Monday. If the key rate stays soft or softens and this shift proves to be sustained, the Fed may have to react by revoking the settings of its interest rate control toolkit. Continue reading.

Important developments around the world

Oil industry investigates damage after Hurricane Ida slam in Louisiana

Energy companies assessed the condition of refineries, pipelines, petrochemicals and offshore oil rigs along the central Gulf of Mexico on Monday, the day after Ida hit Louisiana as a powerful Category 4 hurricane.

Unfinished tractors and pickup trucks pile up as components become scarce

Manufacturers stack unfinished goods on factory floors and park incomplete vehicles in airport parking lots while waiting for missing parts, made scarce by supply chain problems that disrupt multiple industries.

New life and work choices enliven exurbs and bring new strains with them

Extra-urban areas have grown nearly twice as fast as domestic over the past decade, and there are signs that growth is accelerating as Americans prepare for a landscape where increased work from home means the need to commute decreased.

EU recommends stopping non-essential travel from the USA

The European Union recommended stopping non-essential travel from the US due to the increase in Covid-19 cases, diplomats said on Monday, ending a summer vacation break for American tourists.

Summary of the Financial Regulation

SEC chair warns against payment for order flow

Robinhood Markets Inc.’s shares plunged Monday after the chief of the Securities and Exchange Commission signaled he was ready to ban payments on the order flow, which makes up most of the online brokerage’s revenue.

Members Exchange urges regulators to fix stock prices for half a penny

Investors could see shares of Apple Inc. and Bank of America Corp. for $ 152.005 or $ 42.115 per share if regulators sign a proposal presented this week. Members Exchange, a startup exchange backed by major Wall Street firms, said in a proposal that the Securities and Exchange Commission should allow some heavily traded stocks to be valued in half-cent increments.

So far, direct listings have paid off for investors

Eyewear maker Warby Parker Inc. is the latest to file with the SEC for direct listing, demonstrating the persistence of the alternative path to public markets for companies that don’t need to raise money.


Wednesday (all times ET)

9:30 p.m .: Bank of Japan’s Wakatabe speaks at a meeting with local leaders in Hiroshima


8:30 a.m .: US Department of Commerce releases international trade data for July


Goldman Sachs says evictions threaten

Around 750,000 American households are now threatened with eviction from rental apartments in the wake of the latest political changes that protect the financially needy, Goldman Sachs said in a message to customers. The investment bank estimates that between 2.5 million and 3.5 million households are behind on rents and owe landlords up to $ 17 billion, while state aid to tenants is slow. “The strength of the housing and rental market suggests that landlords will try to evict tenants who are behind on rent unless they receive government support,” the note said. According to analysts at Goldman Sachs, this should not have a very negative impact on the economy. They say in the note that “Our literature research shows that an eviction episode of this magnitude is a small burden on consumption and employment growth.”

– Michael S. Derby

Basis points

Asking rents for homes rose nearly 13% year-to-date through July, the highest annual increase in five years, according to real estate data company Yardi Matrix.

US pending home sales declined for the second straight month in July, according to the National Association of Realtors, whose index of pending home sales fell 1.8% from June to 110.7. Pending home sales declined 8.5% year over year in July. (DJN)

Manufacturing output in Texas slowed in August, with the Dallas Fed’s Manufacturing Outlook Survey manufacturing index falling to 20.8 from July 31. The general business activity index, which rates general terms and conditions in the industry, fell from 27.3 to 9. (Dow Jones Newswires)

Aluminum forwards on the London Metal Exchange are up a third this year and prices are around 80% above their low in May 2020 when the pandemic restricted sales to the aerospace and transportation industries.

German inflation in August was 3.9% year-on-year, compared to 3.8% in July. (Dow Jones Newswires)

Business and household confidence in the euro zone fell slightly in August after hitting an all-time high in July, the European Commission said, noting that the economic sentiment indicator fell from 119.0 in July to 117.5. Economists polled by the Wall Street Journal expected an index of 118.0. (DJN)

Canada’s quarterly current account surplus rose to $ 3.58 billion or the equivalent of $ 2.84 billion in the second quarter as goods exports soared, Statistics Canada said. The data for the first quarter has been revised, Statistics Canada said, adding that the current account surplus for the first three months of the year was $ 1.82 billion, compared to an earlier estimate of $ 1.18 billion. (DJN)

(END) Dow Jones Newswires

Aug 31, 2021 9:35 AM ET (1:35 PM GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

How India’s COVID Disaster Is Devastating Leisure Sector – The Hollywood Reporter

The devastating second wave of the COVID-19 crisis in India has turned many sectors of the local economy upside down, including the country’s storied entertainment industry, which was still reeling from the effects of last year’s first wave of the pandemic.

India is currently the epicenter of the global COVID-19 pandemic, with the country accounting for over 3.7 million active cases while the total death toll has crossed 246,000. In the first week of May, a World Health Organization report stated that India accounted for 46 percent of new cases recorded worldwide and 25 percent of deaths.

As the second most populous nation on earth, with over 1.3 billion people, the ongoing crisis has overwhelmed the country’s medical infrastructure, leading to a humanitarian crisis.

In recent months a host of Indian celebrities have also tested positive, including Aamir Khan, Alia Bhatt, Ranbir Kapoor, Vicky Kaushal, Bhumi Pednekar and Deepika Padukone, who underwent treatment. Tragically, there have also been some fatalities among the esteemed elder corps of Bollywood, such as actor Bikramjeet Kanwarpal (whose credits include the spy drama Special Ops on Disney+ Hotstar), veteran composer Shravan Rathod and classical music icon Pandit Rajan Mishra.

While cinemas gradually began to open in October with limited seating and film shoots resumed, the devastation caused by the ongoing second wave since March has now brought everything to a halt. The wildly popular cricket event Indian Premier League, which has been a massive streaming success for Disney+ Hotstar, had to be suspended mid-season due to the pandemic. Brief attempts to keep India’s most beloved game going amid the carnage of the new wave was met with widespread criticism over the resources used to protect wealthy and healthy players, prompting organizers to agree to a full, ongoing shutdown.

“Everyone is making plans and contingencies based on an assessment of when things will open up, but there is no way of knowing that,” Producers Guild of India president Siddharth Roy Kapur tells The Hollywood Reporter. “It’s a bit like drawing up plans on the beach and then the waves come and wash them away before you know it.”

Kapur says nearly every major Indian film production is on hold following the implementation of lockdowns in April in the western state of Maharashtra, home to the country’s entertainment epicenter, Mumbai. While some shoots, mostly for television shows utilizing indoor sets, temporarily shifted base to other states such as Goa, the severity of the second wave has brought things to a standstill across regions. Many major cities also are imposing curfews and lockdowns, including the national capital Delhi, a popular shooting location but currently the pandemic’s worst-hit major population center.

Kapur, who was earlier head of the Walt Disney Co. in India, now runs his own banner, Roy Kapur Films, which has seen a number of its projects suspended. The disruption to the company’s films and series is “being mirrored all over the industry,” he says.

Similarly, Amazon Prime Video’s debut Indian feature co-production, Ram Setu, starring superstar Akshay Kumar, is currently on hold. In early April, Kumar tested positive and was briefly hospitalized but recovered soon after.

With shoots stalled, daily wage workers employed in various capacities in film and TV crews have been hit especially hard. Last year, the Producers Guild launched a relief fund for workers which also saw Netflix contributing $1 million. Kapur says the Guild is again reaching out to its members to raise funds. While the Guild has yet to release figures, it is estimated that over last year and this year, the relief fund has raised about $2 million.

Meanwhile, as the country embarks on a massive vaccination drive — over 170 million doses have been administered so far — some corporate entities in the industry are stepping in to assist the government’s lagging public health efforts. Leading production banner Yash Raj Films announced that it would pay for the vaccination of 30,000 members of the Federation of Western India Cine Employees. The company has sent a letter to Maharashtra chief minister Uddhav Thackeray to  allow it to purchase vaccines.

In addition, YRF’s Yash Chopra Foundation will initiate a direct benefit transfer of $68 (5,000 rupees) to women and senior citizens of the industry and distribute ration kits to workers for a family of four for an entire month through non-profit organization Youth Feed India.

The Walt Disney Company India and its Star network announced it would contribute $6.8 million for local Covid-19 relief efforts, building upon the $3.8 million it contributed last year.

When it comes to the financial impact of the pandemic, analysts estimate that 2021 could be even more dismal than 2020. According to an annual report by consultants Ernst and Young, total revenue for India’s media and entertainment industry — covering all sectors including film, digital, TV, music, print, animation and gaming, among others — fell by 24 percent in 2020 to $18.7 billion (1.38 trillion rupees) compared to $24.7 billion (1.82 trillion rupees) in 2019 — “in effect taking revenues back to 2017 levels.”

The television industry saw its total revenue falling moderately to $934 million (685 billion rupees) from $1 billion (787 billion rupees) in 2019. However, digital saw a boom with video subscriptions jumping to $57.8 million (42.2 billion rupees) from $38.4 million (28.2 billion rupees) and EY predicts this figure could reach $76.3 million (56 billion rupees) in 2021.

But the film business was the worst hit with 2020 revenue crashing by more than half to $1 billion (76 billion rupees), compared to $2.6 billion (191 billion rupees) in 2019.

“The current crisis, from a cash flow and bottom line point of view, is worse than last year for the industry,” Reliance Entertainment CEO Shibashish Sarkar tells THR. “A substantial amount of cash which got invested in new projects is stalled. In terms of working capital locked and lack of monetization, the situation is worse than last year.”

With cinemas shut for six months in 2020 starting with a two-month long national lockdown imposed last March, a slew of releases skipped theatrical release and went straight to digital as producers scrambled to supplement revenue. As restrictions for public spaces were gradually eased and cinemas began reopening from October, the box office seemed to slowly recover, thanks largely to some South Indian language hits such as Tamil title Master, which collected an estimated $33 million (2.5 billion rupees) and Telugu release Krack, which grossed an estimated $8.15 million (600 million rupees). Hollywood also pulled in audiences with Godzilla vs Kong collecting $8.7 million in its two week run when it opened in late March, making India amongst the top-ten foreign territories for the Warner title.

The theatrical industry saw a ray of hope from October until early April this year when the second wave hit and cinemas shut down again until further notice. The successes seen in these months “reinforced our faith in the Indian theatrical business,” Inox Leisure CEO Alok Tandon tells THR. As India’s second-largest multiplex chain after PVR Cinemas, Inox runs 648 screens in 69 cities. Tandon is confident that when cinemas re-open, Hollywood titles like Top Gun: Maverick, No Time to Die, Mission: Impossible 7 and big ticket Indian releases will bring audiences back. “If the content works, people will come back to theaters,” he says.

In the brief window when cinemas did reopen, mainstream Hindi language Bollywood didn’t see any major performers, since highly anticipated titles such as actioner Sooryavanshi, starring veteran Bollywood star Akshay Kumar, and cricket drama 83, both from Reliance, have been on hold for over a year.

Sarkar can’t confirm when these titles will release in cinemas given the ongoing situation but says “we are extremely confident of the product and whenever they come to theaters, audiences will love them.”

The enormity of the pandemic has also led to digital releases being postponed. Director Rakeysh Omprakash Mehra’s boxing drama Toofan, starring Farhan Akhtar, was headed straight to Amazon Prime Video, eyeing a May 21 bow, but its release has now been put on hold. “In light of the severity of the situation, our focus is completely on the pandemic and on supporting our employees, their families and in helping the wider community,” Akhtar said in a statement, adding that a revised release date would be shared later.

With the traditional film business under a cloud, producers have begun to veer towards creating more digital content. Sarkar says that for Reliance, “not just last year but over the last two or three years, we used to be around 90 percent in films, which has now come down to 60-65 percent while 30-35 percent content is for OTT and television.” Reliance also has an animation unit which produces shows such as Little Singham for Discovery Kids, Smashing Simba for Cartoon Network and Golmaal Junior for Nickelodeon. Unlike other productions, Sarkar says animation projects have been ongoing since last March just when the pandemic first hit “and employees were given hardware, software and proper bandwidth to work from home.”

But the current halt in productions could also affect content pipelines for digital platforms if last year’s figures are any indication. According to the Ernst and Young report, 2020 saw OTT players spending over $138 million (10.2 billion rupees) on creating around 1,200 hours of original content across 220 titles (excluding acquired movie rights and sports) which was a reduction of 27 percent from $190 million (14 billion rupees) in 2019 for around 385 titles. The reduced content spend in 2020 was caused by a five month stoppage of productions.

However, last year also saw digital platforms ramping up their acquisitions of film titles, with Amazon Prime Video India first off the block when it picked up a number of films starting with Gulabo Sitabo toplined by Indian screen icon Amitabh Bachchan co-starring with Ayushmann Khurrana. This obviously led to a furious debate over disrupted release windows which has become even more pronounced this year.

For instance, the much awaited title Radhe: Your Most Wanted Bhai starring Salman Khan announced a simultaneous release on digital, via the Zee5 platform, in addition to cinemas, and is slated to premiere on the May 13 Eid holiday weekend.

This obviously upset cinema owners who were banking on Khan’s mass appeal to bring in crowds, though given the ongoing situation, its highly unlikely if cinemas can actually open this month leaving Radhey to bow on digital, as experts warn that India could well be hit with a third wave of the pandemic at some point. Assuming a theatrical release was possible, Tandon is clear that his cinemas would not have run Radhe as a simultaneous release “because Inox believes that theatrical windows should be followed.”

Streaming giants, however, see things differently. “A year ago I told you there will be several disruptions leading to innovations, and at that time there was no evidence of any of this except for the fact that we had a lockdown,” says Amazon Prime Video India director and head, content, Vijay Subramaniam, referring to a statement to THR last year after the company unveiled a slew of acquisitions. “I continue to hold that view very firmly and what you are seeing is disruptions leading to innovative approaches to windows,” he adds, explaining how box office hit Master released on Amazon just two weeks after its theatrical run in January, as opposed to the traditional six to eight week window in pre-pandemic times.

But the disruption in windows has come at a heavy price for cinemas considering India has always been an under-screened market with only about an estimated 9,000 screens. That number is believed to have fallen further with estimates indicating that about 1,500 single screen cinemas had to shut shop over the last year due to the pandemic.

Tandon says that it is difficult to assess how many cinemas closed and he reckons that “not more than 500-600 single screen cinemas have shut and this is by hearsay since we don’t have any official data.” But he points to the South Indian market, which has more single screens “which did very well [with local titles when cinemas opened].”

However, even a publicly listed multiplex chain like Inox had to take a hit in the 2020 financial year which ended on March 31, 2021. The company’s total revenue dropped sharply to $16.1 million (1.19 billion rupees) from $260 million (19.14 billion rupees) in the previous financial year. Despite the setback, Tandon says Inox still “has a strong balance sheet” and pointed to the promoter’s stake, held by a mix of holding companies and individuals, which was reduced to about 47 percent from 52 percent.

The financial restructuring also saw massive cost cutting, with Tandon noting that monthly expenditures fell from about $11.5 million (850 million rupees) to $1.63 million (120 million rupees) last year. When cinemas were reopened, costs went up to between $3.4 million-$4.0 million (250 and 300 million rupees), “but the endeavor is to bring it down further.”

As the Indian entertainment sector continues to deal with the impact of the pandemic, there could be opportunities in identifying assets and companies for takeovers for recently launched International Media Acquisition (IMA) Corp., a New Jersey-registered company of which Sarkar is CEO and leading shareholder. IMA is set up as a Special Purpose Acquisition Company (SPAC), often called “blank-check companies,” which have no commercial operations and are formed strictly to raise capital through an IPO for the purpose of acquiring an existing company. IMA plans to raise $200 million-$230 million on the NASDAQ exchange within the next 12-18 months and has plans of targeting acquisitions in North America, Europe and Asia. Its management team includes the likes of David Taghioff, the former co-head of CAA’s global client strategy department who now heads Library Pictures International, Greg Silverman, former president of creative development and worldwide production at Warner Bros., who now heads Stampede Ventures, and former Disney India executive Vishwas Joshi, among others.

With India being a focus area for IMA, Sarkar explains that “there are businesses which look like they are available at interesting valuations and we definitely have an idea about the business fundamentals without factoring in the impact of the pandemic. So even if the business is not performing well because of COVID-19, we can assess if the fundamentals are strong.”

Once IMA Corp starts its operations, Sarkar says he will be relinquishing his position at Reliance to focus full time on running the SPAC outfit. Owned by the Reliance-Anil Dhirubhai Ambani Group, Reliance Entertainment also holds a minority stake in Amblin Partners.

Beyond just the impact on balance sheets, the pandemic is also leading to a re-assessment on the technical and creative fronts. “Cloud computing is going to facilitate in a big way” says Subramaniam, adding that he believes the use of CGI will be pressed into service even more “because you have learned the importance of protecting yourself against such forces of nature and you have to be smart about using technology even more. It will be a big mindset change to look at technology in a friendlier manner.”

Similarly, Subramaniam believes that onscreen storytelling itself will receive a reset thanks to the ongoing effects of the pandemic. “If you wanted to tell a story about a bunch of students who never meet for two years and only [interact] on social media, two years ago that script would have been a joke,” he says. “Today that would be a hot script.”

Film theaters, leisure sector start to rebound

ODESSA, Texas (KOSA) – For many, the weekend means catching the latest blockbuster. But the cinema isn’t just about the show.

It means popcorn and an ice cold drink, which many people haven’t experienced in a year. That changes quickly.

“We have always been confident that we will be back in this position sooner rather than later,” said Christopher Maples, general manager of Cinergy.

Maples has been with Cinergy for nearly four years. He watched the pandemic devastate the theaters; He’s now witnessing their comeback.

“We’re going there,” he said. “Faster than expected, which brings a lot of challenges.”

It is these challenges that occupy Maples’ Day. The Labor Department’s March employment report painted an optimistic picture for the entertainment sector, which grew by 64,000 jobs.

“You know, we hope to be closer to 100% by May when school is free for the summer,” said Maples. “Based on these numbers, I only have to hire about a hundred more team members [the Odessa] Location.”

According to Maples, 75% of business has returned before the pandemic. That’s far better than last April when Cinergy wasn’t doing any business at all.

He attributes the increase to more people being vaccinated and a monster-sized movie.

“Godzilla vs. Kong has really increased our sales dramatically,” he said.

And with the money monsters by his side, Cinergy is ready for Easter and beyond.

“We just want to be filled with the best team we can as soon as possible.”

Copyright 2021 KOSA. All rights reserved.

Psychedelics ETF to Launch After Sector Attracts Thiel’s Cash

(Bloomberg) – The world’s first publicly traded fund for psychedelics companies is set to debut in Toronto this week as the investment industry seeks to capitalize on rising interest in potential psychiatric treatments with the drugs.

The Horizons Psychedelic Stock Index ETF, which is listed as PSYK, is expected to trade on the NEO Exchange on Wednesday, the operator said. The fund tracks the North American Psychedelics Index.

Companies working with drugs containing compounds like psilocybin, the substance in magic mushrooms that causes psychedelic effects, are multiplying. Some early-stage investors are betting that the drugs could disrupt the $ 70 billion market for mental health treatments. The wave of craze for cannabis stocks in recent years has in some ways extended to these drugs, which have long been associated with nightly rave parties.

Stocks of companies like MindMed Inc. and Peter Thiel-backed Compass Pathways Plc have risen in recent months. MindMed has grown more than tenfold since its first day of trading in Canada in March and has a market value of $ 1.4 billion ($ 1.1 billion). The New York-based company recently announced that it has raised approximately $ 237.2 million since its inception.

Compass’ US-listed shares are up roughly 165% since it went public in September, increasing their market value to $ 1.6 billion. Jason Camm, Thiel Capital’s chief medical officer, is on the board.

The North American Psychedelics Index compiled by Solactive AG fell 2.7% on Tuesday after five consecutive days of gains from 12:45 p.m. New York time. It’s up about 14% since it started trading on Jan. 18.

Cannabis comparison

Steve Hawkins, chief executive of ETF operator Horizons ETFs Management Canada Inc., said it was time to offer the new investment option as more psychedelic companies go public. He said the company had received more inquiries about the psychedelics ETF on its website than it did for its first marijuana ETF, which launched as HMMJ in 2017.

The story goes on

This marijuana fund was on a wild ride. After debuting at C $ 10 per unit, the euphoria over Canada’s legalization of cannabis rose to over C $ 26 and fell below C $ 5 last year. This month it rose again above the IPO price.

Read more: Psychedelic Stock ETF might be less trippy than it sounds

To be included in PSYK, companies must maintain a market capitalization of at least $ 25 million, a stock price of $ 0.10, and an average daily trading value of $ 125,000, Hawkins said. Revive Therapeutics Ltd., Mind Cure Health Inc., and Mydecine Innovations Group Inc. are among the companies claiming to be included in PSYK.

Kevin O’Leary, an early investor in MindMed, chairman of O’Shares Investments and unrelated to Horizons, said the psychedelics sector needs to be indexed because it is too risky for institutional investors to focus on just one company or drug study Set early stage. O’Leary, who also owns shares in Compass, said he was looking for companies that would run multiple trials and attract capital.

O’Leary and other investors in the industry rub against the comparisons between psychedelics and cannabis, emphasizing that they are trying to expand mental health therapies and research rather than focusing immediately on selling recreational products.

Read more: Psychedelic therapy schools are a new trend in mental health

“We couldn’t be further from what the cannabis industry has become,” said JR Rahn, Co-CEO of MindMed. Psychedelics are a new asset class, said Rahn, supporting the urgent need for new and innovative treatments for mental health. He said he expects drug companies to partner in this sector.

In 2019, the U.S. Food and Drug Administration gave the go-ahead for the prescription nasal spray Spravato from Johnson & Johnson, a close chemical relative of the anesthetic ketamine, which works quickly against symptoms of depression.

(Updates with additional information on Thiel’s involvement, market prices on Tuesday.)

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Personal Sector is “Environment friendly” Solely at Extracting Cash From Public

Graffiti in Portland. Photograph by Nathaniel St. Clair

There is nothing that capitalists won’t grab if they see a possibility to score a profit. Not even the most basic needs for human life, such as water, are exempt.

A favorite tactic for grabbing what had once been in the public domain and converting it into private profit is the “public-private partnership.” A tactic sadly abetted by the world’s governments, as the name implies.

Public-private partnerships (PPPs), a decades-long string of disasters for the public but often a bonanza for the private, have left behind a long trail of one-sided results in water systems, electricity distribution, sewers, highways, hospitals and other infrastructure. The latest report testifying to the damage wrought by PPPs comes to us courtesy of the European Federation of Public Service Unions (EPSU), a federation of 8 million public service workers from over 250 trade unions across Europe, and the European Network on Debt and Development (Eurodad), a network of 49 civil society organizations from 20 European countries “working for transformative yet specific changes to global and European policies, institutions, rules and structures.”

The EPSU/Eurodad report, “Why public-private partnerships (PPPs) are still not delivering,” paints a damning picture. The report declares:

“PPP advocates claim they bring financing, efficiency and innovation. But real-life experience reveals a different picture. The following points outline eight reasons why PPPs are not working: 1. PPPs do not bring new money – they create hidden debt 2. Private finance costs more than government borrowing 3. Public authorities still bear the ultimate risk of project failure 4. PPPs don’t guarantee better value for money 5. Efficiency gains and design innovation can result in corner-cutting 6. PPPs do not guarantee projects being on time or on budget 7. PPP deals are opaque and can contribute to corruption 8. PPPs distort public policy priorities and force publicly run services to cut costs.”

The EPSU/Eurodad report defines PPPs as “long-term contractual arrangements where the private sector provides infrastructure assets and services that have traditionally been directly funded by government, such as hospitals, schools, prisons, roads, bridges, tunnels, railways, and water and sanitation plants, and where there is also some form of risk sharing between the public and the private sector.” There may be risk sharing on paper, but in reality even this definition is a little too generous toward PPPs — in almost all cases, contractual clauses put the risk squarely on the public, and when the private company that has taken over a previously public good proves unable to manage or goes out of business, it is the public that pays.

The paper drew on examples across Europe, with some of the worst examples coming in Britain. Privatizing public services leads to higher costs, reductions in the quality of service and lengthier periods in completing construction. All of these results, of course, are directly opposite of what incessant capitalist propaganda continually blares. Although the EPSU/Eurodad report didn’t speculate as to why these results occur, it takes little imagination to see the reasons: Corporations exist to make the biggest profit regardless of social cost while governments need only provide a reliable service without having to generate seven- and eight-figure salaries for executives and windfalls for stockholders and other speculators.

It’s not profits above all else, it’s nothing but profits

Consider the words of Milton Friedman, godfather of the Chicago School of economics whose words are widely followed in corporate boardrooms and in financial publications. He put it plainly in an interview with author Joel Bakan in the context of a former BP chief executive officer suggesting (however disingenuously) the company would make environmental concerns more important:

“Not surprisingly, Milton Friedman said ‘no’ when I asked him how far John Browne could go with his green convictions. … ‘He can do it with his own money. If he pursues those environmental interests in such a way as to run the corporation less effectively for its stockholders, then I think he’s being immoral. He’s an employee of the stockholders, however elevated his position may appear to be. As such, he has a very strong moral responsibility to them.’ ”

That is the standard of the corporate world: Profits for speculators, period. No other considerations, no matter how flowery their public relations concoctions may be. There are no exceptions because a service or product is necessary for human life.

To return to the EPSU/Eurodad report, a much higher cost of financing was one cause of higher costs for the public to access previously public goods. Noting the hidden debt in these deals, the paper said, “In a PPP, instead of the public authority taking a loan to pay for a project, the private sector arranges the financing and builds the infrastructure, then the public sector pays a set fee over the lifetime of the PPP contract. In some cases, users also pay part or all of the fee directly to the private sector company (e.g. toll roads).” The United Kingdom National Audit Office “found that the effective interest rate of all private finance deals (7%-8%) was double that of all government borrowing (3%-4%).”

An even larger differential was found in France: “A particularly vivid example was the Paris Courthouse PPP, signed in 2012, which featured an investment of €725.5 million and no less than €642.8 million in financing costs. The French Court of Auditors found that the interest rate for borrowing for the PPP was 6.4 per cent, while in 2012 the weighted average rate for government bond financing in the medium-long term was 1.86 per cent,” the report said, adding that operating costs were also higher.

Another example is a Stockholm hospital that cost €2.4 billion instead of the projected €1.4 billion. The hospital was not only completed four years later than scheduled, but a “design competition” resulted in “operating theatres not being adapted for operations; the risk of medicines being destroyed because of medicine rooms being too warm; and physicians having to carry administrative material in backpacks because of the lack of space for administrative tasks.” One conclusion from this poor result is that “the high level of complexity, together with the private partner’s interest in cost-cutting as much as possible, can easily result in undesirable corner-cutting.”

The report concludes that “What decades of experience has shown is that PPPs come at a high cost and are not delivering the expected benefits.”

If you can sell it, they will buy it

PPPs are particularly common in Britain, an unfortunate development that is not the cause of any one party. Britain’s version of public-private partnerships are called “private finance initiatives.” A scheme concocted by the Conservative Party and enthusiastically adopted by the New Labour of Tony Blair and Gordon Brown, the results are disastrous. A 2015 report in The Independent revealed that the British government owed more than £222 billion to banks and businesses as a result of private finance initiatives. Jonathan Owen reported:

“The startling figure – described by experts as a ‘financial disaster’ – has been calculated as part of an Independent on Sunday analysis of Treasury data on more than 720 PFIs. The analysis has been verified by the National Audit Office. The headline debt is based on ‘unitary charges’ which start this month and will continue for 35 years. They include fees for services rendered, such as maintenance and cleaning, as well as the repayment of loans underwritten by banks and investment companies. Responding to the findings, [British Trades Union Congress] General Secretary Frances O’Grady said: ‘Crippling PFI debts are exacerbating the funding crisis across our public services, most obviously in our National Health Service.’ ”

The Independent article reported that private firms can even flip their contracts for a faster payday. Four companies given 25-year contracts to build and maintain schools doubled their money by selling their shares in the schemes less than five years into the deals for a composite profit of £300 million. Clearly, these contracts were given at well below reasonable cost. Nor is health care exempt: A 2019 report by the Progressive Policy Think Tank found that there are English hospitals forced to divert one-sixth of their income to paying back private finance initiatives, with National Health Service trusts paying more than £2 billion on such repayments per year, “taking money away from vital patient services.” For just £13 billion of private investment, the NHS must pay back £80 billion! Quite a windfall for banks.

Naturally, such financial legerdemain is not limited to any particular country. Here is just a small sampling of outcomes:

* During the course of a 25-year contract with Suez and Veolia, water rates in the city of Paris doubled after accounting for inflation. Thanks to a secret clause, the two companies received automatic price rises every three months. When the contract finished, Paris re-municipalized its water system. Despite the short-term expenses of doing so, the city saved about €35 million in the first year and was able to reduce rates by eight percent.

* A privatization of the Buenos Aires water and sewer systems resulted in chronic failures to meet contractual obligations, repeated demands that the contract be renegotiated (granted by the neoliberal governments of the 1990s), failure to meet water-safety standards, worsening pollution of underground water sources, and price increases over the first decade of the contract 12 times that of inflation. The Argentine government then had to spend years raising legal challenges to take back the system even though the private company was in obvious default of its contractual obligations.

* The German city of Bergkamen (population about 50,000) reversed its privatization of energy, water and other services. As a result of returning those to the public sector, the city began earning €3 million a year from the municipal companies set up to provide services, while reducing costs by as much as 30 percent.

* A report by Food & Water Watch found that investor-owned utilities in the United States typically charge 59 percent more for water and 63 percent more for sewer service than local-government utilities. After privatization, water rates increase at about three times the rate of inflation, nearly tripling on average after 11 years of private control. Corporate profits, dividends and income taxes can add 20 to 30 percent to operation and maintenance costs.

* A study by University of Toronto researchers of 28 Ontario public-private partnerships found they cost an average of 16 percent more than conventional contracts. Elsewhere in Canada, the Sea-to-Sky Highway in British Columbia will cost taxpayers C$220 million more than if it had been financed and operated publicly, and the cost of a project at the Université de Québec à Montréal was doubled to C$400 million.

Water as a commodity rather than a human right

That even water is a commodity is no surprise when corporate leaders consider it just another product that should have a price, most notoriously enunciated in 2014 when the chairman of Nestlé S.A., Peter Brabeck-Letmathe, issued a video in which he denounced as“extreme” the very idea of water being considered a human right. And not only water — various schemes exist to destroy the U.S. Postal Service in the interest of corporate profit.

There are even corporate executives who want to privatize the weather. No, that’s not in the realm of science fiction. The head of a private weather forecaster, AccuWeather, has repeatedly lobbied to prohibit the U.S. government’s National Weather Service from issuing forecasts! Under this scenario, the Weather Service would hand all of its data to private companies, who would then issue forecasts, while of course letting taxpayers foot the bill for the data. One of the U.S. Senate’s dimmest bulbs, fundamentalist Rick Santorum (thankfully no longer in office), once promoted a bill to do just that. And, incidentally, the National Weather Service issues forecasts more reliable than those of AccuWeather.

Public-private partnerships are one of the surest ways of shoveling money into the gaping maws of corporate wallets. The result has been disastrous — public services and infrastructure maintenance is consistently more expensive after privatization. Cuts to wages for workers who remain on the job and increased use of low-wage subcontractors are additional features of these privatizations. Less services and fewer employees means more profit for the contractor, and because the contractor is a private enterprise there’s no longer public accountability.

The rationale for these partnerships is, similar to other neoliberal prescriptions, ideological — the private sector is supposedly always more efficient than government. A private company’s profit incentive will supposedly see to it that costs are kept under control, thereby saving money for taxpayers and transferring risk to the contractor. In the real world, however, this works much differently. A government signs a long-term contract with a private enterprise to build and/or maintain infrastructure, under which the costs are borne by the contractor but the revenue goes to the contractor as well.

Public-private partnerships are nothing more than a variation on straightforward schemes to sell off public assets below cost, with working people having to pay more for reduced quality of service. Capitalism in action