Always remember how Macquarie built its millionaires on outrageous tolls and charges | John Quiggin

The recent retirement of Macquarie Group CEO Shemara Wikramanayake marks the culmination of a highly successful career. She’s leaving the company with shares worth hundreds of millions of dollars after nearly 40 years at the Sydney-based institution. Under her leadership, the “millionaires’ factory” has increased its annual revenue by around 80% and nearly doubled its profit. Wikramanayake has also overseen and consolidated the group’s transition from a firm specialising in privatised infrastructure to a global merchant bank earning profits from commodity trading, specialist asset finance and wealth management.Macquarie shareholders, who have tripled their money over the past eight years (with dividends and capital gains), have plenty of reason to be grateful.The public, in Australia and elsewhere, may take a slightly more jaundiced view. The foundations of the millionaires’ factory were laid through a string of private infrastructure deals that greatly enriched Macquarie while delivering expensive or substandard services.The biggest disaster of all has been Thames Water, privatised by the Thatcher government in the UK and acquired by a Macquarie-led consortium in 2006. After extracting billions in dividends for itself and other investors, and loading the company with debt, Macquarie sold out in 2017. By that time, the utility’s performance was so dire as to be unsalvageable. Nearly a decade later, the UK government is still grappling with the choice between an unpalatable renationalisation and a hybrid model that is likely to prove unworkable. In June, Andy Burnham called for public ownership at Thames Water. As parts of Wales are in drought and the rest of the country is experiencing prolonged dry conditions, about 23 million people across the UK are currently under a hosepipe ban.Another example worth mentioning is the privatisation of Sydney Airport to a Macquarie-led consortium, which promptly raised a wide range of fees and charges. The ACCC has repeatedly concluded that the airport is a monopoly and that price monitoring is ineffectual. The issue was predictable, and predicted.Macquarie was also a pioneer of the private toll road industry, which has left Australian cities saddled with costly transport systems, characterised in the words of a review of the Sydney toll-road system as a “poorly-functioning patchwork”. International deals such as Ontario’s Highway 407 were even worse for the public, though highly successful for Macquarie’s millionaires.Macquarie Group is not the only corporate giant built on lucrative deals with the public. CSL, one of Australia’s most valuable companies, was created by the privatisation of the Commonwealth Serum Laboratories, which had produced a wide range of innovations. The privatised CSL was awarded a long-term contract to supply products derived from blood plasma at a far higher cost. The resulting cash flow was ploughed into a global acquisition program that made CSL the giant it is today. Meanwhile, research on commercially more unattractive products such as antivenoms and vaccines for tropical diseases was scaled down, abandoned or left to universities and public research institutes.Other privatisations have followed a similar pattern of rhetoric about private sector efficiency combined with continued public largesse. Qantas has enjoyed the favoured treatment of a national flag carrier while disclaiming their obligations to either the travelling public or its own employees, beyond those dictated by profit maximisation. Telstra forced us to buy back, at massive expense, the telephone network built under public ownership and sold only a few years previously.If there is any consolation here, it is that (long after the public) policymakers have finally woken up to the damage done by these deals. Not so long ago, Infrastructure Australia was proclaiming the benefits of innovative finance and universities were offering courses in “financial engineering”. Today these terms are rightly viewed with suspicion. As UK commentator Anthony Hilton wrote in the wake of the crash of Carillion (a major participant in private finance initiatives): double quotation markIts demise is also the consequence of the relentless application of a neo-liberal political philosophy that for years has elevated financial engineering above real engineering; off-balance-sheet finance above paying for things openly; and lauded the private sector above the public sector. Ordinary people can express respect for the achievements of Shemara Wikramanayake at Macquarie Group. But every time you pay a toll or an outrageous airport parking charge, remember that the millionaires’ factory was built from the proceeds of charges like these.