G4S and the Corporate State

by John Grayson, Ed Lewis

The story of G4S is a case study in the erosion of democracy and the hollowing out of the state.

First published: 02 August, 2012 | Category: Activism, Corporate power, Employment & Welfare, Politics

G4S has attracted a torrent of media criticism as a result of its mishandling of the Olympics security contract.  But allegations of incompetence and mismanagement notwithstanding, there are more fundamental political questions raised by the company’s deep involvement in public services.  NLP’s Ed Lewis interviewed John Grayson, an independent researcher and campaigner with the South Yorkshire Migration and Asylum Action Group, about the history of G4S and its role in the corporate takeover of the state.

Perhaps we should start with the history of G4S.  Could you outline for us the company’s origins and its growth and growth strategy over the years?

G4S is a transnational corporation that has followed a familiar trajectory of takeovers and mergers. Its roots are in Denmark and Sweden in the early and mid-twentieth century with the Falck and Philip-Sorensen group of security companies.  In the UK, Group 4 and Securicor are the original company names which were used in the 1960s and ‘70s.  The company has since grown dramatically to become G4S (through a merger of Group 4 Falck and Securicor in 2004).  Nick Buckles emerged as CEO in 2005.  The company is now quoted on both the London and Copenhagen stock exchanges, brands its interests and companies as ‘G4S’ in 125 countries and is the second largest private employer in the world (after Walmart). 

The UK and Europe were the main growth areas in the 1980s and ’90s, mainly in its core business of providing security for private companies and individuals; and this kind of activity still makes up around half of G4S’s business today.   It is now one of a handful of private security firms that dominate this under reported market.  In the UK there was one private security employee to every 170 citizens in 2011, compared to only one police officer to every 382 citizens – ratios comparable only to Hungary and Serbia.  This incessant process of private corporations taking over the role of the state to secure and guard private property was extended from the 1990s by Securicor and Group 4 into the outsourcing of the state’s erstwhile monopoly of violence in the criminal justice and penal sector.  Securicor had the contracts for court and custodial escort services across London by 1993 whilst Group 4 was managing its first privatised prison – the Wolds near Hull – in 1991 and designing, building and managing the first private prison – Fazackerly in Liverpool – in 1997.  Securicor and G4S also bought into the lucrative US prison and security markets with ‘correctional institutions’ in 1997 and with G4 Falk’s acquisition of the Wackenhut Corporation in 2002 – the second largest US security services company. 

Parallel to this was the role of Securicor and G4S in the outsourcing of immigration and asylum detention, transport and escort services.  Securicor as early as 1970 was managing immigration detention at Manchester and Heathrow and in 1993 Group4 took over Campsfield immigration detention centre.  By 2012 G4S was managing four detention centres including the Cedars ‘family friendly’ centre which gives a cover for the continued detention of children by using the Barnados charity as a partner. 

Of course the development of prison and asylum markets has been shared with other major security company players like SERCO and Sodexho and minor players like Reliance.  In the UK though, G4S has set the pace. 

The company has also begun to set the pace in the UK in what used to be described as the ‘mercenary’ or ‘military contract’ market.  In 2008 it took over the Armor Group, a bodyguard company (now G4S Risk Management) operating in Iraq and Afghanistan, and in 2008 acquired Ronco, a company specialising in mines clearance.  In the UK G4S Gurkha Services employs redundant Gurkha service personnel and already has contracts to train British army recruits.  G4S companies were specifically criticised in a 2010 US Senate armed services report on contractors and just last month (July 2012) G4S has had to respond to another critical report from the Global Policy Forum, reporting on the UN’s use of private security contractors. 

G4S seems to powerfully illustrate the merging of state and corporate power in the neoliberal era.  How important is the company’s relationships with states for its business model and what do we know about the company's lobbying activities and political influence?

G4S certainly demonstrates the commodification of key state functions into growth areas for corporations.  As one American commentator described it ‘every prisoner a profit centre, every immigrant a business opportunity’.  As opportunities for profits in global manufacturing, services, and now financial institutions, decline, the security and welfare functions of states are being targeted.  These new ‘markets’ are seen as very attractive to investors.  In 2012 G4S’s major investors include Prudential, Legal & General and Black Rock Inc., the world’s biggest investment fund who own over 5% of G4S shares. 

When, as in G4S’s case, over a quarter of your business depends on revenue from state contracts, then you need to be part of the political process.  G4S has Lord (John) Reid on its board, along with the former Met Commissioner Lord Condon.  But G4S’s lobbying power is not simply about the wholesale buying of politicians and former civil servants.  It is embedded in the regulatory process and sits on the very bodies that licence and regulate its markets.  G4S is in on UN debates on regulating private security; involved in EU advisory bodies; and UK industry bodies and lobby groups. 

One might be optimistic about G4S imploding now, but ministers have been very cautious about direct criticisms of the corporation.  Ed Miliband called for them to be excluded from contracts – but only for police contracts.  G4S is now delivering the work programme, the ‘troubled families’ programme and bidding for the disabled ‘eligibility for work’ contracts.  The experience of disastrous outsourcing contracts in other fields may be worth remembering.  In the field of IT systems it has often meant that failing corporations are still offered new and revised contracts in the public sector.  Politicians have ‘bought into’ G4S in a very big way – it will take a long campaign to persuade them to dispense with their services. 

One of the main grounds for opposition to privatisation is the erosion of democratic accountability.  To what extent does this apply in the case of G4S? They've been taking on some services from public bodies that are already criticised for their lack of accountability, for example the police, so is there a substantive change when these services are contracted to G4S?

The history of G4S and its predecessor companies represent a case study in a key element of modern neoliberal states – the privatisation and hollowing out, of those same states.  The contracting out of these services to private companies erodes the already very limited forms of accountability and furthermore fundamentally corrupts the political system by undermining any notion of a public good. 

The ‘small’ state, it seems, will cede its monopoly on security, punishment, violence and elements of warfare, to transnational corporations like G4S, capitalised from state funds, lightly taxed and with shareholders and senior executives totally meshed with political and business elites.  The work of Dexter Whitfield is important here.  In a series of texts, which have grown out of a lifetime of work with unions and working class ‘community’ organisations, he identifies the emergence in countries like the UK of ‘corporate welfare’, an extension of the ethics and practice of the private corporations in the arms industry and the ‘warfare state’.[1]  Here the state is the monopoly source of all contracts and profits – and the corporations manage to attract a constant stream of politicians and former generals, as board members to promote their continued business.  Interestingly, just like G4S, arms manufacturers have moved into the welfare sector with ‘educational services’ subsidiaries (Babcock is a recent example).  Whitfield has also uncovered the development of global secondary markets where PFI contracts and privatised schools, hospitals and utilities are traded like coffee, metals and oil. 

These unholy alliances mean that, across the UK political parties, G4S has political lobbyists and promoters of their interests.  Civil servants probably see in G4S, opportunities for reductions in state expenditure.  But in fact Whitfield and others have documented that PFI and outsourcing generally, is more expensive than direct services and financing.  G4S was exposed during the Olympics farce as having placed a huge management fee into the contract, around 17% of the total value, as well as their expected ‘profit’ – apparently around £30 million. 

Thus elected politicians are themselves enmeshed in the public relations programmes of the very corporations that we expect them to hold to account.  At the height of the campaign in Sheffield against G4S privatising humanitarian housing for asylum seekers, it was impossible to get an ‘on the record’ response from any MP critical of G4S.  Nick Clegg, the deputy Prime Minister has his seat in Sheffield and the G4S website on 12th January announced that, ‘G4S the UK’s leading security company has been congratulated by Deputy Prime Minister Nick Clegg today as one of the leading companies in opening their doors to young people from all walks of life’.  It was therefore predictable that Clegg would remain totally silent on the plight of asylum seekers in his constituency.

Accountability of private security corporations to democratic values, or even to basic principles of transparency and scrutiny is problematic.  Legal battles continue on how far private corporations can be held to account.  They bask in a sector of ‘self regulation’ and even the toothless PCC (Police Complaints Commission) is showing anxiety that G4S and other security company police personnel could be beyond its reach.  The DPP after two years of dithering over charging former G4S employees for responsibility for the death of Jimmy Mubenga in 2010 has decided, despite a documented wealth of evidence from whistleblowers and former G4S employees, not to proceed.  This news was buried in the tide of other news about G4S and the Olympics.  Lord Ramsbottom former chief inspector of prisons in the House of Lords on the 19th July described the decision as ‘perverse’.  Another member of the Lords pointed to the real danger of state agencies getting into bed with private security corporations.  Lib Dem peer Lord Alerdice said ‘The UKBA has not just employed G4S it has become like G4S’ 

How far do you think the current Olympics scandal can be attributed to G4S's way of doing business?

One of the key elements in the whole process of privatisation of criminal justice, the prison and detention estates – and some would argue the original rationale of the Thatcher government and Labour’s first Home Secretary Jack Straw – was that if state expenditure was to be controlled in the huge expansion of prison building and incarceration, then the unions representing workers had to be defeated by privatisation so as to enable the cutting of staffing levels and wage and pension costs.  G4S privatisation of asylum housing for example means that around fifty UNISON jobs will go in asylum teams in Yorkshire employed under the local authority contracts – one of the reasons UNISON speakers have supported demonstrations against G4S.

The Olympics contract has exposed the fact that G4S recruits staff only in the ‘mobilising’ period of contracts, a few weeks before delivery.  It has also exposed the deregulated and casualised nature of the private security labour market, with low wages and little expenditure on training staff on short term contracts.  G4S’s contracts, which form part of the UKBA national housing contract for 20,000 asylum seekers, are also beginning to unravel for similar reasons.  In Yorkshire they signed the contracts near the end of March with one subcontractor for the mobilising period.  Campaigners managed to force them to drop this contractor.  Then in June when G4S actually began the contract they named totally new subcontractors, half of them with no experience of housing, one of them an obscure private company only registered in January this year.

The Olympics debacle also demonstrates the real vulnerability of corporations like G4S who, greedy for contracts, attempt to expand too rapidly; as well as the centrality (and fragility) of PR in the G4S business model.  G4S perhaps should have learnt from an even more expensive debacle in November 2011, when it failed to take over rival security company ISS in a £5.2 billion deal involving borrowings of £3.7 billion.  Investors revolted, but Nick Buckles survived and the chair of the G4S board Alf Duch-Pederson went instead.  The Olympics contract was always at the forefront of G4S reports and news for its investors and the effect of the ‘shambles’ on the G4S share price indicates how important it was.

Private security corporations that mix welfare with warfare and union busting with border control can expect, and have got, resistance from the most unlikely of allies.  On a recent demonstration in Birmingham, against police privatisation, UNITE was joined on the picket lines by the Police Federation and the Palestine Solidarity Campaign which was protesting G4S servicing of Israeli and West Bank prisons.  In Yorkshire politicians, churches, academics, lawyers, workers and tenants have united to get the G4S asylum housing contracts stopped.

Mobilising outrage against G4S in the post Olympic climate is becoming easier all the time.

 

You can read more on G4S at Corporate Watch and OpenDemocracy.

References


[1] Dexter Whitfield, In Place of Austerity, Restructuring the economy, state and public services (Nottingham: Spokesman Books 2011).

 

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