U.K. model

In the U.K., larceny by design

Print edition : October 31, 2014

Margaret Thatcher. Photo: Gerald Penny/AP

The 35-year-old “U.K. model” of privatisation provides important lessons about the true intent of the sale of a mind-boggling range of public assets to private, and foreign, entities.

NO country in the world offers as forbidding a warning of the pitiful consequences of privatisation as the mind-numbing British case initiated by that arch-priestess of neoliberalism, Margaret Thatcher, in 1979. It reveals the brutal nature and purpose of privatisation in all its destructive power. India has much to learn from this fateful 35-year-long saga.

James Meek, author of Private Island: Why Britain Now Belongs to Someone Else (Verso, London), noted recently ( The Guardian, August 22, 2014) that the sharp increase in the cost of a range of services that are critical to ordinary folk—water, rail transport, housing—can be blamed squarely on the misadventure called the “experiment” in privatisation. But much more was at stake than the mere price of services. Most important of all was the systematic emasculation of the power of the British working class, which, since the Second World War, had forced the elite to deliver a social contract that went by the now much-abused name of the welfare state. The political rout of the working class was made total by Labour adopting a “new” posture in the garb of New Labour, which has since made it indistinguishable from the Tories.

Destroying a social compact

Indeed, the legacy of the “Westminster model”, which is so often the superficial norm by which the polities and political structures of Britain and India are compared, pales into insignificance when compared with the similarities that characterised politics in the two countries around the same time, in the mid-1940s. While the heroic sacrifices of the working class in wartime Britain resulted in their interests being necessarily accommodated in the power structure after 1945, in India the mass upsurges that led to the rout of colonialism demanded the incorporation of the popular agenda in the new nationalist enterprise after Independence. The new post-War political configuration resulted in the nationalisation of a range of industries, infrastructure and services that were until then in private hands and the foray, led decisively by a public sector presence, into new realms such as nuclear energy and space exploration. It also led to a spate of legislation in both countries that explicitly protected the interests of the working classes while offering a modicum of protection to private industry. Both countries were fully committed to a welfare agenda that reflected this social compact. Thus, services such as bus and train transport and industries such as coal, steel and power generation and distribution came under public control.

But this started unwinding by the late 1970s. The “winter of discontent” that characterised the last days of the Labour government led by James Callaghan in 1979, which was fuelled by a wave of strikes demanding better wages in response to rising inflation amidst a recession, was met by the Tories’ demand that the working class’ wings be clipped decisively. The Thatcherite “revolution”, which the elite used effectively to topple the post-War social compact, unleashed the tidal wave of privatisation that has since devoured every conceivable aspect of social existence in Britain. Margaret Thatcher’s own personal antecedents (an account that played up her image as being a mere grocer’s daughter) allowed a mythology to be perpetuated. Couched in endearing terms, it promised to herald the dawn of “small shareholder capitalism” (whatever that may mean to anyone who understands the social process), an adventure in which the masses could participate as “stakeholders”.

However, in the velvet glove lurked the fist that threatened to suppress wages and increase inflation. The other arguments used to defend privatisation, which will have a familiar ring to an Indian audience, were that the induction of private owners would impart “dynamism” and “efficiency” to the enterprises on the block. Under the onslaught of policies that divined “fiscal rectitude” as being at the pinnacle of a politician’s responsibilities, the first wave of privatisation resulted in the sale of the prime jewels in the British crown: British Petroleum, Cable and Wireless, and British Aerospace. But even this was nothing compared with the shock and awe that awaited Britain in the 1980s. In that decade, enterprises and services in every conceivable aspect of British life were sold off. Services such as water and gas and even airports were not spared the hammer that banished industries, the premier airline and engineering and power generation and distribution companies from the pale of public scrutiny in Parliament.

But even after this breathtaking sale of public wares, still more remained to be placed on the anvil. Significantly, the bizarre case of the privatisation of the rail network commenced under a New Labour government in 1994. The stubborn idiocy that championed the exercise, and which defied every canon of economic logic, demanded the “unbundling” of not only assets but services. While British Rail’s infrastructure was hived off to a privatised entity, Railtrack, the train operations were sold off to “franchisees”, a euphemism for private train operators. A series of rail accidents between 1996 and 2000 raised serious concerns that profit gouging had been the only benefit of the experiment with privatisation. One observer, commenting on this phenomenon, said the exercise was nothing but “legalised larceny”. Undeterred by the troubled legacy, investors are now eyeing the prime jewel that has been spared from a full-blown assault, the National Health Service, even if they are fearful of the popular outrage that it may spark. But even the NHS has been fraying at the edges, with several services being outsourced and several more being planned for that route. The British case offers important lessons which, if learnt, could well spare India the social and economic devastation that has swept Britain and changed its political landscape in the last four decades.