£25bn here and £25bn there, and pretty soon you’re talking real money. It has been absolutely apparent for at least five months that nationalisation represents the only realistic means of safeguarding the astonishing sums of taxpayer cash shovelled into Northern Rock to rescue the bank from the consequences of managerial incompetence.
Finally Alistair Darling has gotten the message. The erstwhile bearded Trot himself has brought the UK’s number five mortgage lender within the ambit of proletarian property relations. Only another 199 of the top 200 monopolies to go and Britain becomes a workers’ state, comrade.
Shame the government didn’t see things the same way when Rover was going tits up. But in the financial services-driven British economy of today, grubby little manufacturing concerns seem somehow not to count.
What this episode proves is that nationalisation really is no worse than, say, bestiality, ebola, paedophilia, diabolism or any given combination thereof, and could at least be seriously discussed in other contexts.
Yet even as an advocate of various forms of common ownership – varying from nationalisation to municipalisation and workers’ co-operatives, depending on circumstances - I don’t see any special merit in bringing a one-time building society that got too big for its boots into the public sector.
It was surely right to try to protect depositors; the greedy shareholders can frankly swivel. As economics textbooks make clear, the dividends they have been pocketing all these years are their reward for putting their capital at risk.
The principle is the same as having a tenner on a gee gees; if you lose the bet, you don’t get your money back. Without state intervention, Northern Rock would be worthless. The whinging from the likes of RAB Capital is nauseating.
The danger with today’s development is that public ownership will be regarded simply as a means of bailing out companies up a well-known creek, while the positive case for such measures will be disregarded entirely.
Let's get away from the lie that the unfettered market economy the Tories and New Labour alike have nurtured has been a runaway success. It has wrecked manufacturing industry, and reduced British workers to the lowest level of employment rights in the industrialised world.
Privatisation has, of course, freed taxpayers of the need to pump hundreds of millions of pounds a year into inefficient nationalised industries. Now we just pump billions of pounds a year into inefficient privatised businesses instead.
Selling off such natural monopolies as the railway system and basic utilities simply licences the fleecing of the customer for the sake of private profit.
Legally speaking, the first duty of a private company is act in the best interests of shareholders. But anyone with any sense wants hospitals to act in the best interests of patients, schools to act in the best interests of pupils, and water and electricity companies to act in the best interests of consumers.
The notion that private sector management is inherently superior to, or necessarily ‘more dynamic’ than, public sector management surely stands as comprehensively shredded as the last set of Enron accounts. Consider such triumphs as Railtrack, Equitable Life and Marconi.
That’s why the railway system is subsidised by the taxpayer to the tune of £5bn a year, three times what was paid out to BR. According to the House of Commons transport committee, the tube now costs the taxpayer a staggering twenty times as much as it did when it was in the public sector.
Some industries are – as economic theory used to recognise - natural monopolies. There is no point building a second set of water pipelines and installing a second set of taps in every household.
But in order to control or influence a major company, the choice is basically between regulation, financial incentives and public ownership. Given that private firms exist to maximise profits, it is perfectly reasonable to legislate that they do not do so by cutting down rain forests or using toxic chemicals.
It is unrealistic and unreasonable to try to use regulation to ensure that it pursues a goal entirely different from maximising profits, such as satisfying social needs within a framework of sustainable growth. After all, the company can be taken over and the management sacked if it strays from the profit maximisation path.
That’s were democratic social ownership comes in. The right have won the propaganda war on this one for more than two decades. But if the left cannot put the idea back in circulation, nobody else will.
Posted at 13:41, 18 February 2008
Comments (21)
Some posts are so right that there's nothing left to say.
It's a shame this stuff flies perpetually under the radar, a detailed rolling account of the massive costs of privatisation (lost revenue, increased costs and so on) is essential, I'd do it myself if I was up to it.
Tory Cliché Bingo:
Labour mismanaging the economy - 1 point
Failed politics of the 1970s - 5 points
Even loony lefty Vince Cable is at it - 10 points
We'd have done the same under the circumstances - 1,000 points
Gah! Twice.
What happened there?
Yes, agree with all that's said.
Still, I can't help thinking, since I am just finishing *Plundering the Public Sector* by Craig Davis, that this particular measure will cost us dear. Some wizard scheme by New Labour PLC's hive of incompetent and thieving Consultants is bound to be in the offing.
A good post, Dave. Crudely put, why the government decided to prop Northern Rock up, and why the Tories would have done the same in the circumstances, goes back to the underpinning of bourgeois power in Britain. As I understand it, the ruling class collectively (and has historically) has depended more on finance, plunder, speculation, and banking rather than industry. Famously, Arkwright got the capital for his first mill from the landlord of his local. The banks wouldn't touch him.
If anything this was shown up sharply by Thatcher and sons from the 80s til today. Manufacturing in Britain has been devastated, while the strength of the bourgeoisie increased. The government could afford to wring out a few platitudes for Rover and get away with it because its failure did not unduly impinge on ruling class interests. However, if Northern Rock had been allowed to go to the wall the financial market and the rest of the banks would have taken an even greater hit. The reputation of the City as the centre of world finance would have been threatened. Hence the reason why they stepped in.
It's a relatively bold move but with the most equivocal justification you've ever heard. Every statement on the matter was qualified by saying that they want to give it back to the private sector as quickly as possible. Pathetic. Harold Wilson looks like a socialist hero in comparison.
Good post Dave. If the Northern Rock fiasco and the sub-prime crisis generally are not warning signs that neo-liberal dogma is not all that it's cracked up to be, I don't what it is.
Great Stuff,
Here in Sydney,
The Battle lines have just been drawn,
The Labor Party, the workers party (sic) is trying to flog off the electricity grid...
"Selling off such natural monopolies as the railway system and basic utilities simply licences the fleecing of the customer for the sake of private profit."
Oh please. Can you imagine what a mess we'd be in if British Gas, BT and the Post Office were still running the show?
"The notion that private sector management is inherently superior to, or necessarily ‘more dynamic’ than, public sector management surely stands as comprehensively shredded as the last set of Enron accounts."
Enron collapsed due to fraud. Fraud happens in the public and private sector. It's just easier to catch in the private sector because they have to adhere to accounting standards and released their company records to the stock market. The public sector hides the corruption and lies instead.
On a really good Ch4 Dispatches special, the private equity Boss Jon Moulton savaged the global financial system (and specifically the US/Uk) saying it was not fit for purpose, he also said much bigger shocks are in store for the world economy.
'How The Banks Bet Your Money
A global credit crunch has put Britain's banks in a crisis that threatens the future of jobs and businesses and may even trigger a wholesale recession.
'The question is: will it stop there? This is a story about the destructive power of finance: what happens when banks are driven by short-termism; when bankers are rewarded with vast bonuses, free to operate under inadequate regulatory supervision, and with the complicity of a government too in awe of big business to step in.
'
http://www.channel4.com/news/articles/dispatches/how+the+banks+bet+your+money/1563152
LFAT, if privatisation of natural monopolies is so great, could you then address yourself to the billions in subsidies that go into share holders' pockets? How is this situation any better than what went before?
And while you're there, please stop with the "socialists think that BT and British Gas were great" straw man.
Proper socialism is a long way from top-down Morrisonian bureaucratic nationalisation.
Just a wee pedantic point. The Tube (its operations, anyway) *is* still in the public sector. It's infrastructure has been privatised.
Which actually makes your oint even stronger. If the government had privatised the whole bloody lot, it would probably be swallowing even more public funds.
"Proper socialism is a long way from top-down Morrisonian bureaucratic nationalisation."
this is a slightly philosophical question, but how do you know that?
If you want to be pedantic that should have read: "Socialism as I envisage it, as do the vast majority of socialists that I know, is a long way from top-down Morrisonian bureaucratic nationalisation"
Top-down Morrisonian bureaucratic nationalisation is often better than the free market but it's not what I would want a fantasy incoming socialist government to implement.
Clear?
Isn't it the case that Brown and Beardie avoided nationalisation - the only game in town - simply because they were scared shitless of being accused of being Old Labour by the Mail and Tories? Pathetic!
If they had any guts they'd use the NRock as a base for a People's Bank.
Let the private sector squeal about unfair competition - isn't the Royal Mail an "unfair competitor" (in their eyes) with TNT et al? If governments (and the people) want state control over basic utilities, services and financial institutions, let's have it!
"Clear?"
not really.
Is this other form of public ownership one you have experienced? Where has it existed previously?
Not that I can think of off the top of my head.
As you started with the philosophical questions, can something only exist if it has previously existed?
so the hunter becomes the hunted... ;-)
Yes clearly something, or I guess a set of relations in this case, can be brought into existence.
But can you really "know" that something that has never existed will definitely not be like something that has existed?
It's not just wankery (honest!), I'm just always amazed at the faith shown in something that has no demonstrable track record.
Well nobody could have predicted the rise and survival of capitalism a few years ago so I don't think that's much of an argument.
I don't recall saying that I "know" socialism would be this way. My point is just that it is something that socialists ought to strive for.
I haven't even suggested my alternative so it seems a bit early to be knocking it.
Despite the obviously flawed methodology, nationalising NRock is a significant measure and some justifiable gloating at the failure of capitalism seems in order.
The lessons surely are, that it should have been done when the losses were announced.
Just handing money out and getting nothing in return made no sense at all.
But equally, the aim of returning the bank to the private sector could prove yet another money-pit.
Not only should it stay nationalised, but it could become a vehicle for increasing the public housing stock.
A state-owned bank would also help finance the infrastructure investment that's needed for renewable energy and green transport policies.
No longer will it be necessary to wait for some friendly multi-national stakeholder to make a decision before government targets can be met.
I somehow doubt that Darling and Brown will see it that way, but that's all the more reason to be breathing down their necks.
Nationalisation needs to carried out in the interests of those who voted for them in good faith