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Nationalisation: The disastrous experiment that failed nations

Thursday, October 11, 2012


Frequently they is referred to, perversely, as the “public sector”; which they is not! State monopolies always post a notice to potential competitors, saying: “Private, Keep Out”.
Hi-Lo, and Super Value are in the public sector: Their shares are open to members of the public, they are traded on the open market, they daily face competition on price, quality, delivery times, packaging, customer care and service.
They pay taxes, are strike-free, compete for capital, labour, and pay market rates. Inefficiencies are punished: CEOs have been fired, and bankruptcy is the customers’ final sanction, for unacceptable services. No such “severities” apply to these so-called public sector: T&TEC, Petrotrin, Evolving Technologies and Enterprise Development Company e-TecK), Trinidad Cement Ltd, Caribbean Airlines Ltd, National Entrepreneurship Development Company Ltd, etc.
The reasons advanced for post-war nationalisations were:
1. Improvement in industrial relations. Instead, strikes were more frequent, they lasted longer and, rather than being economic, became political issues. They became the biggest threat to industrial peace, due to a combination of union power and their annual recourse to the bottomless taxpayers’ pockets.
2. The promotion of full employment. Nationalisation has enabled industries to postpone job-losses for a time; but the resulting over-manning have proved unsustainable and eventual job losses were consequently greater. Overmanning in the oil industry in Trinidad: for every five workers employed, only three are needed. (The Commonwealth Secretariat, London). A 40 per cent rate of overmanning.
3. The gain in productivity from the removal of absentee ownership. State monopolies are “orphans”; historically obese. But due to the absentee ownership of the government and the public—the funding agency—state monopolies are effectively controlled by union leaders; the monopoly source of their power base.
Indeed, governments have more control over the private sector, which they do not own, (eg, tax and minimum wage legislation), than they do over the so-called public sector; which they theoretically own. 
State monopolies are industrial baronies not accountable to anyone: Parliament, government, shareholders nor the market place. The rate of return on capital is negative.
Nationalisation removes the threat of mergers and acquisitions, takeovers, quality assurance or bankruptcy. They have no need to compete for capital in the market, which is taken coercively (all taxes are coersive), from the public, to whom they are not accountable and serve badly! Most damaging of all is the inevitable “politicisation” of economic life.
4. State monopolies were assumed, at birth, to be efficient as they were considered superior to wasteful competition. But efficiencies are driven by competition in the market place, from which state monopolies were protected at birth. 
They are deaf to market signals. The best value of the state sector is that it provides a quiet life for incumbents. They have flashy management; use cutting-edge, clichéd language, Victorian labour practices; and massive indifference to the consumer.
They never innovate—no incentive to do so—and which is always disruptive, thus subversive to the quiet life; and may threaten jobs. Their major objective: stable poverty. They demand a larger slice of the same cake (their productivity is negative); and never blaspheme by using the words “wealth creation.” 
State monopolies are controlled by union leaders who have never had to meet a payroll or have run a private business. Their essence is control which bestows power, rather than ownership, which creates liability. 
Productivity has no meaning for state monopolies, so their political foot soldiers don’t waste time pushing it. They are parasitic upon the taxes of the private sector, which union leaders are ideologically committed to destroy.
See Table Below
Also privatised were: Royal Ordinance (Arms Factory); National Bus Company; Thomas Cooks (Travel) and British Leyland (cars). Three million Council Houses were sold to occupants; enlarging a property owning democracy; in addition to the millions of small shareholders, who bought shares in previously state monopolies. 
Pride in new home ownership led to millions of new monies being invested in upgrading council houses, leading to a vast reduction in “slums” and a rebirth of run-down housing estates; and the dismissal of the vast bureaucratic and inefficient rent-collecting agencies, which seldom collected rents. 
State monopolies were priviledged and thus rightwing! The state monopolies have cost the taxpayers more than £160,000,000,000 over 20 years in subsidies; annual losses became a tradition. 
Sustainability with a vengeance, leading to the planned impoverishment of the state. All the privatised companies have taken on more workers, innovated and are now taxpayers rather than mere consumers of other people’s money. 
The result: lower taxes. The consumer is king. The movement went from the state to the market.
Companies Proceeds: in millions of pounds @ 1980 prices
British Areospace 150  
Cable & Wireless 224  
Enterprise Oil 392
Amersham International 71   
British Oil 549   
Jaguar Cars 294
Associated British Ports 22   
 British Telecom 3,916 
British Gas 5,434
British Airways 900  
Rolls Royce 1,363  
British Airports 1,281
British Steel 2,500   
Water Companies 5,110
Electricity 5,092
National Power:
Power Gen 2,230   
Scottish Power 2,880 
British Sugar 44
National Freight Corp 53.5  
Suez Finance 57  
Tech.Services 91
Ferranti 636


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