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Stating the Case

Stating the Case

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Published by Ian Williams
Dissecting the dogma of privatization.
Dissecting the dogma of privatization.

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Published by: Ian Williams on Jun 18, 2013
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02/03/2014

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 http://www.insideinvestorrelations.com/articles/case-studies/19525/thoughts-on-thatcher/
Comment: Rethinking Thatcher's privatization drive
Comments (0)| 4 Jun 2013 | Rating |PrintbyIan Williams
 
Finding chinks in the armor of the Iron Lady’s legacyMargaret Thatcher’s death in April revived discussion of state ownership of industries.The
New York Times
always described Mrs T as ‘the prime minister who privatized theloss-making state industries’. In reality, she was careful to sell only those that were veryprofitable, otherwise her friends in the City would not have been so eager to snap them up.That well-known Bolshevik Winston Churchill nationalized BP, which was making untold millionsfor the Treasury by the time Mrs T sold it. The utilities that were privatized were no more efficientafter the event than before, and usually inflicted much higher charges on their captive customers.The same management teams that had led the state enterprises kept their desks but tended topay themselves much more, despite mediocre results. In the modern version of shareholder capitalism, they escaped the political scrutiny of both parliament and citizenry and swapped it for the benign insouciance of money managers.It’s true that in some countries state industries were channels of patronage and corruption, but theindustries Thatcher sold were not among them. They
did 
have strong unions, but for most of thepost-war period those unions co-operated in productivity measures and closures, as well as hugereductions in employees. Industries like British Rail lost three quarters of their workers under state control, and these workers tended to be low paid anyway, as governments used them tohold down pay rates and allegedly control inflation.If the British state industries had a fault, it was not inherent in their form of ownership, but rather that the permanent government of Treasury civil servants starved them of investment, and thusproductivity, in order to reduce the Public Sector Borrowing Requirement (PSBR). The PSBRwas, and is, an irrelevant shibboleth, as if there were no difference between borrowing to financeinvestment and selling bonds to financeday-to-day government operations. Indeed, that was one of the stated reasons for privatizing British Telecom: bringing the antiquated telephone networkup to date would have needed huge amounts of public investment.Thanks to Mrs T, in the 1980s, competing parallel universes to the left and the right called for thenationalization of strategic industries, or liberating business from the ‘tyranny of the state’. Bothwere, and are, utterly detached from reality, as indeed is much of the discussion now.In the real world, the governments of countries like Singapore, Norway or other oil states nowhold huge stakes in British and American industry, without any diminution of business efficiency.Wall Street travels to work on the public-owned MTA and PATH trains and, in between glassesof Champagne, drinks water supplied by New York City. The Street lacked enthusiasm to investin a 50-year water tunnel building program, but it is not reticent in its acceptance of Uncle Sam’scash in times of crisis, as long as it comes untrammeled by ownership and control.Back in Britain, one of Mrs T’s successes was the privatization of the Trustee Savings Bank, until

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