How Margaret Thatcher sold the family silver to reform society
The passing of the UK’s former Prime Minister Margaret Thatcher has brought the issue of her work privatizing public assets to the surface. When she began her efforts, her country was in desperate need of revenue. However, there were deeper reasons for her privatization binge. From the FT.com:
Mrs. Thatcher embraced it initially as a way to reduce public debt after the 1980-81 recession. It was only when the £4bn flotation of British Telecom in 1984 proved hugely successful – with the offer almost 10 times subscribed – that she seized on its political possibilities for rolling back socialism.
In 1987 came the flotations of British Airways, Rolls-Royce and British Airports Authority, followed later by steel (which had been renationalised by Labour in the 1960s), water and electricity. John Major’s government sold off the remains of the coal industry and the railways.
The Guardian discusses the motivations further:
Privatisation was at first subordinate to other policy themes, above all wage suppression to control inflation. But the first Thatcher administration did successfully introduce a degree of privatisation in some large public sector companies, above all British Aerospace and Cable & Wireless. At this stage, however, the focus was on privatising already profitable entities to raise revenues and thus reduce public-sector borrowing.
Thatcher turned the throttle to high. From The Guardian again:
Following the Tories’ third election victory, they were sufficiently confident to roll out their most aggressive privatisation programme yet. British Steel, British Petroleum, Rolls Royce, British Airways, water and electricity were among the major utilities for sale. These privatisations provoked serious opposition, perhaps sufficient to curb any tendency toward privatisation in the National Health Service. Nonetheless, market-driven measures continued to be imposed in the public sector, from the “internal market” in the health service to Major’s ill-fated citizen’s charter.
There has been no national leader in the United States who has championed privatization as much as Thatcher did. The largest U.S. projects have been toll road privatizations, like the Indiana Toll Road, which turned into a fiasco. Many smaller projects have never been profitable. Most of the cheerleading for privatization in the U.S. has come from private investors and think tanks:
— Robert Litan (@BobLitan) April 4, 2013
No one in the U.S. has taken up the mantle of privatization to rein in the power of public unions the way that Thatcher did. It’s not clear that the Thatcher version would ever even take hold. Instead, we find efforts like the one I wrote about yesterday where public unions in Wisconsin are losing layers of employment rights that do not have equivalents in the private sector. This seems to be a better long-term approach. If government is managing its finances prudently, there will be no reason to sell off the Tennessee Valley Authority, the Hoover Dam or the interstate highway system to private investors.