Sunday, February 24, 2008

Guest opinion: Martin Meenagh writes;


Sensible Social Ownership.

I am no mad fan of nationalisation for its own sake. There are some things government has proved bad at, for instance education in England.

However, it is time to ask why we don't have some sort of social control of utilities, transport, and energy. It is also time to ask why we have the private sector providing police services, collecting information about the public, and getting hugely rich off of what appear to be rubbish contracts to manage the affairs of the people electronically. Even Her Majesty's Revenue and Customs is now legally lowering its own liabilities by outsourcing to a companies like Mapperley, Cap Gemini and Capita.

The standard justification in England is that the way the UK outsources some of the core businesses of government to the 'private finance initiative' meets several requirements. It is meant to lower public borrowing, and therefore interest rates. It is meant to make companies more efficient. It is meant to expose the provision of services to private competition. It is meant to save the people money.

Except it does not. The interest on the national debt is now as great as spending on the army. Public sector borrowing is climbing very near to the forty-per cent of GDP mark. Vast swathes of private industry depend upon the government underwriting their loans and also, in the case of train companies, on subsidies.

If a measure of price change were used that shows how much the average family spends on bills for essential services as well as on taxes, we now spend out more of our incomes than in 1979. Here's a file of the RPI on pdf format that you can look at yourself.

If you happen to be a commuter, do you really think that you are getting the best service?

'Europe would never allow renationalisation' is another call we sometimes hear from the anti-social ownership crowd. Apparently, if we interest the commission in national affairs, they will end up breaking up the NHS and banning government control of private firms.

What nonsense. It is fundamental to European law that companies that exercise powers that others might not--like gas companies, water companies or energy companies that can come into your home or compel you to pay their charges--are implicitly state bodies. They are also natural monopolies. The thing to do is to have them controlled by elected or representative commissions, like the BBC is. They would not, in that context, be against European law at all.

Even some economists who favour the market see the sense of regulating natural monopolies in a way that sets price and incentives. To my mind, however, this is unnecessarily complex. Why have the pretence of a market when you are organising something for a bigger purpose? Commission-based control works for US baseball, why not British trains?

We should also revisit the issue of cooperatives and worker-owned businesses. They work in some places, not others. Like the UK's last coalpit (at the time of writing). Or, for a while, the John Lewis stores and Lucas aerospace in England. John lewis, which is a department store chain owned by its staff, beat the Financial Times 100 companies in terms of performance last year.

This month, the Spanish completed yet another link in their massive, high-speed, forward looking rail network which uses a state company backed by government money openly to co-ordinate others on tight contracts. The Germans pursued rich tax dodgers, with intelligence agencies--the way JFK pursued cartel-operating steel bosses in the sixties. In a typical American variation on industrial policy, the American army continued the development of airships, which are vital to a low-supply high-price oil future.

Britain? We moaned a bit, bought some secrets off the Germans and grudgingly, if sensibly, nationalised the unproductive 70% of a failed bank because Barclays would like us to and Barclays provides billion in PFI funding. Not, of course, that I am implying any undue influence, duress or any sort of backstairs shenanigan went on at all.

Oh, and we took over the debts of metronet, which was a company that was set over the London tube network. It promptly set up all number of other small companies it owned, overcharged itself so that the government had to subsidise it, and duly collapsed.

We should all get off our knees, identify what civil servants or elected commissioners could control better than management consultants and pension fund shareholders, and work with trade unions to make it a reality.

The world economy is changing and getting colder and colder by the day. The credit with which Britain has sustained its Alice in wonderland national finances (and to be fair, I have enjoyed on my credit cards) is coming to an end. This country should put itself into a position where it pays off debt, cuts down loans and subsidies to the private sector, and controls even if it doesn't own those things that are the people's business.

That makes sense. Have a look at the campaign for public ownership, and then, well, come on in--the water's fine!

3 comments:

Anonymous said...

"Except it does not. The interest on the national debt is now as great as spending on the army. Public sector borrowing is climbing very near to the forty-per cent of GDP mark."

Er this is because there has been huge profligacy on the NHS, benefits and the rest of the public sector... Not because privatisation hasn't worked. As you are clearly a searcher for greater efficiency, I take it you support the privatisation of the NHS?

"Vast swathes of private industry depend upon the government underwriting their loans"

Wow I didn't know this, could you provide an example? And please don't say Northern Rock because that was a government response to a government created problem

Ernest de Cugnac said...

The author says: "The standard justification in England is that the way the UK outsources some of the core businesses of government to the 'private finance initiative' meets several requirements. It is meant to lower public borrowing, and therefore interest rates. It is meant to make companies more efficient. It is meant to expose the provision of services to private competition. It is meant to save the people money. Except it does not. The interest on the national debt is now as great as spending on the army."

"Except it does not."

Really? The citation is to a Telegraph article which states "When the £100 billion bail-out for Northern Rock is added to the national debt, the annual interest payments will be almost neck and neck with expenditure on defence."

This seems to run exactly counter to the authors apparent argument which is that nationalisation will lower the national debt, while in fact it does the reverse.

CAMPAIGN FOR PUBLIC OWNERSHIP said...

Sorry that it has taken me so long to reply! I have been busy and only noticed these comments today.

Anonymous-- I would have pointed you to the rail industry, to the nuclear industry, to defence procurement, and to the utilities in the UK. Whoilst not all underwritten, no serious observer fails to note the hidden and apparent subsidies and the implicit government guarantees of financial support. I would also point you to the activities of companies like Capita and EDS, both of which, through the PFI, depend upon shadow companies backed by the government to channel funds.
As for the NHS, I don't believe in privatisation. The other authors on this blog might take issue with me, however, because I think that the german solution of government-backed social insurance by age cohort, and a mix of provision of services, is a worthwhile model. I also differ with some people because I think that the case for education vouchers, abolition of the national curriculum, and community backed schools supported by bonds and parents isn't an indefensible idea. I am rather attracted to it, in the abstract.

Northern Rock was a mess from start to finish. I pine a bit for the old TSB and the building societies, though no large amount of money is ever really earned honestly and banks can never be more than functional--they can't bear more than cursory scrutiny as organisations, since they all get off on folly and cupidity.

That brings me to ernest's point. Yes, taking on that company was an addition to the national debt. Over time, that debt will sink and the company will probably make money for the nation. I am not a statist, but do not mind this now. It outraged me at the time that this was being viewed in isolation from the fact that PFI schemes add in three ways to national debt. They add to spending on the renatl of infrastructure, financed by debt; they add to future liabilities; and they are linked to the effective underwriting of private companies in the first place. I prefer social enterprises, cooperatives, and in a few cases old-fashioned national ownership.

I'm happy to continue the debate at my blog, www.martinmeenagh.blogspot.com , though I would ask that you don't write in anonymously, and that you refrain from any personal abuse or bad language. otherwise, fire away!