There are widespread calls from regional communities and unions for a government bailout of Rex Airlines. The public interest is central to any such essential services question. It warrants a broader discussion of nationalisation, especially in the face of yet another “market failure” of commercialised essential services.

The neoliberal legacy

Using public funds to prop up private investment in marginal for-profit sectors of commercialised services has become standard political fare. Many of these privatised corporate creatures were created during the past 50 years of neoliberal dismantling of previously publicly owned services.

There is a long list, and it is not confined to the soft target areas of the public purse such as health, education and aged care. It has also been applied to central levers of the national economy such as the Commonwealth Bank, telecommunications, the energy grid, and transport infrastructure generally.

Neoliberal narratives of the consumer benefits of greater competition and using private capital to replace the “drain on the public purse” are habitually invoked by both conservative and social democratic governments/politicians.

Parenthetically, it doesn’t seem to apply to the $386 billion AUKUS nuclear submarine program. Our neoliberal political custodians of the public purse seem studiously untroubled by this particular “bottom of the harbour scheme” for the Commonwealth budget.

Yet, there is no intrinsically valid economic, political or ethical public interest argument for using public funds to bailout failing commercial services. This is especially so for those deemed essential.

Government bailouts, subsidies, and equity shares simply buffer looming investor profit loss and serve as a bridge to the restructured resumption of private enterprise. It is the legitimacy of this private for-profit enterprise space that should be tested first and foremost.

Job preservation is not a sufficient bailout reason, as the unions would have it. Understandable of course. After all, privatisation of these previously nationalised assets and services has been at the cost of decent jobs, wages and working conditions.

That’s a core peg in how a for-profit space is created for private capital: Replacing and squeezing existing labour costs (ie “productivity” enhancement) and socialising discarded labour costs to the public welfare budget. But a bailout doesn’t alter the deteriorating conditions for workers. Without wider transformational measures it just perpetuates business as usual.

Slashing labour costs is matched by a second profit-making peg, the transfer of public interest monopoly market power, previously held on our collective behalf by the state, to private investment capital.

Private monopoly market power grants the leverage for corporate profit expansion at the expense of competitors and through economies of scale. That’s why it’s a central structural trajectory within capitalist economies. Painting over market duopolies as “competition” masks substantial collusion underneath. The 4 major banks have made it an art form.

In the case of Rex, the attempt to address a marginal ‘for profit’ space for regional Australia air services has essentially been crushed by the market power of a previously nationalised Qantas.

It bears reminding that Qantas itself was bailed out by the public purse during the Covid crisis: $2.9 billion or some 30 percent of its market capitalisation. There is no suggestion those billions are being returned to the public purse now that it has returned to profitability with a dramatically leaner workforce and services.

Neither side of our neoliberal custodians of the public purse have it as a policy objective.

This parallels the unrecovered tens of millions in JobKeeper monies to the corporate sector for jobs that were not even under threat from Covid shutdowns. The integrity of the public interest or purse certainly didn’t feature as a Qantas bailout condition, nor result in an equity share, nor essential service guarantees for regional Australia.

On this question of essential services, it is precisely the dumping of non-commercial service provision that forms the third peg to these neoliberal forms of privatised enterprise profitability.

There is a basic economic reason why Rex attempted to expand into the lucrative major city route market and why (and how) it got crushed by the two major players in this market.  Regional economies and communities are not sufficiently commercial to sustain fully privatised regional air services.

Privatising essential national services like Qantas was always going to lead to maximising profit and minimising costs, with savage cuts to labour costs and uneconomic service provision. The transfer of public interest monopoly power into their private hands has given them the commercial power to get away with it.

No doubt there will be an altruistic proposal forthcoming for Qantas (or some other corporate entity) to commercially provide an “essential air service” guarantee to regional Australia on behalf of government via the public purse.

The only interests served by such sleights-of-hand (deception really) are the immediate commercial interests of the corporate providers and the revolving door of elected political lobbyists doing their bidding on the parliamentary benches.

Framing the democratic public interest first

So, how does framing the public interest bear upon Rex and the air services crisis of regional Australia?

Simply bailing out Rex with public money would perpetuate the travesty of a broken neoliberal ideological model whose central mission was to dismantle the public sector on behalf of private interests.

Neoliberal privatisations of essential services have always been an economic, political and ethical scam of the public interest and the public purse. Apparent consumer cost savings from initial privatisation phases has now widely rebounded into multi-faceted cost of living crises: with user-pays cost blowouts in essential utilities, health care, housing and transport and a run-down of service funding and standards in remnant public sectors.

For all the rhetoric over public ownership draining the public purse, increased public debt reflects stress from socialising capitalist losses, bailing out and refloating private enterprises, the dramatic reduction in corporate taxation, and growth of private investment tax loopholes for the richest 10 per cent.

As a result of the massive public bailout of private enterprise during Covid, the public debt to GDP ratio nearly doubled to over 50 per cent.

Should Qantas be renationalised, and Rex absorbed by the reinstated national carrier? —  where the economically viable routes offset the uneconomic, unviable regional routes in the national public interest? It’s a more rational economic and political discussion than other options raised so far.

Qantas market capitalisation is only $10.5 billion. Add Virgin ($475 million) and Rex ($65 million) and the entire core of essential Australian air services could be secured in the public interest for $11 billion.

By extension, also nationalising the lucrative Sydney airport corporate monopoly (52 billion market capitalisation) and a sustainable platform of essential air transport would be re-leveraged in the public interest.

The re-assertion of the democratic public interest over private capital interests is long overdue. The structural cost-of-living crisis, compounded by essential service privatisations, is sufficient in itself to demand an alternative course across central levers of the economy.

Using the public budget to buffer the public/‘consumer’ consequences of privatisation is not a sustainable public interest business model. The Covid crisis was a dramatic example of ballooning public costs to shore up corporate profits in moments of enterprise crisis. This is not an outlier event. The Covid response mimicked the GFC public socialisation crisis policy. More systemic crisis challenges lie ahead.

Reconciling fundamentally opposed private versus public/community interests can no longer be papered over by kicking the public interest can down the road via greater public debt. Choices have to be made, or judgements on unsustainability will be imposed on the public budget from without.

Nationalisation in the new global era

Multiple crises are converging in this turbulent period for the national and global economy.  Only creating a more democratically empowered and economically secure nation state can offset and enable challenges to the self-interested power of mega-corporations. This includes navigating the geo-political and global catastrophes ahead.

For example, what economic policy measures need to be fashioned as the climate crisis deepens its hold — with ever mounting “natural” disasters ravaging the national economy?

The private insurance sector is preparing to declare vast areas uninsurable or setting cost imposts that most working people and small business sectors cannot afford. Only insuring areas that generate private profit is a de facto handball for the public purse or community charity to pick up the remaining disaster tab. It makes a mockery of the concept of insurance.

How can the public interest be served if profitable insurance is in private hands rather than used to offset disaster recovery claims on the public purse? The most obvious rational response is a substantial and sustainable public ownership of the insurance industry.

Continuing to privatise profits and socialise losses reflects a political capitulation to the corporate interests that neoliberalism serves.

A current illustration is using “green capital” to privatise the profitable side of the green energy transition. For all the folly of Coalition policy for publicly-owned nuclear power, we now have the ironic spectacle of Labor righteously advocating private market investment decisions and deriding Coalition nationalisation as “Stalinist central planning”.

Now is the time to change course and prepare for predictable structural events that will jeopardise public/community wellbeing: like the looming income security time bomb, when corporate AI, or the next economic/pandemic crisis, cuts a swathe through the job market; or when Extractive Capital flight economically strands regional communities in the green transition and leaves environmental degradation in its wake.

Returning to a pre-neoliberal, social democratic nationalisation model is no longer an economic option. Subsidising the private profit conditions for corporate investment and renationalising “uneconomic” areas compromises the public interest and constitutes a further drain on the public purse. Private investment capital would likely take flight or go on strike rather than return to the tax regimes that applied in the previous social democratic nationalisation period.

It was through exercising the political power of private ownership that corporate interests were able to slash their taxation and block the expansion of any public ownership interest in conflict with their profit growth. Neoliberalism eventually prevailed for this very reason.

It is precisely the democratic ownership question that needs to reshape the nationalisation imperative in the crisis conditions unfolding nationally and globally. It is ownership that confers the social and political power to realise economic interests embodied within that ownership.

Corporate capital possesses this power in abundance. It pursues its narrow commercial interests unrelentingly and successfully in the public sphere at our collective expense. Rudd’s resource rent tax debacle is a glaring recent example.

Only a political policy course that strategically places central levers of the national economy in public hands provides the deeper democratic public interest platform, ownership power, and collective economic security to navigate the crisis conditions ahead.

We need democratic nationalisation in order to sustain, not drain, the public purse.

The issue of Rex and regional Australia is a comparatively small component of this wider public interest debate. But resolving Rex within a framework of genuine democratic public ownership interests would be a good start.

Image: Jochen Bullerjahn