Does it matter that the entire infrastructure of wastewater collection and treatment in Kent, including tens of thousands of kilometres of sewers, is controlled by the Australian asset manager Macquarie? It should do, as these pipes belong to Southern Water, a company that has faced criticism for its harmful discharges into the sea. Under Macquarie’s control, Thames Water was also criticized for neglecting investments and polluting rivers with untreated sewage, all while extracting billions in dividends and accumulating massive debt. In 2018, Ofwat, the industry regulator, imposed a record £120m fine. However, Macquarie had already divested from the company, leaving others to bear the consequences.
Macquarie represents what academic Brett Christophers refers to as an “asset-manager society,” where these firms increasingly own and control our vital physical systems. They earn fees from managing global housing and infrastructure assets worth $4tn – a figure that has grown exponentially in the past 40 years. The business model focuses on extracting profits from owned infrastructure by minimizing costs and maximizing income generated from these holdings.
The English water industry has embraced this model, resulting in catastrophic outcomes for customers and the environment. Having maximized their gains, investors are now seeking government bailouts. Nationalizing the industry would protect it from exploitation. It is a sensible solution since assets generating revenue are not a burden on the public purse. However, the Conservative Party opposes nationalization due to ideological reasons, while the Labour Party is hesitant to upset global capital, considering that American investment firms own nearly 17% of English water.
In his book “Our Lives in Their Portfolios,” Professor Christophers examines how extensively the asset-manager society has taken hold in southeast England. There, we find examples such as Blackstone, a US firm owning rental properties, PSP Investments from Canada owning rolling stock, and Luxembourg’s Cube Infrastructure Managers operating a broadband network. Between 2010 and 2015, the UK completed over 1,000 infrastructure deals, surpassing the total of the next 10 European countries combined. No sector, including hospitals, farmland, and green energy, is immune. Even Swedish schoolteachers’ retirement savings have been utilized to build and maintain 24 Scottish schools.
Often, profits are privatized while losses are socialized. Sussex police, for example, find themselves bound by a 30-year PFI deal for three custodial suites, although only two are in use. They still have to pay an asset manager £150m. While there may be some positive experiences, public sentiment is generally lacking. Comedian and actor Ben Elton captured this sentiment in a recent railway documentary, stating, “We sold off British Rail because the Tories considered it a firm run badly by the UK government. They sold it so it could be run even more badly by rail companies owned by the Italians, Germans, and French.”
This system involves both Britain and the US, which contribute 75% of the $56tn global retirement savings pool. Although some of this money comes from teachers and nurses, the majority comes from high earners. While funds from Wolverhampton local government pensions support Brazilian real estate, the substantial gains from asset management disproportionately benefit bankers, lawyers, and consultants. As a result, Britain is left in a state of disrepair, while the public is being exploited by asset managers who prioritize high financial returns over social benefits. This unsustainable model requires a complete reevaluation.
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