DOES PRIVATIZATION REALLY BENEFIT THE PEOPLE OR JUST THE WEALTHY FEW?
By Duncan R. Shaw, PhD
Madrid, 20 August 2022
As Britain sweats through the hottest and driest summer on record, an acrimonious debate has started about the consequences of the privatization process unleashed on the country 40 years ago by Margaret Thatcher.
The pretext for this debate flaring up now is the parlous water situation: an alarming drought has led to water restrictions in many parts of the country – and to dramatic increases in the price of water.
Household water bills are much higher in Britain than in most European countries.
This increase comes at exactly the same time as massive hikes in the price of electricity.
Most British families are worried about how much they will have to pay for energy this coming winter.
A more immediate concern, however, is how much they willl have to pay for water – and what restrictions will be placed on that water during the drought. Will Britons be allowed to – and afford to – water their parched gardens? Fill up their swimming pools? Wash their cars?
This appalling situation has led to massive criticism of the private water companies, with many media outlets and citizens’ groups calling for the renationalization of water.
The influential centre-left newspaper The Guardian has led the charge, claiming that it is “time to fix Britain’s broken private utility model, whereby natural monopolies are able to dupe weak regulators.”
The Guardian has backed up its campaign for renationalization by citing the massive salaries earned by water company executives, and the disgraceful dividends paid out to shareholders.
All of which has lead to a more fundamental question being asked: have the sweeping privatizations imposed by Thatcher (who, bizarrely, has a square named after her here in Madrid) led to improved services for the people of Britain – or instead to higher bills, massive executive salaries and shareholder dividends?
Even the right-wing neoliberal Cato Institute has now concluded that Thatcher went too far with her privatizations (despite having been one of her loudest cheerleaders in the 1980s).
The Labour government of Clement Attlee, from 1945 to 1951, nationalized what were termed the “commanding heights of the economy” – at the same time as creating the (still hugely popular) National Health Service – in the name of national security and efficency.
About 20 per cent of the British economy was nationalized by Attlee, including coal, railways, road transport, the Bank of England, civil aviation, electricity and gas, and steel.
Growing up in northern England in the 1960s and 1970s, most people seemed pleased that these essential public services were owned and controlled by the state (‘owned by the people’), without the vicissitudes of ‘market forces’ (price increases, reduction of services, etc).
Thatcher insisted on sweeping privatization more on the grounds of neoliberal ideological fanaticism than pragmatic necessity. She quickly sold off steel, railways, airways, airports, aerospace, gas, electricity, telecoms, and water utilities.
Her controversial ‘Blue Revolution’ delighted her friends in the now deregulated City of London – investment banks made massive profits through privatization – but did it actually lead to improved services for the British people?
Opinion polls taken recently suggest that most people now have a negative view of privatization, especially with massive water and electricity bills landing on their doorstep.
I escaped from the neoliberal horrors of ‘Maggie’s Farm’ in 1985 – one of the best decisions I have ever taken, and one I have never regretted.
12 years later, after getting married in Spain in 1997, I promised my wife a pleasant summer honeymoon travelling by train through the Peak District, the Lake District and the Scottish Highlands. This was exactly the time when British Rail was being carved up into small privatized for-profit companies. The situation was so chaotic (confusion about timetables, connections, etc) that after a frustrating week trying to get up to Scotland we finally gave in and rented a car.
The great Ken Loach made a sardonic but also depressing (and little-known) film about the carve-up of British Rail, which is well worth watching – this trailer is hilarious.
Continental Europe has generally been more sagacious about privatization (though the massive scandal of the carve-up of Spain’s local saving banks is a sad exception to this general rule).
Most European countries have followed Thatcher’s lead only in certain sectors – in order to reduce inefficiency and public debt – but with very stringent and careful safeguards and limits (the famous ‘golden share‘ being kept by the state).
In sad contrast, the neoliberal heartland USA has gone even further down the dismal privatization road than Britain, as the scandal of privatized prisons suggests.
Privatization has also been controversial and unpopular in Latin America, as I witnessed in the Argentina of Carlos Menem in the 1990s – and also in the Chicago School-plagued Chile of Pinochet.
In the past 20 years, centre-left governments in Latin America have tried to reverse what they consider to be the unecessary and harmful privatizations of the 1990s.
Neither has privatization been popular in Africa and Asia; most Africans and Asians now regard it as a swindle that has only benefitted the wealthy.
So: should privatization be perceived as a legitimate attempt to improve services and give the public more choice – or instead as a cynical, deceitful carve-up which only leads to higher prices, massive executive salaries and obscene shareholder dividends?
Was the great Paul Weller wrong when he sung , in 1985, “they take the profits – you take the blame”?
Your comments, please…
7 thoughts on “DOES PRIVATIZATION REALLY BENEFIT THE PEOPLE OR JUST THE WEALTHY FEW? ”
Aleksandar
very nicely written article.
In the famous “Private public partnership” profits go to private partners and losses are absorbed by the public. 🙂
Although “public “ doesn’t necessarily mean absence of corruption and mismanagement. “Public” ownership without transparency is not good either.
Thanks Prof. Another excellent overview of a long running debate. Yes the massive privatisation programme in Britain was the ultimate con....giving ordinary people the illusion of the trickle down effect...through share ownership....which in the short term gave them a windfall when they sold them , but in the long term meant that the shares eventually were bought back by the big investors who enjoyed the real dividends and control. Similarly the massive sell off of council houses. Whilst there was nothing wrong with allowing everyone to become part of the 'property owning democracy'...those stocks of public housing were never replenished and so we now have a severe housing crisis where low income families cannot afford to either buy or rent homes and the gap between rich and poor continues to widen.
Good summary, but this is not a topic on which I possess a lot of knowledge, with the exception of school. I think charter schools as a replacement for primary and secondary schools have completely missed the mark, and for profit institutions in higher education have little concept of what education is supposed to be all about.
Add education to your list!
Privatisation (academisation) ends the accountability of local schools to local people and denies teachers the natural network of other local schools.
The article written by Prof. Shaw is clear and concise.
Nationalization should coexist with privatization, that way people will have options to choose.
Going private can be a good thing depending how it is carried out, and if the government make sure that the process doesn't just serve as a means to enrich just a few. When it is done according to certain criteria, it could be a positive result, because it can increase the offer and competition of a sector and, in the end, benefit the consumer, as, in my opinion, happened in Spain with the privatisation of the telecom sector.
On the other hand, privatisation of certain other sectors of the economy should be made in a way that the government keep some kind of control, so that if things start going in the wrong direction, the state can always have a word to say, so that things can be ammended.
very nicely written article.
In the famous “Private public partnership” profits go to private partners and losses are absorbed by the public. 🙂
Although “public “ doesn’t necessarily mean absence of corruption and mismanagement. “Public” ownership without transparency is not good either.
A very good article where we can see the problems of privatizacion.
Thanks Prof. Another excellent overview of a long running debate. Yes the massive privatisation programme in Britain was the ultimate con....giving ordinary people the illusion of the trickle down effect...through share ownership....which in the short term gave them a windfall when they sold them , but in the long term meant that the shares eventually were bought back by the big investors who enjoyed the real dividends and control. Similarly the massive sell off of council houses. Whilst there was nothing wrong with allowing everyone to become part of the 'property owning democracy'...those stocks of public housing were never replenished and so we now have a severe housing crisis where low income families cannot afford to either buy or rent homes and the gap between rich and poor continues to widen.
Good summary, but this is not a topic on which I possess a lot of knowledge, with the exception of school. I think charter schools as a replacement for primary and secondary schools have completely missed the mark, and for profit institutions in higher education have little concept of what education is supposed to be all about.
Add education to your list!
Privatisation (academisation) ends the accountability of local schools to local people and denies teachers the natural network of other local schools.
The article written by Prof. Shaw is clear and concise.
Nationalization should coexist with privatization, that way people will have options to choose.
Going private can be a good thing depending how it is carried out, and if the government make sure that the process doesn't just serve as a means to enrich just a few. When it is done according to certain criteria, it could be a positive result, because it can increase the offer and competition of a sector and, in the end, benefit the consumer, as, in my opinion, happened in Spain with the privatisation of the telecom sector.
On the other hand, privatisation of certain other sectors of the economy should be made in a way that the government keep some kind of control, so that if things start going in the wrong direction, the state can always have a word to say, so that things can be ammended.