Our generation lives with the hangover from the privatisation, marketisation, and outsourcing of successive governments after the 1980s. For 30 years (and counting), the restructuring of our whole economy and society under market-principles has been gospel to large sections of our political classes. The market remains all-seeing, all-knowing, all-powerful. To deny this fact would be sacrilege.
Yet we no longer live in those dark times. Our generation has the liberty to critique the consequences of privatisation from a position of hindsight. We live and breathe its consequences.
From the 1980s onwards the Thatcher and then Major Conservative governments embarked on one of the most ambitious privatisation programs ever seen outside of Pinochet’s Chile. The wholesale auctioning of vast swathes of state assets, publicly owned industries, and state subsidised services were the centrepiece of this privatisation agenda. The trains, gas, water and electricity providers, the car and steel industry, the docks, road haulage, British Telekom and even British Airways were all sold off to the highest (if often extremely undervalued) bid.
The successes and failures of privatisation should depend on a number of different economic, societal, and sometimes political indicators. Economically we might judge the privatised industry on both whether it provides a good service to its users, whether it remains value for money, and whether it invests for the future. On a societal level we might judge them on how well they contribute to society as a whole, and how they treat their workforce.
It remains clear that certain privatisations (such as that of telecommunications) and that of road haulage remain economic successes if one uses classical economic parameters. However these industries are structured in a way that competition – the prime objective of privatisation – is able to prosper.
Yet certain privatised industries such the railways, gas, electricity, water, and for that matter, health, remain what are called ‘natural monopolies’. This means that the most efficient number of firms in the industry remains only one. Think what would happen if train companies started competing on the same line of track for customers or water companies laid down new pipes every new household it provided for. It simply wouldn’t work.
Three of these privatised natural monopolies remain beacons to the world for how not to organise an industry; the railways, water companies, and energy providers. On British railways commuters pay on average 3.5x more than the French, 4.6x the Germans, and up to 10x the Italians for the equivalent train journey. According to a study by ASLEF, the public subsidy in the last year before privatization was £431 million, now it is £6bn. British trains also remain some of the most over-crowded in Europe. More passengers, packed into fewer carriages, at more expensive fares, mean more profit for train operators. Before Major’s Conservative government privatised them in the 90s, even Thatcher claimed the railways would be a ‘privatisation too far’. All we have now is a very large, extremely inefficient, private monopoly.
This scene can be mirrored across other industries as well. Lack of investment by water companies has led to higher prices than pre-privatisation, while also creating a situation where 5x as much water is lost in pipe leakages than are used from our hosepipes. For energy providers, even more worryingly, there were 1 in 4 people listed in fuel poverty this winter due to persistently high gas prices.
The final irony is that our privatized industries are now becoming owned by foreign (partly or fully nationalised) providers from France and Germany.
Our current coalition government wishes to use this same medicine on our NHS. If previous examples of privatisation and marketisation attest, the consequences will be an unmitigated disaster. Those who forget the past are condemned to repeat it.