Privatisation turns liabilities into assets

Article by John Blundel in The Business

WHERE else could we learn that Mongolia is to sell off its nationalised circus troupe? The Camel Wool Company of Ulan Bator is also coming to market. I know nothing of their wines but it has to be good news that Kosovo’s vineyards are being privatised. I am heartened to learn the factory that produced those millions of bronze busts of Lenin at Sherematova, near Moscow, is now making busts of great names of the Enlightenment, including my hero Adam Smith.

I learn these little nuggets from my monthly mailing of Privatisation Watch, a newsletter from the Reason think tank in California that eavesdrops on the practice of liberalisation around the globe. It has a bias towards the experiences of North America but it picks up deliciously obscure morsels too.

The French navy is contracting out much of its sub-Arctic island Kerguelen. Private prisons in Arab nations have zero torture and deg-

radation, unlike the state-run ones. Stunted by state-owned monopoly telecom companies, millions in Africa are being liberated by mobile phones and lives transformed.

We ought to applaud the first stock market flotation by this government – that of Qinetiq, the Ministry of Defence’s laboratories, which have now been subjected to the mysterious processes that convert loss-making companies into profitable ones. This is a profound alchemy.

Britain once led the way in privatisation. After the opera bouffe of the Falklands War, a reinvigorated Conservative government under Margaret Thatcher got serious about selling off the state’s sleeping assets. Having been timid, it suddenly was emboldened to bring so many nationalised industries to market it created a phenomenon that was picked up and copied around the planet. Companies such as British Airways, British Gas, British Telecom, British Steel, British Rail and other former monoliths were all sold off.

But today Britain no longer leads the world. Everyone is doing it. It is not possible to construct a league table of privatisation enthusiasm but Estonia – a mere Soviet province 15 years ago but which has since discarded its state assets with alacrity and joy – must make any shortlist.

Privatisation Watch is an inspiration. It is rich in comedy too. I cherish the notion of the teacher unions that argue school choice cannot work as the parents, educated at municipal schools, are not literate enough to exercise choice. I cannot but giggle to learn that Fidel Castro, devout Marxist, has personal assets above $500m. He should be privatised; in time he will be.

The team at the Reason Foundation that produce this inventory of pleasure is not uncritical. Replacing a state monopoly with a corporate one is scant improvement. The authors are critical of the creation of BAA out of the Department of Transport’s top UK airports, including Heathrow and Gatwick. They argue instead that the airports should have gone into separate ownership. The mooted Spanish takeover bid may achieve this.

But for this monthly dose of cold sense I would not have known that the only smoothly-running bit of the M6 motorway is operated by the Macquarie Infrastructure Group of Sydney. They could run all our motorways far better than the Highways Agency. Here is a vivid example of a simple reform that would be highly popular. For mysterious reasons the bureaucracy will not yield.

Britain struggles to pay its council taxes and the Treasury has to top up what householders cannot afford to keep our bloated local authorities lubricated. If you want a service run badly leave it to Municipal Man. Schools, libraries, crematoria, housing, or planning can be assured of dud delivery. In Ecorse, Michigan, I learn, the local government went into receivership. Under commercial criteria it pays out a dividend instead of demanding a tax. Every department of UK local government could be brought to market. It would be a revolution but a happy one. Im