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Wednesday, October 15, 2008

Why stop at the banks? Renationalisation can cure other British failures

This piece of mine appears in The First Post

As the economics pundit Will Hutton put it, "It was only months ago that nationalisation seemed to belong to the world of big band music, ration coupons and nylons."

Now, of course, everything has changed.

The Government's acquisition of Northern Rock in February, and this week's £37bn purchase of sizeable public stakes in three of Britain's leading banks, means that the great nationalisation 'taboo', in force since the Thatcherite counter-revolution of 1979, is finally at an end. Even the Sunday Telegraph has been forced to acknowledge that "nationalisation is no longer a dirty word".

Now that the Rubicon has been crossed, the question that needs to be asked is: If the government can nationalise our banks, why can't they bring our malfunctioning railways, our profiteering utility companies and our widely condemned privately owned airports back into public ownership?

In the standard neo-liberal rewrite of Britain's post-war history, nationalisation is portrayed as an unmitigated disaster. Nationalised industries were - so the narrative goes - inefficient, badly run and a drain on the public purse.

But new quantitative research goes a long way to shattering this myth. It shows how productivity growth in publicly owned enterprises compared favourably to that in the private sector and in the US, where utilities remained in private ownership. And the profitability of the nationalised industries improved too, from decade to decade.

Advocates of privatisation claimed that the mass sell-off of Britain's public utilities, public transport and infrastructure would improve efficiency and benefit the consumer. In fact, the opposite occurred. Britain's railways are by far and away the most expensive in Europe, with fares up to 14 times higher than on the continent - despite the new train companies receiving four times more in taxpayers' subsidies than the state-owned British Rail.

It's a similar story with our privatised airports, which, with their tacky, shopping-mall atmosphere are widely regarded as an international disgrace. Those who hold to the dogmatic 'publicly-owned bad, privately-owned good' mantra should reflect that Manchester Airport, the one major British airport which remains in public ownership, regularly comes out top in surveys of customer satisfaction and was voted Britain's best regional airport last year.

As for Britain's energy utilities, with record price hikes in place and more on the way, is there anyone now prepared to argue that privatisation has benefited consumers?

As opposed to the arguments for privatisation, the case for re-nationalising the railways, utilities and airports is based not on ideology, but on common sense. Natural monopolies such as railways and utility companies are better in public ownership than in private hands where, because of the need to pay dividends to shareholders, prices paid by consumers will always be higher.

To see how different things could have been, we only have to look across the Channel. While Britain pursued an extremist path in the 1980s and 1990s by "selling off the family silver" - to use former Conservative Prime Minister Harold Macmillan's wonderfully damning phrase - our European neighbours preferred to take a more pragmatic approach.

No other major European country has yet followed the British example and sold off its railways. Even Switzerland, regarded by many as a bastion of the free market, has kept its railways in public ownership. And while British householders face record hikes in their energy bills this winter, the position is rather different on the continent where, due to greater state involvement, price rises are nowhere near as high.

The recent financial meltdown has done much to discredit the neo-liberal ideology that Britain has followed - under both Conservative and Labour governments - over the past 29 years. It's time to ditch that ideology and return to the common sense approach to public ownership that Britain followed after World War Two.

Our unhappy experience since 1979 shows that it's privatisation - and not nationalisation - which deserves to be regarded as a 'dirty word'.


Anonymous said...

'As the economics pundit Will Hutton put it, "It was only months ago that nationalisation seemed to belong to the world of big band music, ration coupons and nylons." '

Just who believed this notion? Hopefully, (but i expect otherwise) thoes who did will be consigned to coventry.

The follies of privatisation have been with us for decades. Its not just now that theyve become noticable. Has any society become improved by letting economic anarcy (=free market) reign? This is the basis of a lot of farmer suicides in things like the dairy industry in australia.

To 'nationalise' should mean keeping vital industries in the charge of the people...

One latest disaster of privatising a business is QANTAS, which if anyone is paying attention, has had a string of disasters. The Commonwealth bank (australia again)ceased to be a public instutition under the last Labor g0vt (1990s) (ironic)...result: an increase in bank fees and lowering of interest rates...the idea being the poor (= the people) will bank elsewhere.

Bolivia and its water wars????

So why are people only now with the wall street disaster saying: Nationalisation (or re-N) is a good idea...havent they been paying attention????

Anonymous said...

'Now, of course, everything has changed. '

Why? Because its happened to the rich?? This little fact has been ignored as much as the disaster of privatisation on the rest of us since the advent of 'Nylon'..


Anonymous said...

'Advocates of privatisation claimed that the mass sell-off of Britain's public utilities, public transport and infrastructure would improve efficiency and benefit the consumer'

There are liers, damned liers and privatisation advocates. Most egs of privatisation in places like australia (where i live) and bolivia, have been disasters. the idea that efficiency is improved has been disproved by Commonwealth Bank, Telstra and QANTAS.

WHERE can the advocates show egs where public enterprises have been improved FOR THE PUBLIC by selling to the highest profit making bidder??? Maybe the shareholder benefits...

Why are we even debating this issue? Surely democratic govts are supposed to be FOR the people...Their advocacy (both parties) tells us whom they serve, and whom they have to deceive.


Neil Clark said...

Brian, you're absolutely right- we shouldn't even be having to debate this, it's so clear cut. The trouble is that for the past 30 years capital has ruled the roost. They've got the policies they want- privatisation, deregulation, tax cuts for the very rich, cuts in corporation tax etc. It's ironic that nationalisation has made a come back in order to bail capital out, but now that the Rubicon has been crossed, we need to do all we can to get those publicly owned enterprises that were flogged off after 1979 back in public ownership.
Bus privatisation has also proved disastrous in Australia as it has here, as I probably don't have to tell you.

Roland Hulme said...

When it comes to the railways, I think you're right. Even in New York, it's the MTA that runs the trains, buses and subways and they're cheap, efficient and profitable.

I'm all for the free market, but when America (Capitalist heaven) decides that public ownership of something like public transport is the only choice - we'd probably be wise to follow them.

Neil Clark said...

you're right about the MTA Roland.
What we must never forget was that even Thatcher- and her 'free market' Transport Secretary Nick Ridley ruled out selling off BR, believing it to be a privatisation too far. The only people calling for it were the nerdish free market loons at the Adam Smith Institute. They don't inhabit the real world.
Yet because the Major govt desperately wanted to flog something to pay for tax-cuts the railways went.

Anonymous said...

The fact that Ridley opposed rail privatisation really does show how extreme and unworkable an idea it was and is - after all, Ridley *never* accepted Butskellism, and was a long-term hero for the ultra-Thatcherite wing of the party because he had publicly opposed nationalisation as far back as *1961*, when Butskellism was at, or very close to, its zenith. If even he opposed it, you knew just how bad an idea it was.

It's been said that Major's original idea was, typically, a somewhat romantic and rose-tinted plan of reviving the Big Four companies formed in 1923 and lasting until nationalisation (though they were publicly owned from the outbreak of the Second World War onwards), which would at least have kept the trains and tracks largely in the ownership of the same companies, and that he was forced into the privatisation we did get by Adam Smith Institute ideologues. Does anyone know anything about this? I can believe it, because Major was more of a romantic at heart than a privatise-everything fanatic, but was forced into further privatisations by the neoliberal takeover of the party that he was ultimately far too weak to oppose.

neil craig said...

I believe I have previously argued that privatisation virtually everywhere has benefitted consumers. I might ask the reverse question - is there anybody willing to say that our telephone system would really be cheaper & more extensive if we went back to the nationalised days when it could take a year to get a new line?

On energy the problem is that, for purely political reasons the state has prevented us having the nuclear electricity we could. Since it costs French consumers 1/4 what we are paying it is clear a free market would go nuclear.

And yes I am aware that the French electricity is a nationalised company & indeed when it builds here we will have nationalised electricity, just not our own nation. Perhaps rather than calling for nationalisation you should concentrate on how we should make our state fit for purpose before giving it such power. The worst argument against nationalisation tends to be the politicians who support it.

Roland Hulme said...

I think Neil Craig makes some good points.

I remember when the trains got privatised, I was a teenager and I was wondering how on earth it would work, having one company own the tracks and several others own the trains. It made no sense at all.

It makes even less sense now.

but British Telecome is a good example of when privatisation DOES work. We had a crappy time with BT and switched to a cheaper, better providor back in England. The fact that we could do that encourages BT to become better and cheaper. The old British Telecom would have thought 'so what' at our complaints and carried gaily along on their way.

The healthcare system is a curious one. When our son got born here in America, the care we received was beyond the wildest dreams of the NHS. That people said, we live in New Brunswick, the 'health care' city in the heart of New Jersey, the 'health care' state. We probably got the best natal care available in the world.

Yet, even with my health insurance, we paid for it. It cost us a couple of thousand dollars.

What made THAT annoying was the fact that our son's next-door-neighbour in the NICU was the adorable baby of an illegal immigrant couple. New Jersey law dictates that they got the same health care was we did, even though they couldn't pay for it.

Presumably, if their treatment cost $15,000 and our treatment cost $15,000 - the fact that only one of us was paying explains why my wife and I got saddled with $30,000 in costs (which the insurance company paid the vast majority of.)

Neil Clark said...

you're totally right about the railways. Telephones are a different case, because of the telecommunications revolution we have experienced since the 80s- the introduction of mobile phones etc, means that there can be more competition.
I'm appalled that, in addition to your health insurance, you had to pay a couple of thousand dollars for the delivery of your son.
You could have it all done on the NHS here for free (only the cost of your NI contributions). The NHS is world class- and having experienced its excellence first hand all my life I'm extremely sceptical that it can be bettered.

Anonymous said...

Yes, I would *definitely* suspect that telephone services are better in the UK now than they would be were it all still done by the Post Office. I've heard enough horror stories about the old system to convince me of that. BT was the first privatisation, and the first example of something that eventually goes too far is often quite sensible and will, as in this case, broadly be supported by people who criticise what happened later.

Anonymous said...

neil craig....the privatisation of Telstra in australia had one tragedy early on. A boy with asthma living in the country died because telstra had cut the families phone services...why? to cut costs:

Letter from an Australian Telstra worker on the death of a 10-year-old boy

My experiences in the field as a Telstra technical specialist leads me to wholly concur with your February 25 article on the tragic death of Sam Boulding. Your statement that responsibility for this child’s unnecessary death is the result of the cost-cutting and staff cuts by Telstra directed by successive federal governments, both Liberal and Labor, is right on mark.

Sam Boulding died during a severe asthma attack because his mother’s telephone service had been down for 10 days and she could not call for an ambulance and medical assistance. Telstra could not reconnect the phone because there was a backlog of faults. This situation was not accidental but had been systematically created over the last decade and a half by Telstra’s aggressive elimination of thousands of technical field workforce jobs. These jobs were destroyed not because they were redundant but to reduce operating costs, push up profits and more recently to boost share values in preparation for full privatisation. During this 15-year period Telstra cut its workforce from 93,000 to 45,000.


so please spare me the idolisation of privatisation...


KNaylor said...

Some intersting points.

As Neil knows I'm a Tory but I have never agreed with this utterly daft idea that everything should be subjected to abstract market forces.

The basic utilities should be owned by the state, water, gas and electricity.

This is not because of 'ideology' but because the infrastructue of a nation should be run by those it benefits.

It is an in-built strength of that nation and, controlled by the state, is democratic.

I am pessimistic about this financial crisis.

Unlike the rest of you, I don't welcome it, even though I knew it was going to happen.

Rather than being the herald of a new era of social democracy or 'social' control over the economy it could lead to other things.

The escape forwards into militarism, the belief that the remaining supplies of oil must be contended.

At this moment, I can tell all of you that, quite simply, I'm frightened. This is not something I want to admit to. But I am.

There is no reason why the conflicts of the past will not once more be again a subject of contention.

That's why I read Neil's article about the Crimea with utter dread.

Once our nation was, at least, directed by those who KNEW what WW2 was about and what death, destruction and being dead meant.

Like my father who saw how Liverpool was smashed by the Luftwaffe and how he saw his school mates arm hanging half way into a bush and dead USAF airmen strangled in Oak trees by their own parashutes.

Neil often writes very good articles why war should be avoided

I respect that why is why I believe there has to be a coalition of traditional the left wing with the right.

This is NOT strange. Nor is it irregular.

If you look back in English history, it is something that Johnathan Swift, William Cobbett and George Orwell have in common.

We now have Miliband controlling foreign policy. If that doesn't frighten people, I have no idea what could.