Bringing privatisation into disrepute

Advocates of privatisation have often paid insufficient attention to one of the most important reasons why scholars like Friedman and Hayek argued in favour of privatisation: that people are the best judges of how to spend their own money and, moreover, that they have a right to spend their own money as they wish. Privatisation must not be separated from the broader libertarian project of making government smaller and giving people control of their own lives – which includes their own money.

If privatisation is justified primarily on efficiency grounds then there is no reason why it should not be used by the enemies of freedom as a means of expanding the role and scope of the state: let the private sector do the dirty and expensive work of providing essential services and what’s left of people’s income after paying for those services is then taken by the state to make transfer payments and fund all manner of dubious activities, bodies and agencies.

Successive governments have not used the proceeds of privatisation to give people back more of their own money to spend. Rather, they have used the savings made to expand the role of the state, for example by providing ever more generous transfer payments, higher pay for public sector employees and the funding of new regulatory bodies and agencies. Money that would have previously supported the nationalised industries is now allocated to a host of other government activities rather than being returned to taxpayers.

Those who believe in freedom should therefore not uncritically praise privatisation. It should be supported solely as a means to the end of increasing individual freedom by giving people back more of their own money to spend. Where privatisation becomes a backdoor way of expanding the role of the state and thereby reducing people’s freedom this should be exposed and criticised.

Harold Wilson used to talk about the candyfloss society; but I always argued that the government would be welcome to nationalise the candyfloss industry if only schooling and health services could be privatised in return.Governments are notoriously bad at managing industries where customers are free to choose, since they do not really understand how markets work. Hence welfare services like schooling and health should not be referred to as ’state monopolies’ (single sellers), since they are not actually selling anything. Instead they should properly be called ’state monoparechies’ (single suppliers).

It’s important not to forget how successful the British privatisations were in the early days. Huge efficiency gains were achieved and the role of the state was reduced for a few years in the mid-late 1980s. However, in recent years many privatised industries have been subject to increasingly heavy regulation and state intervention. One thinks of water and electricity in particular. These sectors, though still ostensibly private, are now effectively corporate vehicles for the pursuit of UK/EU environmental and social policies. The entrepreneurial process has been stifled and the markets are dysfunctional. Having said this, traditional nationalisation would probably be even worse.

John makes a very important point here. One of the interesting facets of the use of private finance in the public sector (e.g. building new social housing) has been that government has lost any control over those bodies using private resources. A key aim of government seems to be that it lessens the perception of responsibility without any reduction in practical control. The same applies to several privatisations (the railways especially) where government retained some influence over strategy and policy but without being held to account.

I have taken the liberty to draw attention to your excellent post, Mr. Meadowcroft, to the readers of the blog that I am privileged to contribute to (see below). It goes without saying that the context in which I chose to place the excerpt from your post is entirely my responsibility.http://redstateeclectic.typepad.com/redstate_commentary/2009/06/beware-when-the-state-privatises.html

There seems to be a confusion on my part concerning the author of the post. To me, a new convention in the bloggosphere seems to make a distinction between “author” and “person responsible for final posting.”I apologise for my illiteracy in the matter. Otherwise my earlier post requires no alteration.

Georg, I’m a bit confused as to why there is confusion – I am the author of the post. But thanks for spreading the word.

When I use my RSS feed, I get a “conspectus page” of the 10 most recent posts of IEA – your post is “signed” by Richard Wellings. Let me know if you might want a screenshot of what I call the “conspectus page.”

Georg – Thank you very much for pointing this out and sending the links. I think this may be a minor glitch with our system. I will see if it can be rectified.

Normally the glitches are with my system, but whenever I can be of assistance to IEA, I will be happy to contribute thus.

[...] transmogrify into something else entirely. We started out regulating energy companies, following privatisation, to prevent misuse of monopoly powers. But then we extend powers to enforce energy cuts – a [...]

Harold Wilson used to talk about the candyfloss society; but I always argued that the government would be welcome to nationalise the candyfloss industry if only schooling and health services could be privatised in return.Governments are notoriously bad at managing industries where customers are free to choose, since they do not really understand how markets work. Hence welfare services like schooling and health should not be referred to as ’state monopolies’ (single sellers), since they are not actually selling anything. Instead they should properly be called ’state monoparechies’ (single suppliers).

It’s important not to forget how successful the British privatisations were in the early days. Huge efficiency gains were achieved and the role of the state was reduced for a few years in the mid-late 1980s. However, in recent years many privatised industries have been subject to increasingly heavy regulation and state intervention. One thinks of water and electricity in particular. These sectors, though still ostensibly private, are now effectively corporate vehicles for the pursuit of UK/EU environmental and social policies. The entrepreneurial process has been stifled and the markets are dysfunctional. Having said this, traditional nationalisation would probably be even worse.

John makes a very important point here. One of the interesting facets of the use of private finance in the public sector (e.g. building new social housing) has been that government has lost any control over those bodies using private resources. A key aim of government seems to be that it lessens the perception of responsibility without any reduction in practical control. The same applies to several privatisations (the railways especially) where government retained some influence over strategy and policy but without being held to account.

I have taken the liberty to draw attention to your excellent post, Mr. Meadowcroft, to the readers of the blog that I am privileged to contribute to (see below). It goes without saying that the context in which I chose to place the excerpt from your post is entirely my responsibility.http://redstateeclectic.typepad.com/redstate_commentary/2009/06/beware-when-the-state-privatises.html

There seems to be a confusion on my part concerning the author of the post. To me, a new convention in the bloggosphere seems to make a distinction between “author” and “person responsible for final posting.”I apologise for my illiteracy in the matter. Otherwise my earlier post requires no alteration.

Georg, I’m a bit confused as to why there is confusion – I am the author of the post. But thanks for spreading the word.

When I use my RSS feed, I get a “conspectus page” of the 10 most recent posts of IEA – your post is “signed” by Richard Wellings. Let me know if you might want a screenshot of what I call the “conspectus page.”

Georg – Thank you very much for pointing this out and sending the links. I think this may be a minor glitch with our system. I will see if it can be rectified.

Normally the glitches are with my system, but whenever I can be of assistance to IEA, I will be happy to contribute thus.

[...] transmogrify into something else entirely. We started out regulating energy companies, following privatisation, to prevent misuse of monopoly powers. But then we extend powers to enforce energy cuts – a [...]

Post new comment

The content of this field is kept private and will not be shown publicly.
Type the characters you see in this picture. (verify using audio)
Type the characters you see in the picture above; if you can't read them, submit the form and a new image will be generated. Not case sensitive.

Invest in the IEA. We are the catalyst for changing consensus and influencing public debate.

Donate now

Thank you for
your support

Subscribe to
publications

Subscribe