Sales of the century

Privatisation and Popular Capitalism
January 27, 1995

The stream of studies of recent privatisation has so far come mainly from economists, with conclusions favourable or hostile drawn from contrasts with the 50-year-old state organisations they replaced. A sociological study of the "social, cultural and political changes'' following the transfer back to private ownership is a welcome addition to the literature for social science students, since privatisation is the most profound transformation in British industry since the postwar replacement of private by state ownership.

A table in chapter one conveniently displays the gross proceeds from the private investors who responded to the flotations from 1979 to 1992: in descending size from petroleum, gas, telephones, water and electricity through steel and power to telecommunications, airports, cars and engines (Rolls Royce). The economic assessments offer ample though not final assessments of the resulting quality of products and services, prices, range of choices, investments and yields. This sociological study, scholarly and minutely detailed, must also be regarded as provisional.

Peter Saunders, professor of sociology at the University of Sussex and Colin Harris, senior lecturer in social and organisational behaviour at the nearby University of Brighton, examine the effects on "the lives of the people, their values and beliefs'' variously involved. Saunders reports on the people as consumers, as members of the organisations of farmers, landowners, trade unions and employers, as voters and shareholders. Harris writes about the effects on the employees and their unions. The research into the new 1980s culture of "popular capitalism'' is detailed, sometimes original, always clearly argued and seasoned with shrewd if contestable judgements.

There is praise for the non-political regulators' defence of consumers without choice between regional monopolies, but the conclusions convey, with exceptions, generally unfavourable verdicts on privatisation and its depressing effects on employees.

Saunders deploys almost lyrical prose on the achievements in the privatisation process. Two examples: the privatisers "turned British Steel from a loss-making albatross into a slimmed-down profitable concern"; the widening ownership came in "all parts of the country, all age groups, both genders, and social classes''. Harris acknowledges two intended achievements: the managers in the water industry have acquired autonomy to follow the market and the workers are less inclined to follow union strike-inclinations.

Yet both conclude that sociological reverse prevailed over advance. Saunders sees the water consumers as gaining little from still unaccountable regional suppliers. The environmental interests have gained from acquiring a national champion in the National Rivers Authority but the unions have lost bargaining power. The water owner-voters value their investments and would resent re-nationalisation but the general increase in share owners has had a derisory effect: "the great privatisation crusade has turned out to be much ado about nothing''. And Harris finds that the water workforce "is becoming disillusioned, alienated and frightened''.

These seem premature conclusions. Four reservations are relevant. First, it may be too soon to draw conclusions. Despite the disappointments, renationalisation -- or deprivatisation -- is no longer proposed in any political quarter. "Public'' ownership has lost its magic for the public, perhaps because socialisation brought no real control by the citizen-voter-taxpayer. "Public'' ownership has become a dog that no longer barks. Private ownership has been made effective by the new power of the shareholders to sell owner-rights; this the nominal owners of "public'' property could not do. "Values and beliefs'' may change with time.

Second, the reach of privatisation is not exhausted, nor are its effects on "values and beliefs'' final. If Railtrack is next, whether the political motive is extended private ownership or sizeable proceeds to facilitate tax reductions, there are "public'' services to denationalise. Most "public'' services do not have to be supplied by government. Many municipal services, from refuse disposal to sports facilities, could gain from competitive management and shareholder ownership. Education, medical care, housing, and pensions could be better controlled by the public acting as consumers equipped with weekly purchasing power than as voters with questionable votes every five years.

Lower-income parents would be less likely to be elbowed out of their schools by middle-class parents who move to districts with higher housing costs to fill the best state schools. And lower-income patients would be less vulnerable to queue-jumping by middle-income patients with cultural power.

Third, privatisation has been the industrial revolution of all times. It has spread round the world, not least to the former socialist countries, where it is changing values and beliefs that will in time react on British life.

Fourth, social studies based on opinion polls are precarious. They report what people think, not what they do. Workers who believe their jobs are at risk should be asked if they have bought shares in the privatised industries.

It is agreed by all parties that if the Post Office remains a "public'' service it must be "commercialised''. But politicised ownership is not geared to the risks and periodic losses of competition, especially with overseas industries that have been privatised to better the British example.

Perhaps a well-deserved second edition of Privatisation and Popular Capitalism might explore these probabilities. Saunders' study of privatised housing in A Nation of Home Owners makes him well-equipped to lead further studies of the sociological effects of developing privatisation on popular capitalism.

Arthur Seldon is a founder president of the Institute of Economic Affairs.

Privatisation and Popular Capitalism

Author - Peter Saunders and Colin Harris
ISBN - 0 335 15709 2 and 15708 4
Publisher - Open University Press
Price - £37.50 and £12.99
Pages - 167pp

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